Frequently Asked Questions
About Fraud Prevention Plans And Special Investigations Units
- What Insurers Need to Know
Section 409 of the New York Insurance Law and Regulation 95 require insurers to file with the Department of Financial Services, Financial Fraud & Consumer Protection Division, Criminal Investigations Unit, Insurance Frauds Bureau a plan for the detection, investigation and prevention of insurance fraud. The Fraud Prevention Plan must include provisions for establishing a Special Investigations Unit (SIU), apart from any underwriting or claims units, to perform these functions. The following questions and answers provide information that may be useful to insurers in implementing this mandate.
New York Insurance Law permits insurers to use the services of an outside contractor
to perform the functions of an SIU. What requirements must an insurer fulfill
when using an outside contractor?
Answer: Regulation 95 86.6(b)(1) An insurer that uses an outside contractor to perform SIU functions must include with its Fraud Prevention Plan a copy of the executed agreement between the insurer and the contractor. The insurer remains responsible for the development and implementation of its Fraud Prevention Plan.
- What is meant by an
open budget line for an SIU?
Answer: Each SIU should be established as a separate unit with its own budget line. The Department will review the source of each SIUs funding.
- Besides establishing
an SIU, what other provisions must be included in Fraud Prevention Plans?
Answer: Fraud Prevention Plans must also include provisions for in-service training programs for investigative, underwriting and claims staff in identifying and evaluating suspected insurance fraud; development of public awareness programs; and development of a Fraud Detection and Procedures Manual, among other requirements of Section 409(c).
- Section 409 of the Insurance Law and Regulation
95 require insurers to submit an annual report to the Department. When is the
report due? What information must the report contain?
Answer: The report is due no later than March 15 of each year. The Department has developed a specific form, the "Annual SIU Report," designed to generate required information about the insurer's experience, performance and cost effectiveness in implementing the Fraud Prevention Plan. Insurers are required to file their reports electronically through a secured environment on the Department's portal Web site. Instructions for electronic filing can be found on the Web site.
details is an insurer required to provide regarding the staffing of a Special
Answer: The Plan must include the name, title, job description and geographical location of each investigator in the SIU. Insurers must demonstrate that investigators meet the qualifications specified by Section 409 (b)(3) and Regulation 95 86.6(c).
there a requirement for an SIU to include a minimum number of investigators?
Answer: No. Each company has broad latitude in deciding how much of its resources will be dedicated to fraud prevention. However, companies must justify the adequacy of these resources.
- SIU investigators hired after
September 10, 1996 must be qualified by specific education and/or experience as
outlined. Regulation 95 86.6(c). Among these qualifications is an associate's
or bachelor's degree in criminal justice or a related field. What are some related
Answer: Related fields include police science, forensic science, government/public administration, security management and pre-law. Other fields will be considered if they meet certain requirements.
is meant by the vulnerability of an insurer?
Answer: Vulnerability means the risk of potential loss from fraud, which varies from company to company. It is an important factor for insurers to consider when preparing a Fraud Prevention Plan. For example, strict underwriting guidelines coupled with thorough investigations of all policy applicants will decrease vulnerability.
insurers required to develop a Fraud Detection and Procedures Manual?
Answer: Yes. Section 409(c)(6) requires that insurer Fraud Prevention Plans provide for the development of such a manual for use by underwriting, claims and investigative personnel. If the Manual is available in hard copy, insurers are requested to submit it to the Department. However, if the Manual is an electronic version available for internal use only, the Department uses various methods to verify the existence of the Manual.
- Are an insurers Fraud Prevention
Plan or Fraud Detection and Procedures Manual subject to New York States
Freedom of Information Act?
Answer: No. Section 409(e) of the New York Insurance Law states that "Any plan and the information contained therein, or correspondence related thereto, or any other information furnished to this section shall be deemed to be a confidential communication and shall not be open for review or be subject to a subpoena except by court order or by request from any law enforcement agency or authority."