Insurance Fraud Task Force Recommendations Released

SPRINGFIELD -- The Insurance Fraud Task Force appointed by Governor George H. Ryan and Director of Insurance Nat Shapo last November is recommending more detailed reporting requirements and a whistle blower statute to combat organized insurance fraud in Illinois. Director Shapo who chairs the task force announced the group's findings and recommendations in a report released to the Governor and General Assembly.

The report recommends that existing reporting requirements, which currently apply only to property and casualty insurance claims, be expanded to include all lines of insurance and to insurance application and premium fraud. The Department of Insurance would promulgate administrative rules to define the type of information to be reported, the framework for collecting and compiling such information, and procedures for turning information over to the proper law enforcement agency or prosecutor.

The proposed Illinois Insurance Claims Fraud Act is similar to existing whistle blower statutes in other states. The proposed Act would provide a strong monetary incentive to both governmental entities and private citizens to pursue civil cases against the perpetrators of insurance fraud. The Act would allow a State's Attorney, the Attorney General or a private citizen to sue anyone who knowingly participates in an insurance fraud scheme against an insurance company and to receive up to fifty percent of the proceeds recovered. Defendants could be fined $5,000 to $10,000, and assessed up to three times the amount of each claim for compensation under a contract of insurance.

The Insurance Fraud Task Force was created by law last year to "investigate the issue of organized insurance fraud and methods to combat it." Over the past several months, the Task Force has examined a number of issues, including the feasibility of a formal fraud insurance bureau in Illinois. "While a majority of members believe that insurance fraud is a significant problem," Shapo said, "we concluded that the creation of a fraud bureau is premature until we get a clearer handle on the scope of the problem. By restructuring the way information on insurance fraud is collected and reported, we'll be in a much better position to evaluate the need for a centralized fraud bureau."

Shapo added that the Insurance Research Council is currently conducting a survey on existing fraud bureaus. "When that report is published next year, we can review its conclusions and apply them to the knowledge we gain from our proposed reporting requirements."

To provide a mechanism for the ongoing study, the Task Force also recommends that the Insurance Director create a new task force that will meet not less than every six months after new data collection begins.

Members of the Insurance Fraud Task Force are:

Nathaniel S. Shapo, Illinois Department of Insurance, Chairman
Larry Barry, Illinois Life Insurance Council
Charles Burhan, Liberty Mutual Insurance Company
Ed Carter, Office of the Attorney General
Betty Cordial, Vista Consulting Group, Inc.
John Eager, National Association of Independent Insurers
Michele Ernst, CNA Insurance Company
Rodney Fisher, State Farm Insurance Companies
Judy Fitzgerald, National Insurance Crime Bureau
Donna Ginther, AARP
Arthur Hannus, American Heritage Protective Services, Inc. (first alternate)
Arthur Hill, Jr., Cook County State's Attorney's Office
Edward Moran, Allstate Insurance Company
Sam Nolen, Illinois State Police
Michael Parrillo, United Automobile Insurance Company
Donald Pebworth, Blue Cross/Blue Shield of Illinois
William Raines, Fremont Compensation Insurance Group
Kenneth Ryan, Illinois State Medical Society
Gene Sacco, Cook County Sheriff's Department
Ross Silverman, Katten, Muchin and Zavis
Donald Whitehead, Federal Bureau of Investigation