Report 2017-103 Recommendation 2 Responses

Report 2017-103: Workers' Compensation Insurance: The State Needs to Strengthen Its Efforts to Reduce Fraud (Release Date: December 2017)

Recommendation #2 To: Insurance, Department of

To reduce insurers' potential underreporting of workers' compensation fraud, CDI should, by June 30, 2018, create a public report that ranks workers' compensation insurers based on the effectiveness of their antifraud efforts, including the rate at which they submit fraud referrals.

6-Month Agency Response

CDI created its first public report. It is posted online at: https://www.insurance.ca.gov/0300-fraud/0100-fraud-division-overview/12-siu/. The report covers calendar year 2016 activity. In November 2018, the CDI will issue a report that addresses calendar year 2017 activity. Each November thereafter, a subsequent calendar year report will be issued.

California State Auditor's Assessment of 6-Month Status: Fully Implemented

A link to CDI's 2016 annual report titled "Report on Insurer Workers' Compensation Fraud Detection, Investigation and Referral" can be found at the URL CDI provided in its response.

60-Day Agency Response

CDI has tentatively identified a number of factors it is considering including in its public report that will rank workers' compensation insurers based on their antifraud efforts, including the following:

1) The percentage of total insurer claims that resulted in SIU investigations.

2) The percentage of total insurer claims that resulted in fraud referrals to CDI.

3) The percentage of SIU investigations that resulted in fraud referrals to CDI and the DAs.

4) The number of quality/thorough referrals, as a percentage of total fraud referrals (quality/thorough referrals measured as the number of cases closed due to insufficient resources and the number of cases CDI or a DA opened).

5) The number of fraud referrals that were closed due to insufficient evidence (referrals lacking sufficient quality or thorough investigative information) as a percentage of total fraud referrals, would factor into this ranking as a negative ratio.

6) The number of arrests that originated from the insurer's fraud referrals, as a percentage of total fraud referrals.

7) Total fraud referrals as a percentage of total premiums.

8) The number of noncompliance findings from SIU Field Exams, Desk Reviews, or noncompliance with CDI investigative demand letters would be factored into this ranking as a negative ratio.

CDI is in the process of analyzing the potential ranking methodology to determine whether it would violate any confidentiality requirements and whether the eight factors being considered for inclusion provide a meaningful basis for ranking worker's compensation insurers. The anticipated date of completion of its first public report card is June 1, 2018.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2017-103

Agency responses received are posted verbatim.