2017 0803 - GOV (Senate) - Insurance Fraud in America: Current Issues Facing Industry and Consumers - Jerry Moran (R-KS)

  • 2017 0803 - GOV (Senate) - Insurance Fraud in America: Current Issues Facing Industry and Consumers, Jerry Moran (R-KS)  ---  [BonkNote]
    • [PDF-77p,  VIDEO-CSPAN]
    • CFA - Rachel Weintraub, Legislative Director and General Counsel, Consumer Federation of America
    • NAIC - John D. Doak, Insurance Commissioner, Oklahoma
    • Richard Blumenthal (D-CT)
    • Senate - Committee on Commerce, Science, and Transportation - Subcommittee on Consumer Protection, Product Safety, Insurance, and Data Security 
  • (p1) - Jerry Moran (R-KS) - This hearing will examine the scope of insurance fraud at large in the United States and address nationwide fraud trends across a variety of insurance markets, including property and casualty, and life insurance. In addition, we’ll discuss the tools available to states, insurers, and consumers to protect themselves against these crimes. 
  • (p9-10) -Statement - NAIC - John D. Doak, Insurance Commissioner, Oklahoma
    • Coordination with Federal Government and International Partners
      • In addition to our work with insurance consumers within our own states, state insurance regulators collaborate with our Federal and international colleagues to address insurance antifraud issues. State insurance regulators work with the U.S. Department of Treasury and other financial regulators on Anti-Money Laundering (AML) initiatives as well as initiatives to combat the financing of terrorism (CFT), which can involve permanent life insurance, annuities, and other products with cash value or investment features. While the Treasury Department’s Financial Crimes Enforcement Network (FinCen) has primary responsibility in this arena, state regulators coordinate with FinCen and monitor insurer activities to make sure they are not engaging in these activities and are not susceptible to those acts. To cooperate and facilitate the sharing of information, state insurance departments and FinCen have established Memorandums of Understanding and insurance regulators notify appropriate Federal regulators if an insurer is not in compliance with AML/CFT requirements. 
    • Current Insurance Fraud Trends
      • Life insurance fraud: State insurance departments are also seeing a rise in the tragic case of parents or guardians taking out a life insurance policy on their child and then murdering them for the payout. State insurance departments are currently working diligently on ways to tighten insurers’ underwriting procedures and assist local law enforcement by closely monitoring and possibly preventing the sale and issuance of such policies.
  • (p25) - CFA - Rachel Weintraub, Legislative Director and General Counsel, Consumer Federation of America 
    • Fraud by the Insurance Industry Against Consumers
    • I will first focus on fraud by the insurance industry against consumers.
  • (p71) - Richard Blumenthal (D-CT) - And I think you and we have a special responsibility here given that we’re talking about life insurance. We’re talking about insurance people buy in the expectation their sisters, their brothers, their children, and their spouses are going to rely on it to survive, to live, and to reap the benefits of that life.
    • A lengthy article in the New York Times last year detailed a new and disturbing trend in the whole life industry. I’m sure you’re aware of it. 
    • Insurance companies have jacked up premiums on whole or universal life policies and have shifted the burden of dividend payments from the insurance company to other policyholders.
    • People who bought universal life policies in the 1980s and 1990s, some of which guaranteed annual returns of 4 percent or more, are seeing their premiums now soar.
      • So the new exorbitant rates have left many older Americans with no choice but to drop coverage and lose, you guessed it, the entire value of their policy after years and years of investing in it.
    • And I am raising this issue. I know we’re not going to have final answers today, but I want to ask Ms. Weintraub, realizing that many whole life policies were underwritten during a decade of high interest rates that could support more generous dividends.
    • I also understand these insurance policies gave a guarantee, and policyholders seem to have kept their side of the bargain.
    • Are these exorbitant increases in premiums fair and justified, or are they simply a way for insurance companies to reduce their liability and eliminate the most expensive policies, I understand they’re expensive, but don’t they have an obligation to do better?
  • CFA - Rachel Weintraub, Legislative Director and General Counsel, Consumer Federation of America - It certainly seems unfair to a consumer who has been paying into this policy and then only to find that it is unaffordable for them and they can’t get the benefit of what they’ve been paying for.
    • Certainly that has an unfair result.
    • It’s entirely the reason why consumers have insurance to begin with, and being unable to use it in the way that they’ve been paying for, for years and years is certainly problematic.
    • And I would definitely recommend more research looking into how the disproportionate effect it has on especially older Americans and their ability to obtain coverage, and the investment they put into it.   
  • Richard Blumenthal (D-CT) - Thank you. I would invite other responses. I know we’re short on time. Perhaps others can answer that same question for the record. And again my thanks to the Chairman for his generosity and indulgence. Thank you.
  • Jerry Moran (R-KS) - Does anyone want to include anything?
  • NAIC - John D. Doak, Insurance Commissioner, Oklahoma - I would just close by thanking you from the National Association of Insurance Commissioners, the regulators. We believe that state-based regulation is the best place for insurance. We’re the closest place to the consumer. Like in my state, we’ve been regulating insurance since statehood. And my colleagues that I represent, we’re very proud of the work they do protecting consumers. So we appreciate the opportunity to be here. This is a very, very timely topic and evolving topic relative to new trends in fraud. So thank you, Senators, for having us.