Insurance Commissioner Ricardo Lara and Assemblymember Lisa Calderon, Chair of the Assembly Insurance Committee, announced this past week that the California Senate and Assembly have passed Assembly Bill 2872, which would support the work of sworn officers at the California Department of Insurance who are the state’s leaders in preventing and stopping insurance fraud. This bill would help close the pay gap between the Department’s sworn fraud detectives and sworn officers in other state agencies, helping strengthen staff retention and enforcement efforts that protect public safety. AB 2872 is headed to Governor Gavin Newsom’s desk for his consideration.
“Insurance fraud is a multi-billion-dollar drain on our state’s economy perpetrated by organized crime and complex financial schemes that harm our most vulnerable, including seniors and immigrant communities,” said Commissioner Lara, who sponsored AB 2872. “Stopping and preventing insurance fraud is critical to our state’s economy and community safety, and it is vital that we recruit and retain our committed, hard-working investigators charged with protecting consumers.”
AB 2872 would raise the compensation for the Department’s detectives to match the compensation of Special Agents at the California Department of Justice who are in the same bargaining unit. This will close the over 20 percent pay gap currently between the two departments and help the Department of Insurance recruit and retain more fraud detectives.
“This legislation not only supports the Department’s efforts to keep our constituents safe from fraud, but is a significant milestone in establishing gender pay equity,” said Assemblymember Calderon. “The Department boasts one of the highest percentages of women in law enforcement, not only within the state but also across the entire nation.”
The Department of Insurance currently employs more than 200 sworn officers to detect, investigate, and respond to insurance fraud statewide. However, current pay inequities among the investigator classifications have consistently undermined the Department’s ability to recruit and retain experienced fraud investigators. The Department’s current vacancy rate for this classification is over 35 percent, with many investigators citing pay inequity as a reason for leaving the Department to go to other state and local law enforcement departments that pay higher wages for comparable law enforcement work. In fact, over the past two years, more than 75 percent of the transfers out of the Department of Insurance have been to the Department of Justice.
The Coalition Against Insurance Fraud estimates the national economic impact of insurance fraud is $308.6 billion each year – almost $1,000 per year for every single American; specific to California, they also estimate there are $17.2 billion in economic losses in the state each year due to insurance fraud, which result in higher costs for California consumers and businesses.
The Department’s Fraud Division receives 22,000 suspected fraud claim referrals each year, which represents over $600 million in suspected losses.
Cases of insurance fraud include but are not limited to: Injured workers not receiving proper medical treatment, innocent victims of staged auto collisions, patients victimized by medical providers conducting unnecessary medical procedures for profit, and substance abuse patients trafficked to collect insurance money.
The Department’s sworn fraud investigators work directly with local, regional, and federal law enforcement partners, as well as the insurance industry, from detection through prosecution. Just last year, the Department submitted 860 cases to district attorneys’ offices for review.
“We train our investigators to be the best in the business, and we want to keep them here at the California Department of Insurance to continue doing this vital public safety work,” added Commissioner Lara. “I believe AB 2872 is needed to help recruit and retain these hard-working law enforcement officers so we can continue to protect consumers and bring perpetrators to justice.”
Governor Newsom has until Sept. 30, 2024, to act on the bill.
