626.9891  Insurer anti-fraud investigative units; reporting requirements; penalties for noncompliance.--

(1)  Every insurer admitted to do business in this state who in the previous calendar year, at any time during that year, had $10 million or more in direct premiums written shall:

(a)  Establish and maintain a unit or division within the company to investigate possible fraudulent claims by insureds or by persons making claims for services or repairs against policies held by insureds; or

(b)  Contract with others to investigate possible fraudulent claims for services or repairs against policies held by insureds.

An insurer subject to this subsection shall file with the Division of Insurance Fraud of the department on or before July 1, 1996, a detailed description of the unit or division established pursuant to paragraph (a) or a copy of the contract and related documents required by paragraph (b).

(2)  Every insurer admitted to do business in this state, which in the previous calendar year had less than $10 million in direct premiums written, must adopt an anti-fraud plan and file it with the Division of Insurance Fraud of the department on or before July 1, 1996. An insurer may, in lieu of adopting and filing an anti-fraud plan, comply with the provisions of subsection (1).

(3)  Each insurers anti-fraud plans shall include:

(a)  A description of the insurer's procedures for detecting and investigating possible fraudulent insurance acts;

(b)  A description of the insurer's procedures for the mandatory reporting of possible fraudulent insurance acts to the Division of Insurance Fraud of the department;

(c)  A description of the insurer's plan for anti-fraud education and training of its claims adjusters or other personnel; and

(d)  A written description or chart outlining the organizational arrangement of the insurer's anti-fraud personnel who are responsible for the investigation and reporting of possible fraudulent insurance acts.

(4)  Any insurer who obtains a certificate of authority after July 1, 1995, shall have 18 months in which to comply with the requirements of this section.

(5)  For purposes of this section, the term "unit or division" includes the assignment of fraud investigation to employees whose principal responsibilities are the investigation and disposition of claims. If an insurer creates a distinct unit or division, hires additional employees, or contracts with another entity to fulfill the requirements of this section, the additional cost incurred must be included as an administrative expense for ratemaking purposes.

(6)  Each insurer writing workers' compensation insurance shall report to the department, on or before August 1 of each year, on its experience in implementing and maintaining an anti-fraud investigative unit or an anti-fraud plan. The report must include, at a minimum:

(a)  The dollar amount of recoveries and losses attributable to workers' compensation fraud delineated by the type of fraud: claimant, employer, provider, agent, or other.

(b)  The number of referrals to the Bureau of Workers' Compensation Fraud for the prior year.

(c)  A description of the organization of the anti-fraud investigative unit, if applicable, including the position titles and descriptions of staffing.

(d)  The rationale for the level of staffing and resources being provided for the anti-fraud investigative unit, which may include objective criteria such as number of policies written, number of claims received on an annual basis, volume of suspected fraudulent claims currently being detected, other factors, and an assessment of optimal caseload that can be handled by an investigator on an annual basis.

(e)  The inservice education and training provided to underwriting and claims personnel to assist in identifying and evaluating instances of suspected fraudulent activity in underwriting or claims activities.

(f)  A description of a public awareness program focused on the costs and frequency of insurance fraud and methods by which the public can prevent it.

(7)  If an insurer fails to timely submit a final acceptable anti-fraud plan or anti-fraud investigative unit description, fails to implement the provisions of a plan or an anti-fraud investigative unit description, or otherwise refuses to comply with the provisions of this section, the department, office, or commission may:

(a)  Impose an administrative fine of not more than $2,000 per day for such failure by an insurer to submit an acceptable anti-fraud plan or anti-fraud investigative unit description, until the department, office, or commission deems the insurer to be in compliance;

(b)  Impose an administrative fine for failure by an insurer to implement or follow the provisions of an anti-fraud plan or anti-fraud investigative unit description; or

(c)  Impose the provisions of both paragraphs (a) and (b).

(8)  The department may adopt rules to administer this section.