Maryland insurance regulators look to crack down on auto insurance fraud

Maryland's top insurance regulator is trying out an old-fashioned approach to cracking down on insurance fraud: publicly shaming offenders.

The Maryland Insurance Administration published Monday an update on civil and criminal insurance fraud cases. The news release named 22 people sanctioned for civil insurance fraud and 15 people sanctioned for criminal insurance fraud so far this year.


"We want to make an example of folks," Maryland Insurance Commissioner Al Redmer Jr. said. "If folks are tempted to engage in fraud and they see us shaming and making a public example of folks we catch, I hope that will have a chilling effect."

The number of civil insurance fraud cases in Maryland increased tenfold recently, from four in 2013 to 40 in 2015. Penalties and restitution paid rose from $18,265 in 2013 to $143,875 last year. So far this year, the Insurance Administration has closed 22 civil cases, totaling $146,252 in penalties and restitution.


Meanwhile, cases of more serious criminal insurance fraud declined 45 percent between 2013 and 2015.

"It is a big issue," Redmer said.

Redmer wants the state to take a more aggressive approach to combating insurance fraud. In addition to a more robust media campaign, he also wants to hire a lawyer dedicated to cases too small for the Maryland attorney general's office to pursue.

To gather other ideas and background on the problems, the Insurance Administration convened a meeting Monday with auto insurers and other stakeholders

Insurers said two of the most common — and costly — problems in Maryland are claims for accidents involving a second car that left the scene, which makes details hard to prove, and people using out-of-state addresses to secure lower insurance rates.

"If we don't catch those individuals not paying the adequate amount of premium because they're not using the right address, these costs are being passed on to individuals who are already doing what they're supposed to do," said Larry Hinton, senior counsel for Geico, which has 650,000 Maryland policyholders.

False-address incidents added $500,000 to GEICO premiums in Maryland, including $300,000 in Baltimore, Hinton said.

Insurance rates are based, in part, on where you live. People in cities, where there is a greater density of cars and higher accident and crime rates, pay more for auto insurance than people in rural communities. So when someone who lives in Baltimore uses the address of their weekend home on the Eastern Shore to sign up for car insurance, then gets in a fender-bender in Baltimore, he or she is contributing to the risks that drive rates in Baltimore without paying their share of the price, Hinton said.


Maryland accounts for a third of CSAA Insurance Group's questionable claims, those that the insurer investigates for possible fraud, but only 13 percent of CSAA's total members, said Deanna L. Lykins, CSAA's regional director. CSAA does business in 24 states, including California.

Fraud cases are expensive to investigate, which means the company may end up settling cases where the cost to investigate would exceed the claim, she said. Policyholders end up paying the price in higher rates.

"The cost of insurance fraud gets spread," Lykins said.

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CSAA wants the insurance administration to consider tightening rules about what drivers must do to prove an accident, which Lykins said would make cases less subjective and could result in fewer fraudulent claims.

Marceline White, the executive director of the Maryland Consumer Rights Coalition, said she thinks insurance fraud issues are overblown.

The cost of insurance is a problem — about 15 percent of drivers in Maryland are uninsured, some because they can't afford coverage, she said.


"I'm not sure how fraud fits into that," White said. "I think there are things we could do more directly to bring down the cost."

The state could consider an insurance option specifically designed for low-income residents or prevent insurers from using nondriving-related factors, such as marital status, to determine rates, she said.