Annual Meeting Summary Report • Coalition Against Insurance Fraud • December 2009 1

AttendanceA total of 74 people representing 49

organizations participated in this year’s annual meeting held in Orlando, Florida.

Special Presentation: Ethics and Insurance FraudCombatting fraud with detection,

investigation and even deterrence is akin to using only surgery to treat disease while ignoring the promise of vaccines to prevent the disease in the first place. That was one of the controversial assessments from Michael Josephson, founder and president of the Josephson Institute of Ethics.

Saying that the U.S. has a “hole in our moral ozone” that’s getting larger, Mr. Josephson said the current campaign against fraud likely will never turn the corner using the current strategies, especially with data indicating that acceptance of unethical behavior growing.

Citing a new study conducted by his institute, he said there’s a firm link between

teens who cheat in school and dishonest acts later in life — including filing fraudulent insurance claims. Among the statistics from the teen study:

64% admitted to cheating on an exam,42% said they have lied to save money, and30% said they stole something from a store in the last year.

In comparing ethical decisions of teens and adult activity later in life, the biggest factors were age, whether there was cheating as a teen, and perhaps most importantly, whether they felt that lying and cheating were necessary to succeed in life.

The last factor is key, according to this ethics expert, because it has the best possibility of being reduced through training and positive

ADVOCACY INFORMAT ION OUTREACH

U n i t i n g t h e f r a u d - f i g h t i n g c o m m u n i t y

Board of Directors & Annual Membership MeetingDecember 9, 2009 • Summary Report

Michael Josephson of the

Josephson Institute . . . “Folks,

you need a new strategy.”

Annual Meeting Summary Report • Coalition Against Insurance Fraud • December 2009 2

reinforcement.Factors that had little of no effect on ethical

behavior, interestingly, were occupation, gender and religious beliefs.

If society invested even a small fraction of current anti-fraud spending on changing teen attitudes, the payoff could be huge. A shift of just one or two percent likely would save insurers and society billings of dollars, he said.

Current training programs with positive reinforcement are helping to change the attitude that one must cheat and lie to get ahead in life, according to Mr. Josephson.

His formula for preventing harsh attitudes that encourage fraud include “real enforcement, real training and a focus on integrity.” He was particularly critical on the courts for dishing out probation and other lesser punishments for committing fraud. “More minor punishment for minor violations is more important than major punishment for major violations,” he said.

2009 Prosecutor of the YearUsing innovative tactics to bust large staged-

accident rings, chop shops and other major insurance cons has earned Queens County (N.Y.) assistant DA Mary Lowenberg the Coalition’s Prosecutor of the Year award.

In one case, Ms. Lowenberg indicted 61 members of a staged-crash ring and medical mill that had bilked insurers out of millions of dollars in bogus injury claims. The ring had targeted Asian drivers, and Lowenberg took down key

ring members by innovatively charging them with hate crimes. She also attached more than a million dollars worth of the defendants’ assets to help repay the victimized auto insurers, according to

the award presentation. Ms. Lowenberg also prosecuted yet another 61 members of a vehicle giveup ring. More than 70 vehicles were recovered that were falsely reported stolen. The total insurance payout would’ve been at least $1.7 million. In addition, she successfully prosecuted a large medical mill operating in New York City.

Ms. Lowenberg was nominated for the award by the National Insurance Crime Bureau.

During her acceptance speech, the assistant DA talked about auto fraud trends, including the emergence of “super runners” who are acting as kingpins of massive operations, replacing the loose confederation of lower-level runners who previously engineered accident scams. She also reported a disturbing trends that rings are moving from staging accidents to causing accidents with innocent drivers as a way to avoid detection by insurers.

Ms. Lowenberg said a vital tool in gaining evidence against these rings is the use of wiretaps. She played a few snippets of a runner threatening a crash participant to continue visiting a chiro clinic and another in which the runner chastised a driver for not causing

2009 Annual Meeting Summary Report

Queens County, N.Y. assistant DA Mary

Lowenberg . . .“Rings are moving to

crashes with innocent drivers.”

Annual Meeting Summary Report • Coalition Against Insurance Fraud • December 2009 3

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enough damage to a car he had just rammed.

Health care fraud legislationDr. Peter Budetti, professor of public health

policy at the University of Oklahoma and current Capitol Hill insider, provided an overview on health care

reform and what it could mean to the fraud-fighting community. He said some of the reform provisions — including payment reform and quality improvements — while not fraud provisions, per se, could help to reduce and detect medical provider scams, if enacted.

Dr. Budetti reported that proposals were being consider by Senate Democrats to create an all-payor, anti-fraud system that would be a dramatic shift to expand the ability of states, private insurers and the federal government to combat health care fraud.

“The complexity of the system encourages fraud,” he concluded.

* * * Coalition executive director Dennis Jay also

reported that U.S. Department of Health & Human Services is planning to sponsor a fraud summit in late January with a focus on increasing collaboration with the private sector. HHS reached out to the Coalition to help plan the event. The Coalition in turn brought NICB and the National Health Care Anti-Fraud Association into the planning process. Mr. Jay also reported that the Coalition, at the request of Sen. Al Franken’s

office has secured endorsements from consumer groups of an amendment to the health care reform bill that would also encourage broader coordination among the federal government, states and the private sector in combatting fraud.

Government AffairsThe government affairs committee reported

on several successes in the 2009 legislative session including Connecticut (anti-solicitation), Delaware (misclassification of workers as independent contractors), Texas (restricting access to

auto accident reports) and Hawaii (expanding the jurisdiction of the state's fraud unit). Also announced were targeted states for 2010: New Jersey, Maine, Pennsylvania, Rhode Island, New York and Colorado.

The committee further reported that the recent National Conference of Insurance Legislators meeting ended with agreements on several anti-fraud issues: approval of an airbag theft and fraud model, approval of a workers compensation employee misclassification model, re-approval of the Coalition's model insurance fraud law and calling on Congress

2009 Annual Meeting Summary Report

Dr. Peter Budetti . . .“The complexity of

the system encourages fraud.”

Annual Meeting Summary Report • Coalition Against Insurance Fraud • December 2009 4

to include greater cooperation and coordination among federal agencies, states, law enforcement and private insurers to combat health care fraud. Finally, the committee announced that it has formed a subcommittee to review and recommend changes to the immunity provisions of the Coalition's model insurance fraud law.

The immunity language was drafted when the model was written in the mid-1990s and the committee plans on submitting the review to the board for consideration at the June 2010 meeting.

Public outreach

The Coalition had a record-breaking year in its media outreach efforts, earning 2,630 anti-fraud stories covering 32 fraud topics covering all types of fraud. Stories were placed in most major news outlets in the U.S. including the Wall Street Journal (twice), New York Times, CBS Evening News, Reader’s Digest, Inside Edition, and a remarkable five stories on Good Morning America.

The biggest news success involved identifying recession-driven vehicle dumpings by anxious drivers as a key national fraud trend, and placing more than 1,200 deterrent stories on the

topic. An online fraud awareness manual

also was developed by the Public Information Committee to help

fraud fighters in developing fraud awareness programs. It will be operational shortly. The PIC also elected the 2009 Insurance Fraud Hall of Shame, which was featured as the cover story in the December issue of Claims magazine.

The Coalition also revamped its online fraud statistics section, by far the most popular website feature. This feature will be continually expanded, making InsuranceFraud.org the nation’s leading source of publicly available online fraud information.

Finally, the Coalition won two national awards — one for a news campaign involving vehicle giveups and the other for a “Fraud of the Month” column about child victims of insurance fraud.

ResearchDennis Jay previewed the results of a recent

survey of state fraud bureaus that concluded the economy in 2009 appears to have had a significant impact on the incidence of fraud. On average, fraud bureaus reported the

2009 Annual Meeting Summary Report

Annual Meeting Summary Report • Coalition Against Insurance Fraud • December 2009 5

number of referrals received and cases opened increased in all of the 15 categories of fraud that were included in the survey.

The greatest average increases were found in bogus health plans, drug diversion and fraud by insurance

agents. On the other end of the scale, the lowest increases were found in staged automobile accidents, life insurance fraud and workers compensation fraud by employers.

Most fraud bureaus reported reduction in their budgets since January 1, 2009. About one in four said staff positions also had been eliminated in 2009 and 35 percent reported they were not allowed to fill empty positions. Only 12 percent of fraud bureaus reported that funds for their agencies had been diverted to other agencies or the general fund.

New Coalition leadershipDouglas L. Ashbridge, director of special

investigation for Farmers Insurance, was elected to a two-year term as co-chair of the

Coalition's board. Also elected was John Sargent, SIU manager of MetLife, to the position of treasurer. Steve Perry, head of

the fraud unit of the D.C. insurance department, was re-elected secretary. During the annual meeting, directors also appointed Ralph Burnham, head of the Pennsylvania Insurance Fraud Prevention Authority, to the organization's executive committee, and also elected the International Association of Lemon Law Administrators (IALLA) to the board. IALLA Executive Director Carol Roberts will represent IALLA on the board.

During his Executive Committee report, co-chair Dennis Schulkins of State Farm also announced that seven new members recently joined the Coalition, including Direct General, Etico, Fico, Factual Photo, ISG, the Human Resources Department of the City of New York and the International Association of Lemon Law Administrators.

2010 goals and budget approvedThe board approved the 2010 workplan with

a list of specific goals for each committee. A $702,000 annual budget which included moderate dues increase also was approved.

Board recognitionThe board honored outgoing Coalition co-

chair Dennis Schulkins of State Farm for his steady leadership in guiding the organization during the last four years. Also honored was founding member Walt Dartland of Consumer Federation of the Southeast who is stepping down as longtime chair of the government affairs committee.

Next meetingThe next full Coalition meeting will be held

in June 2010. Location to be announced.

Doug Ashbridge of Farmers Insurance, left, was elected new board co-chair. John Sargent of MetLife was elected treasurer.