Florida Governor Rick Scott Signs Insurance Anti-Fraud Bill HB 1007 Into Law

 

HB 1007 relating to Prohibited Insurance Acts was among the final bills to be signed from both the 2017 Regular and Special Sessions by Florida Governor Rick Scott yesterday, June 26, 2017.  Among other provisions that include specific language directed at preventing Stranger-Originated Life Insurance and viatical settlement contract fraud, the bill establishes uniform fraud prevention standards for all insurers, regardless of size.

To view a brief summary of the bill, click here.  A more detailed analysis is attached for review.

Sponsored by State Representative Holly Raschein, HB 1007 imposes two new requirements on insurers effective September 1, 2017:  large insurers will be required to adopt an anti-fraud plan; and smaller insurers will be required both to adopt an anti-fraud plan and to establish and maintain a Special Investigative Unit (“SIU”), or contract for SIU services.

In addition, the bill requires every insurer to designate an employee to be responsible for implementing the requirements related to fraud investigation.  

HB 1007 provides that all insurers must electronically file the anti-fraud plan, a detailed description of the SIU or the contract for services, whichever is applicable, and the name of the designated employee with the Florida Division of Forensic Services [(“DIFS”), which is part of the Florida Department of Financial Services (“DFS”)] by December 31, 2017, and each year thereafter.

HB 1007 revises existing requirements for an anti-fraud plan to include:

• An acknowledgement that the insurer has established procedures for detecting and investigating possible fraudulent insurance acts relating to the different types of insurance written by that insurer. (Current law only requires descriptions of detection and investigation procedures.)
• An acknowledgement that the insurer has established procedures for mandatory reporting of fraudulent insurance acts. (Current law only requires descriptions of mandatory reporting procedures.)
• An acknowledgement that the insurer provides the required anti-fraud education and training.
• A description of the required anti-fraud education and training. (Current law only applies to workers’ compensation insurers.) An insurer must provide two hours of initial training and one hour annually, thereafter, to the SIU or contractor for SIU services. The education and training must address detection, referrals, investigations, and reporting of suspected insurance fraud for the lines of insurance the insurer writes. The bill requires the initial two-hour training to be completed by December 31, 2018.
• A description or chart of the insurer’s SIU, including position titles and descriptions of staffing.
• The rationale for the level of staffing and resources being provided for the SIU. (Current law only applies to workers’ compensation insurers.)

The above required acknowledgements operate as an affirmation of compliance with the law and may assist the DFS in any necessary enforcement proceeding.

The bill also revises the requirements for those portions of the anti-fraud plan that are specific to a workers’ compensation insurer by deleting provisions that are separately added and made applicable to all insurers; clarifying the requirements for reports related to losses and recoveries; and adding a requirement to report, by fraud type, the number of cases referred to the DIFS.

It further creates a new requirement for all insurers to report fraud-related data for each line of insurance written in the prior calendar year.  The data must be submitted by March 1, 2019, and annually thereafter, and include:

• The number of policies in effect;
• The amount of premiums written for policies;
• The number of claims received;
• The number of claims referred to the anti-fraud investigative unit;
• The number of other insurance fraud matters referred to the anti-fraud investigative unit that were not claim related;
• The number of claims investigated or accepted by the anti-fraud investigative unit;
• The number of other insurance matters investigated or accepted by the anti-fraud investigative unit that were not claim-related;
• The number of cases referred to the DIFS;
• The number of cases referred to other law enforcement agencies;
• The number of cases referred to other entities; and
• The estimated dollar amount or range of damages on cases referred to the DIFS or other agencies.

HB 1007 adds noncompliance with the data reporting requirement as a basis for imposing an administrative fine.

Note that an insurer that obtains a new certificate of authority has six months to comply with the requirement to adopt and file an anti-fraud plan, description of its SIU or contract for SIU services, and the name of the designated employee. The insurer has one calendar year thereafter to complete the required education and initial data collection and reporting.

The bill requires the DIFS to create a biennial report regarding fraud detection, investigation, prevention, and reporting practices. The first report is due December 31, 2018 and must be updated, as necessary, but at least every two years.

The report must provide:

• Information on the best practices for the establishment of anti-fraud investigative units within insurers;
• Information on the best practices and methods for detecting and investigating insurance fraud and other fraudulent insurance acts;
• Information on appropriate anti-fraud education and training of insurer personnel;
• Information on the best practices for reporting insurance fraud and other fraudulent insurance acts to the DIFS and to other law enforcement agencies;
• Information regarding the appropriate level of staffing and resources for anti-fraud investigative units within insurers;
• Information detailing statistics and data relating to insurance fraud which insurers should maintain; and
• Other information as determined by the DIFS.

Legislative analysis acknowledges that, although insurance companies may incur additional costs in implementing the new requirements for their fraud-prevention programs and the required data reporting, these costs may be more than offset if compliance results in more effective fraud prevention and enforcement. 

Also, effective January 1, 2019, HB 1007 authorizes insurers to opt out of required pre-insurance motor vehicle inspections. When opting-out, the insurer must file a manual rule with the OIR stating that the insurer will not be participating in the statutory inspection program and will not require such inspections.  An insurer that has opted-out may establish its own pre-insurance inspection requirements as a condition to issuing a private passenger motor vehicle insurance policy. An insurer may not require payment from the consumer if the insurer implements their own pre-insurance inspection program.

 

 

 

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