BATON ROUGE, La. (BRPROUD) — Some lawmakers believe the state Department of Insurance is not doing enough to investigate possible fraud both by insurance companies and policyholders. A bill aimed to create a commission to catch people falling through the cracks is advancing in the legislature.

HB692 by Rep. Ed Laravadain would create a commission that would look to investigate claims of insurance fraud that could be missed by the department or cases they don’t normally investigate. The 21-member board would be able to bring cases to the State Police and Attorney General’s office to file criminal charges.

“The idea here is to create something full time that’s focused on fraud, committed after a storm because, you know, there’s thousands of complaints that have been filed with the commissioner’s office,” said Eric Holl, executive director of Real Reform Louisiana. “There’s unfortunately, probably by the time we’re done with IDA across Ida, Laura Delta, tens of thousands of lawsuits.”

The Insurance Commissioner Jim Donelon is against the bill. He claims his office has 12 employees that already deal with complaints. He also stated the kind of fraud his office investigates is typically against policyholders.

“Very few, very few complain saying, ‘We were defrauded by our insurance company,’” Donelon said.

Proponents of the bill said many people are not aware when they have been frauded. There is also not much recourse for filing charges against a company.

“I think that there are probably complaints coming in right now to the Department of Insurance that should raise red flags for fraud that are probably being considered mostly on the basis of market conduct and possible fines and revocation of licenses when really people should be facing possible criminal prosecution,” Holl said.

An example of how a policyholder would commit fraud is padding a claim, meaning they put down more damage than there actually is for a bigger check. An example of an insurance company frauding a policyholder is the company sending an adjuster or engineer who intentionally reports smaller amounts of damage, or makes claims that some of the damage was there before the storm which leads to a smaller payout to the homeowner.

Rep. Larvadain asked the Commissioner to explain the number of times he has investigated fraud cases reported to him but he did not have an exact figure.

“He couldn’t say exactly one example of him dealing with fraud with homeowners… He gave the perfect example of why you need it.”

Some of the members were hung up on the makeup of the board. The bill describes the members as follows:

(1) The commissioner of insurance or his designee.

(2) The state treasurer or his designee.

(3) A representative of the La. State Police Insurance Fraud and Auto Theft Unit.

(4) A representative of the Insurance Fraud Unit in the office of the attorney general.

(5) The chairman of the Senate Committee on Insurance or his designee.

(6) The chairman of the House Committee on Insurance or his designee.

(7) One member representing a victim of a named storm who has filed a homeowners’ insurance claim valued between $100,000 and $1,000,000, appointed by the chairman of the House Committee on Insurance.

(8) One member representing a victim of a named storm who has filed a homeowners’ insurance claim valued between $100,000 and $1,000,000, appointed by the vice chairman of the House Committee on Insurance. 

(9) One member representing a victim of a named storm who has filed a homeowners’ insurance claim valued between $100,000 and $1,000,000, appointed by the chairman of the Senate Committee on Insurance. 

(10) One member representing a victim of a named storm who has filed a homeowners’ insurance claim valued between $100,000 and $1,000,000, appointed by the vice chairman of the Senate Insurance Committee. 

(11) One member representing a business owner who has filed an insurance claim in excess of $150,000 as a result of a named storm, appointed by the chairman of the House Committee on Insurance. 

(12) One member representing a business owner who has filed an insurance claim in excess of $150,000 as a result of a named storm, appointed by the chairman of the Senate Committee on Insurance. 

(13) One member appointed by the La. State Licensing Board for Contractors.

 (14) One member appointed by the American Policyholders Association. 

(15) One member appointed by the La. Professional Engineering and Land Surveying Board. 

(16) One member appointed by the National Association of Mutual Insurance Companies. 

(17) One member appointed by the La. Association for Justice. 

(18) One member appointed by the La. Claims Association.

(19) One member appointed by United Policyholders.

(20) A representative of the American Property Casualty Insurance 4 Association. 5 

(21) A representative of the Consumer Federation of America.

Rep. Gabe Firment of Pollock is an insurance adjuster. He believes one-third of the board being made up of “victims” would make it slanted against insurance companies.

“I would hope that membership would be based on particular skills or abilities or knowledge, not on the fact that they were, you know, that the perception is that they were harmed or mistreated on an insurance claim,” Rep. Firment said.

Rep. Larvadain emphasized the bill’s intention is not to rail against insurance companies. He is aware of companies leaving the state that needs disaster coverage more than most of the country. He said he wants to see fair practices and to catch bad actors on all sides. 

A close vote of 7-5 got the bill out of committee and it heads to the full House for the next round of debates.