The National Council Of Insurance Legislators

Amended Model Insurance Fraud Act

The National Council Of Insurance Legislators (NCOIL) Financial Services and Multi-Lines Committee amended and re-adopted the Insurance Fraud Model Act at the recently concluded 2019 NCOIL Summer Meeting in Newport Beach, CA. The amendments were sponsored by Arkansas Senator Jason Rapert, NCOIL Immediate Past President.

“Insurance Fraud is a serious problem that cheats honest consumers” said Rapert. “As legislators, we need to be vigilant to protect consumers and industry from insurance fraud. There have been tremendous technological changes since this was first adopted in 1995. Updating the NCOIL Insurance Fraud Model Act is a logical way to do that.”

Senator Rapert worked closely with the Coalition Against Insurance Fraud to update and modernize the NCOIL model, which was first adopted in 1995, and readopted periodically.
The model, which has been adopted in whole or part in 28 states is updated to provide increased authority for prosecutors; streamline the proof of intent to defraud and how the intent to defraud is identified; and eliminate multiple-proof requirements in many areas to allow for greater prosecution.

As insurance fraud moves internationally and multi-ring fraud accelerates the model allows for evidence of multi-state operations or fraud committed in another state to be used in the prosecution of insurance fraud in another state. The model also calls for – depending on individual state laws and federal bankruptcy laws – orders of restitution against people who commit fraud to be non-dischargeable in bankruptcy so that they cannot escape the restitution order.

Further, the model allows in civil actions the recovery of attorney’s fees, and on the insurance carrier side, the model allows for the rise of the independent contractor’s outsourcing third party’s that insurance companies are using to both protect those individuals under provisions of the model and if they are the ones committing fraud, the model allows them to be held liable. The model now includes fraud in-the-part vs. fraud in-the-whole meaning that under the prior version of the model the entire claim or act had to be fraudulent before the model applied. Now, if only a portion of the claim or act such as medical billing is fraudulent, the model applies. Also, there have been a lot of changes in the past 20 years with regard to medical services, so now terms such as healing arts and pharmacology are included in the model.

The new model requires all applications or claims forms to include the statement in bold italics: ““It is a crime to knowingly provide false, incomplete or misleading information to an insurance company for the purpose of defrauding the company. Penalties include imprisonment, fines and denial of insurance benefits.”

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