Putting the brakes on fraud

April 01, 1992

The only thing surprising about the recent arrest of Ruxton lawyer Nelson R. Kandel for allegedly aiding and abetting insurance fraud is that the arrest happened at all. Every year, insurance companies pay out millions to settle claims for accidents and injuries that never really occurred.

In Maryland, where auto insurance fraud flaws roughly 25 percent of all claims, the cost to consumers approaches $3 billion a year. It's probably more than coincidence that this state, which has the nation's sixth highest premium rates, ranks No. 1 in the percentage of claims filed by people represented by lawyers. In metropolitan Baltimore, in fact, fully half of the insurance claims are submitted already bearing the attorney's name.

Combating the problem is tough. Partly because of greed, partly because it's viewed as a "victimless" crime, insurance fraud is widespread. Law-abiding citizens routinely exaggerate bodily injuries. Police reports and insurance claims are commonly lodged for accidents that never happened. Sophisticated career-fraud artists stage bogus accidents.

Insurance company watchdogs are always on the lookout for these scams. But Mr. Kandel's arrest points to what may be a more effective approach -- going after the doctors, chiropractors and lawyers who work in concert to make them possible. A driver involved in an accident finds a lawyer. Who sends him to a certain doctor. Who orders a few dozen therapy treatments. The driver settles with the insurance company. He walks off a couple thousand dollars richer and the lawyer takes his cut. The doctor, of course, has already been paid. Everybody wins -- except the insurance companies' other policy holders.

These cases are often settled out of court. But even when they do make it into a courtroom, jurors' hands are tied. Evidence and testimony, bogus though it may be, makes it difficult to distinguish reasonable medical care from that manufactured to back an insurance claim.

Relief, though, may be close at hand. The Maryland attorney general's probe sends a strong message to would-be participants in the insurance fraud game. There's currently a proposal in the General Assembly that would create a fraud unit within the state's Insurance Division. There may be other solutions such as a cap on money paid for claims resulting from minor injuries in auto accidents and stiffer penalties for defrauding insurance companies.

Fraud isn't the only culprit responsible for Maryland's high insurance rates, but it is a problem that needs serious and immediate attention.

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