Snyder creates authority to fight auto insurance fraud

The Detroit News
Governor Rick Snyder speaks to a large crowd at the Michigan Science Center about the Marshall Plan for developing talent in Detroit on February 22, 2018.

Lansing — Michigan Republican Gov. Rick Snyder signed an executive order Tuesday creating a new anti-fraud authority in state government to crack down on abuses in the auto insurance, health insurance and banking sectors.

Legislators have long discussed creating an anti-fraud unit as part of larger plans to reform the state’s no-fault auto insurance system and drive down sky-high rates, but multiple proposals have stalled during Snyder’s tenure.

“Fraud in the system drives up the cost of insurance for all Michiganders, and we need to do everything we can to eradicate it,” the term-limited governor said in a statement.

The executive order, Snyder’s ninth of 2018, tasks director Patrick McPharlin with establishing the anti-fraud unit within the state Department of Insurance and Financial Services.

The authority will function as a criminal justice agency and will investigate “criminal and fraudulent activity” related to any matter the department oversees, including the 1972 auto no-fault insurance law, the state consumer protection act and health care statutes, according to the order.

The executive order gives the authority permission to conduct background checks on licensees, collect and maintain claims of fraudulent activity and criminal investigations, collaborate with law enforcement agencies and coordinate prosecution.

Pete Kuhnmuench, executive director of the Insurance Alliance of Michigan, applauded Snyder’s move but encouraged the Legislature to “enact real reforms to bring down the cost of auto insurance for drivers across the state and fix Michigan’s broken, outdated auto no-fault system.”

Legislative leaders and other officials were not immediately available to comment on Snyder’s action.

McPharlin, in a statement, called Snyder’s order a “positive step forward in addressing the universally recognized problem of fraud in the insurance and financial services sectors.” The unit will “increase our ability to investigate fraud and will ultimately drive down the cost of insurance for Michiganders.”

Snyder called for an insurance fraud authority in his 2013 State of the State address while suggesting broader reforms to the state’s no-fault auto insurance system, which requires motorists to have coverage and provides unlimited lifetime medical benefits.

Legislative reform efforts have repeatedly failed in the state Legislature amid intense lobbying from the powerful insurance, trial lawyer and hospital lobbies.

Detroit Mayor Mike Duggan, who pushed a 2017 plan that would have allowed motorists to choose lower-cost plans with less medical coverage but was rejected in the House, sued the state last month in an attempt to force legislative action.