Majority Statement

• Chairman Jerry Moran
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  Majority Statement

  Chairman Jerry Moran

  Good morning, everyone. I call to order this hearing of the Senate Subcommittee on Consumer Protection, Product Safety, Insurance and Data Security.

  As the title suggests, this Subcommittee exercises wide jurisdiction over a diverse range of topics. This will be our first hearing this Congress to examine matters pertaining to insurance – specifically, that of insurance fraud. Thank you to our expert witnesses who came here to join us today.

  Insurance fraud is a major concern not only for insurers – who bear the costs of fraudulent claim payouts – but also consumers, who see these costs passed on to them in the form of higher premiums. 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.

  The insurance industry has an enormous presence in the United States. There are nearly 3,000 property and casualty insurance companies across the country, and another 850 life and health insurance companies. Together, they generated over 1 trillion dollars in premiums in the year 2015 alone.

  The FBI reports that the sheer size of this industry makes it an attractive target for criminals by providing ample opportunities and bigger incentives for committing illegal activities, estimating the total cost of non-health insurance fraud in the U.S. to be more than 40 billion dollars annually. That level of insurance fraud, in turn, costs the average American family upwards of 700 dollars per year in the form of increased premiums.

  With examples of insurance consumer concerns like recent news reports indicating Wells Fargo charged its automobile loan customers for collision insurance they did not need, this hearing is exceptionally timely.  As for oversight, my staff is already in communication with Wells Fargo regarding these concerns, and I plan to follow up accordingly to gather additional information on the circumstances and what is being done to address these issues.

  While insurance is largely regulated at the state level, insurance fraud schemes can and do lead to federal criminal charges, and I believe the federal government must do what it can to protect consumers from bad actors who seek to defraud them. Raising consumer awareness is a significant component of helping consumers protect themselves, and to that end this hearing will highlight a number of current insurance fraud trends – including auto insurance fraud, workers’ compensation fraud, fee churning schemes, and contractor fraud in the wake of natural disasters.

  As was a common theme among popular consumer “scams” discussed in this Subcommittee earlier this year, insurance fraud schemes are constantly evolving and growing in complexity over time. Technology must and will play a crucial role in catching sophisticated fraud activity, and I look forward to learning more from our distinguished witness panel about the use and efficacy of emerging technologies, data collection, and information sharing practices to better detect and prevent insurance fraud.

  Once again, thank you all for being here and generously delaying your August recess travel plans to be a part of this important hearing. With that I will now turn to the Ranking Member, Senator Blumenthal, for his opening remarks.  

Minority Statement

• Bill Nelson
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  Minority Statement

  Bill Nelson

  Thank you for calling this hearing Mr. Chairman.  As Florida’s former insurance commissioner, I’ve seen firsthand how fraud impacts consumers and insurers.

  Insurance fraud takes on many forms from sales abuses that target the elderly to “cash for crash” schemes where accidents are deliberately staged or caused for financial gain. 

  One of the most despicable cases I can recall was that of an insurer who took advantage of black policyholders for decades by overcharging them for burial policies.

  Fortunately, we were able to put a stop to that practice.

  While individual states, and not the federal government, continue to be the primary regulators of insurance, I welcome hearing from our distinguished panel today regarding the trends they’re seeing on the fraud front and whether there is a role the federal government can play to help the states.

  Meantime, since we are talking about insurance, I would also like to take this opportunity to share my thoughts on last week’s health care vote and its aftermath.

  As I have said throughout this process, we need to come together and seek bipartisan solutions to fix the Affordable Care Act and not undo all of the good things its done.  

  That is why I’ve been working with Senator Collins to find solutions that will provide immediate relief to families back home.

  In fact, over the last week the two of us have joined a bipartisan group of other senators who share our desire to find a path forward.

  We’ve discussed creating a permanent reinsurance fund to lower the financial risk of insurance companies and reduce premiums for American families.

  I’ve seen this work before during my days as insurance commissioner following Hurricane Andrew, the second costliest hurricane in our nation’s history.

  In Andrew’s aftermath, Florida established a reinsurance fund to insure the insurance companies for their catastrophic losses.

  The same thing can and should be done for health care.

  I cosponsored a bill to create a permanent reinsurance program that would provide federal funding to cover 80 percent of insurance claims falling between 50,000 dollars and 500,000 dollars over the next two years.  

  After that, federal funding would cover 80 percent of insurance claims between 100,000 dollars and 500,000 dollars. 

  One Florida insurer estimated the bill would reduce premiums for Floridians by up to 13 percent.

  We can also work in a bipartisan manner to fund payments that lower Americans’ out-of-pockets costs.

  These are the same payments the administration is threatening to end that lower costs for millions of Americans.

  If these payments are stopped, there will be real consequences.

  Working families will face higher premiums and fewer insurance options.  In Florida, premiums will increase by 25 percent if these payments are cancelled. 

  Higher costs mean fewer folks will be able to afford coverage. 

  Our colleagues on the HELP Committee, Chairman Alexander and Ranking Member Patty Murray, have the right idea.

  They have committed to holding a series of hearings with the goal of stabilizing the ACA’s insurance market.

  That’s a good start and one I hope we can all get behind because, in reality, it’s going to take more than just a few of us to improve health care for families back home.

  That said Mr. Chairman, I would welcome working with you or any of my colleagues here to find that path forward.

Testimony

• The Honorable John Doak

  Oklahoma Insurance Commissioner, testifying on behalf of the National Association of Insurance Commissioners (NAIC)
  Download Testimony (246.58 KB)

• Mr. Dennis Jay

  Executive Director

  Coalition Against Insurance Fraud
  Download Testimony (108.61 KB)

• Mr. Sean Kevelighan

  Chief Executive Officer

  Insurance Information Institute
  Download Testimony (75.94 KB)

• Mr. Tim Lynch

  Director of Government Affairs

  National Insurance Crime Bureau
  Download Testimony (200.96 KB)

• Ms. Rachel Weintraub

  General Counsel

  Consumer Federation of America
  Download Testimony (779.55 KB)