31.04.15.05

.05 Plan Components.

A. Education/Training.

(1) An antifraud plan shall contain procedures for the provision of education or training, or both, to the insurer's employees regarding the detection of insurance fraud.

(2) Training in the recognition and referral of suspicious claims shall be:

(a) Required of new and existing claims personnel, underwriters, auditors, insurance producers, and consumer service personnel; and

(b) Offered to independent insurance producers who have appointments with the company.

(3) At a minimum, the educational components of antifraud plans shall address the following:

(a) Courses of instruction shall be:

(i) Designed to address specific aspects of fraud associated with a company's product line, and

(ii) At least 2 hours in duration;

(b) Personnel shall be presented with updated material at the entrance level and at least once every 2 years in conjunction with continuing education standards or as a company policy;

(c) A new employee shall receive the regulated education and training regarding the detection of fraud within 6 months of the effective date of employment; and

(d) Training programs may be developed and conducted either by internal personnel or by outside contractors.

B. Detection.

(1) An antifraud plan shall have provisions regarding the early detection of all areas of fraud including, but not limited to:

(a) Embezzlement and internal theft;

(b) Underwriting and application fraud;

(c) Theft and misappropriation of premiums by insurance producers;

(d) Claims fraud; and

(e) Application fraud.

(2) The antifraud plan shall delineate the methods or approaches, or both, that will be utilized in detecting fraud.

(3) An authorized insurer shall:

(a) Designate an individual or individuals, or a specific unit, either in-house or outside, to be responsible for coordinating the detection, referral, and investigation of suspected fraudulent activity;

(b) Include the designation in the antifraud plan; and

(c) Submit amendments to the designation to the Administration.

(4) Fraud detection guides shall be prepared, published, and maintained to assist claims personnel, underwriters, and insurance producers in the identification, detection, and handling of suspicious claims.

C. Investigation.

(1) An antifraud plan shall contain:

(a) Procedures for handling fraud complaints;

(b) Procedures that are to be followed when instances of suspected fraud have been detected, evaluated, and found to warrant a full investigation;

(c) The requirement that the company representative responsible for the conduct and oversight of fraud investigations assign the matter for investigation;

(d) The designation of the individuals responsible for conducting investigations on behalf of the insurer including the individuals responsible for providing the notifications required by §C(1)(g) of this regulation;

(e) Guidelines and procedures for conducting investigations and cooperating with the Insurance Fraud Division or other law enforcement agency which is conducting a criminal investigation if in-house staff is utilized;

(f) Written considerations as to work product and courtroom testimony; and

(g) Guidelines and procedures for notifying the appropriate law enforcement agency, including the Insurance Fraud Division of the Administration.

(2) Investigators.

(a) A company may maintain an in-house staff of investigators or contract with an outside firm.

(b) If an outside firm is used, the firm shall comply with all Maryland licensing laws and regulations to the extent that they are applicable.

D. Auditing.

(1) An antifraud plan shall contain procedures regarding the auditing of insurance producers by the company.

(2) The auditing procedures shall provide for both routine auditing and random audits.

(3) If an irregularity is discovered during an audit, the antifraud plan shall require that the duly authorized company representative who conducts or oversees investigations be notified immediately.

E. Referral for Prosecution.

(1) If an insurer, in good faith, has cause to believe that insurance fraud has been or is being committed, the insurer shall report the suspected fraud to the Insurance Fraud Division or to the appropriate federal, State, or local law enforcement authority.

(2) The reporting policy shall be in writing and maintained in the offices of the company point of contact for fraud.

(3) The written policy shall be open for inspection by market conduct examiners of the Maryland Insurance Administration.