«Insurance Fraud Bureau: Does Wisconsin Really Need One? Nathan L. Taarud Abstract Wisconsin is one of nine states without an insurance fraud bureau. ...»
Fourteen cases were prosecuted, leading to findings of pleas of guilty or no contest. Three cases were dismissed. Three cases had dispositions listed as “other,” while one case resulted in the issuance of an arrest warrant.
Prosecutions for insurance fraud have never been tallied in Wisconsin before now. The methods of data retrieval were limited to a manual online search and personal contact with several clerks of court in major counties. For instance, Milwaukee County, which is the largest county in the state, charges almost 20,000 cases each year. It was therefore easier to have their clerk of courts query charges by statute. An automated search yielded three insurance fraud charges in 2005 and two in 2004. The subjects in the two 2004 cases pled guilty/no contest in 2005.
The researcher met with clerk of courts representatives from Dane, Racine, Kenosha, Rock and Waukesha Counties. Each queried by statute insurance fraud charges filed for years as far back as 1992. Dane County houses the state capital and is populated with just over 450,000 people. It is the second largest county in Wisconsin. They have charged 12 cases of insurance fraud since 1995, averaging a single charge per year.
118,094 total charges were filed in 2005 by 71 of the 72 counties in Wisconsin.
Two counties, Portage and Menominee, did not contribute data to the online database. Portage County reported that one case was prosecuted in 2005, resulting in a guilty plea/conviction (Flatoff, personal communication, March, 2006). Menominee County reported no insurance fraud related convictions and had 55 total charges filed in 2005. Twelve were coded for felony and 43 coded for misdemeanor charges (clerk of courts, personal communication, May, 2006).
A manual case by case search was conducted for the remaining 86,651 cases.
Because all cases charged in a given year are not prosecuted that same year, a search of 2004 charges was also conducted for the most populous counties and those that prosecuted fraud in 2005. These counties comprise 63% of the state’s www.jecm.org Journal of Economic Crime Management Fall 2006, Volume 4, Issue 2 total population. A total of 52,571 charges were searched. This represents nearly half of all the charges filed statewide in 2004. The search yielded only two cases as mentioned above. Milwaukee County charged two cases in 2004 and prosecuted both in 2005. Both pled guilty/no contest. These cases were added to the 2005 prosecution/conviction numbers. One offense occurred in 2003, but was charged and prosecuted in 2005. It appears that once enough information is presented for prosecution, the charge is filed. This may explain why a vast majority of cases charged in a given year are disposed of in the same year.
Of the 21 cases prosecuted in 2005, five were from Sauk County. Sauk County consists of about 57,000 residents (US Census Bureau, 2004). No other county prosecuted five cases in 2004 or 2005. Therefore, these five cases involving staged auto accidents represent an anomaly in Wisconsin.
Milwaukee Country represents about 20% of the entire population of Wisconsin and yielded two and three cases charged in 2004 and 2005, respectively. Just 13 out of 72 counties charged persons with insurance fraud in 2005. Most of the 13 counties that charged for insurance fraud charged a single case in 2005.
The Iowa Insurance Fraud Bureau was not able to provide this researcher with prosecutions for 2005. However, prior studies conducted by the CAIF (2002) show that Iowa’s Fraud Bureau reported prosecution, conviction and open investigations numbers for the years 1998-2000 and 2002. The Iowa Fraud Bureau was created in 1998. During its first year of operation, 136 referrals were received. There were 11 cases presented for prosecution, leading to four convictions in 1998. These numbers increased significantly over the next few years. In 2002 Iowa had a 16% increase in referrals of suspicious insurance claims, from the year before. There were 393 open investigations according to the CAIF (2002). Twenty three cases were presented for prosecution resulting in 17 convictions. There were 15 convictions each for 1999 and 2000.
The CAIF sent a survey to all state fraud bureaus in 2006, requesting 2005 data.
The CAIF provided the researcher with the results of the survey completed by the Iowa IFB. In 2005, Iowa presented 19 cases for criminal prosecution resulting in 13 criminal convictions (Jay, personal communication, June 21, 2006).
The NICB also provided pertinent information consistent with the above data.
They reported to the researcher the following numbers of questionable claims reported by agencies in Iowa and Wisconsin: Questionable claims reported in 2004 and 2005 by various Iowa agencies were 274 and 369, respectively. In Wisconsin 2004 claims equaled 466 and 501 for 2005 (Smidt, personal communication, May 25, 2006).
The following data represents the prosecution numbers for cases followed-up by the NICB: Prosecution numbers for Iowa in 2004 and 2005 were eight and five, www.jecm.org Journal of Economic Crime Management Fall 2006, Volume 4, Issue 2 respectively. The NICB followed-up on seven and eight conviction cases for 2004 and 2005, respectively (Smidt, personal communication, May 25, 2006).
The data provided by the NICB shows that Wisconsin reports about the same amount of questionable claims, proportionately, as Iowa. Iowa’s population is about 55% of Wisconsin’s. Likewise, the questionable claims reported to NICB by each state in 2004 shows Iowa reported about 59% as many cases as Wisconsin. This shows the questionable claims per capita is about the same in each state.
This researcher does not believe the NICB was involved in the five aforementioned Sauk County cases in 2005. Baraboo City Detective Edwards was primarily involved in building that case. This researcher assisted in obtaining a confession from one of those convicted. The NICB was not notified regarding this case. Therefore, if you add the eight cases the NICB followed up on, to the five cases in Sauk County you get a total of 13 cases. It is possible another case was prosecuted without the NICB being advised. This validates the accuracy of the 14 Wisconsin prosecutions identified through online records for
2005. So while the numbers should be deemed reliable, if a case or two were missed and added to the 14, the end result would be the same. Whether Wisconsin prosecutes 14 cases or 16 cases each year, the prosecutions per capita in Wisconsin remain under.30.
Wisconsin prosecutes insurance fraud at a rate of.26 per capita. (2000 population was 5,363,675, according to US Census Bureau Data). Using the 2002 data, Iowa has a per capita conviction rate of.58. Per capita then, Iowa prosecutes about twice as many people for insurance fraud than Wisconsin. In 2005 Iowa convicted 13 people or.44 per capita, about twice as many convictions as Wisconsin.
Wisconsin and Iowa are alike in many ways, yet Iowa prosecutes twice as much fraud per capita. When compared with all other states with IFBs, Wisconsin, performs close to or at the very bottom in insurance fraud convictions.
Information compiled by the CAIF in 2002 shows conviction numbers reported by about 26 states, with IFBs. Not considering workers compensation bureaus, Wisconsin ranks the lowest of these states in insurance fraud convictions. Some states just have fraud bureaus dedicated to combating workers compensation fraud. Minnesota was such a state in 2002. Minnesota created an IFB in 2004.
In 2002 Minnesota’s workers compensation bureau convicted just eight people or.16 convictions per capita. However, this does not accurately represent Minnesota’s current efforts. Rhode Island has a workers compensation bureau solely and convicted two people or.19 convictions per capita. All other states with broad investigative powers and those who investigate just workers compensation cases, convicted more people per capita than Wisconsin for insurance fraud (see figures 1 and 2).
Figure 2. 2002 Convictions for insurance fraud per capita for 14 other states and Wisconsin.
2005 Conviction numbers represented for Wisconsin and Iowa.
The data shows that Iowa prosecutes nearly twice as many people per capita for insurance fraud than Wisconsin does. It also appears that states with IFBs prosecute more fraud than states that do not have IFBs. Of the IFB states Wisconsin was compared with, 16 had lesser populations (see figure 3).
15.9 15.0 12.2 11.3 10.0 8.4 8.2 8.0 7.0 6.3 5.4 5.3 5.1 4.5 4.0 4.0 5.0
Among the comparison states, many had crime indexes lower than Wisconsin.
For instance, from 1960-2000, New York, Kentucky, Virginia, North Dakota, Minnesota, New Jersey, Idaho, and New Hampshire all had better total crime index numbers than Wisconsin. North Dakota ranked 50th, New York 40th, and New Jersey 39th, compared with Wisconsin’s 37th ranking. The total crime index is the sum, per capita, of reported property and violent crime incidents. These include robbery, assault, burglary, motor vehicle theft and arson etc.
To gain a better perspective on these prosecution numbers, questionnaires were sent to twelve fraud experts, anti-fraud leaders and law enforcement in both Iowa and Wisconsin (see Appendix). Many of the fraud experts are currently insurance fraud investigators with prior law enforcement and detective experience. Respondents to the questionnaire possess 273 years combined experience in both law enforcement and insurance investigations. Nearly all respondents believe insurance fraud is prosecuted less in Wisconsin than in other states, because it is not seen as a serious matter, as a result of a lack of education and also a mindset that insurance fraud is an insurance company www.jecm.org Journal of Economic Crime Management Fall 2006, Volume 4, Issue 2 issue. Many mentioned the lack of a central fraud fighting force to take on the fraudsters in Wisconsin.
One respondent is not so sure Wisconsin is prosecuting fewer insurance fraudsters, stating instead “that prosecutions are made under statutes other than ‘insurance fraud’ i.e. Arson, theft, criminal damage etc.” Another respondent believes that as a former officer and detective he investigated hundreds of insurance fraud cases, but as embezzlements, burglaries and other white collar crimes. He also believes the only way to curb the costs of fraud is to have a dedicated state task force.
The same respondent shared an interesting first-hand experience regarding the mindset of some regarding insurance fraud. He recalled a time during voice stress analysis training, when his instructor revealed a story about a recent claim.
“The instructor told the class he reported a claim involving hearing aids being stolen when they were actually left on his dash and they melted. The whole class of police officers laughed at his story and the insurance company paid out several thousand dollars to buy him new ones.” Another interesting perspective came from an individual who has investigated insurance fraud in many states, but specifically in Iowa and Wisconsin. He has investigated hundreds of cases and believes that 60-70% of them contained some element of fraud. He recalled six of his cases were prosecuted in Iowa, Minnesota and Illinois. He has not seen any of his cases prosecuted in Wisconsin. He believes Wisconsin would prosecute more insurance fraud if it had an IFB and, “if insurance companies would be more proactive in fighting fraud.” Another respondent stated that while insurance companies can investigate insurance fraud, it takes prosecutors knowledgeable about the crime, for anything further to occur. “Without the resources to pursue insurance fraud, agencies will continue to go after typical ‘bad guys’ because that is what’s most familiar.” Technology was also addressed by a respondent in the questionnaire. He stated, “The Special Investigations Units and computer programs that identify red flags and identifies these claims should be used more intensely.” He added that he believes other states prosecute more insurance fraudsters because those states have mission statements geared toward fraud prosecutions.