Hearing of the Consumer Protection, Product Safety, Insurance and Data Security Subcommittee of the Senate Commerce, Science, and Transportation Committee - Opening Statement of Sen. Moran, Hearing on Insurance Fraud in America: Current Issues Facing Industry and Consumers

Hearing

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.

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