Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committees on Commerce, Consumer Protection and Housing and Judiciary and Hawaiian Affairs and Labor, to which was referred S.B. No. 2884 entitled:

beg leave to report as follows:

The purpose of this measure is to expand the authority of the Insurance Fraud Investigations Branch to investigate and prosecute insurance fraud in all lines of insurance.

Testimony in support of this measure was received from the following: Department of Commerce and Consumer Affairs, Department of Labor and Industrial Relations, Hawaii Insurers Council, Hawaii Coalition for Health, Davis Levin Livingston Grande, Hawaii Independent Insurance Agents Association, National Federation of Independent Business, Hawaii Employers' Mutual Insurance Company, Hawaii Congress of Health Professionals, The Chamber of Commerce of Hawaii, and numerous individuals. The Hawaii State AFL-CIO, ILWU Local 142, and the Hawaii Medical Service Association testified against the measure. State Farm Insurance Companies, the American Council of Life Insurers, and the Hawaii Association of Health Plans presented comments.

Currently, the authority of the Insurance Fraud Investigations Branch is limited to the investigation and prosecution of fraudulent motor vehicle insurance claims. While Act 125, Session Laws of Hawaii 2003, defined and established penalties for health insurance fraud, the law did not expand the authority of the Insurance Fraud Investigations Branch to enforce the health insurance fraud laws. Similarly, chapter 386, Hawaii Revised Statutes, prohibits and penalizes workers' compensation fraud, but does not designate an enforcement entity.

This measure establishes a comprehensive system of insurance fraud law enforcement by extending the authority of the Insurance Fraud Investigations Branch to investigate and prosecute fraud committed in all lines of insurance. Additionally, this measure expands the offense of insurance fraud to include providing false information on insurance applications and policies and in insurance sale transactions, authorizes civil and administrative remedies, and requires that fines and settlements be deposited into the Compliance Resolution Fund to defray the costs of the operations of the Insurance Fraud Investigations Branch.

Your Committees acknowledge that workers' compensation fraud is an important issue and one that should be carefully and thoroughly reviewed and discussed by this Legislature. However, your Committees find that this issue may be more appropriately addressed in other legislative bill vehicles currently pending before the Legislature, and have therefore amended this measure to delete language extending the authority of the Insurance Fraud Investigations Branch to workers' compensation fraud.

Additionally, your Committees have amended this measure by:

As affirmed by the records of votes of the members of your Committees on Commerce, Consumer Protection and Housing and Judiciary and Hawaiian Affairs and Labor that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2884, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2884, S.D. 1, and be referred to the Committee on Ways and Means.