The Kentucky Senate Banking and Insurance Committee has unanimously approved Senate Bill 24, a measure aimed at expanding the definition of property and casualty insurance fraud to include contractors and public adjusters who charge excessive or fraudulent fees.
According to a statement from the Kentucky Legislative Research Commission, the bill would classify unnecessary charges and inflated costs passed on to consumers as fraud.
The measure applies only to property and casualty insurance and does not cover bodily injury claims.
Senator Rick Girdler (pictured above), a Republican from Somerset and the bill’s sponsor, said the proposed changes would strengthen existing laws.
As severe weather events become more frequent, there are increasing opportunities for fraudulent activity, Chris Nolan, a contract lobbyist for the Insurance Institute of Kentucky, told lawmakers.
He said that property and casualty fraud leads to higher premiums, estimating that the cost to a single household each year is between $400 and $700 due to fraudulent claims.
Fraud remains a major challenge for the insurance industry. A study from RGA revealed that it still tops insurers’ concerns worldwide, with roughly three in four (74%) indicating that the number of fraud cases is either holding steady or increasing compared to previous years.
The Kentucky bill also ties penalties to the financial amount involved in fraudulent activity. Cases involving $500 or more would carry felony charges, with potential prison sentences and fines of up to $10,000 per individual and $100,000 per corporation or twice the amount gained from the violation, whichever is greater.
The American Property Casualty Insurance Association has expressed support for the bill, saying that it would provide consumer protection and curb abusive practices.
Ron Jackson, vice president of state government relations at APCIA, said fraudulent and abusive practices by third parties contribute to higher costs for all policyholders. He said the association will continue working with lawmakers on the bill’s passage.
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