Attorney General Suthers Urges Legislature to Consider Bill to Help Combat Insurance Fraud

DENVER – Attorney General John Suthers today testified in front of members of the Colorado Legislature in support of SB 06-38, sponsored by Sen. Tapia (D-Pueblo) and Rep. Knoedler (R-Jefferson), which would commit more resources to fighting insurance fraud.

“Insurance fraud has become a multi-million dollar problem in Colorado,” said Suthers. “Each year, we receive over 700 referrals from the Department of Regulatory Agencies and the insurance industry, but given our limited resources, we’re only able to investigate around 50 of those. Despite having one of the highest referral rates in the country, Colorado’s funding is close to last.”

At 48 cents per person, the national average for funding insurance fraud units is nearly seven times Colorado’s rate of funding at 7 cents per person.

Since 1997, the year legislation established the Insurance Fraud Unit, the Attorney General’s Office has prosecuted and obtained convictions in 90 criminal cases – a 100 percent success rate. The Unit’s investigations and subsequent convictions were funded through an annual fee of $120 from each insurance entity in Colorado.

The proposed legislation would increase the annual fee from $120 to approximately $425. The additional funds would go toward adding a prosecutor, three investigators and a full-time administrative assistant. Currently, the Office of the Attorney General has one prosecutor, one investigator and a half time administrative assistant devoted to insurance fraud.

Suthers pointed to New York, as an example of a state that realized consumer benefits because of increased insurance fraud prosecution efforts. “After enhancing efforts in New York to combat insurance fraud in 2002, State Farm was able to lower consumer insurance rates by 5 percent,” said Suthers. “Other carriers soon thereafter followed suit, resulting in an estimated savings to industry and consumers of over $250 million.”

According to a joint publication from the Department of Justice and the Federal Bureau of Investigations released last May, insurance fraud (non-health insurance) costs the average family between $400 - $700 per year.

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