By Mark E. Vogler
---- — LAWRENCE — Drivers who purchase automobile insurance in the city have saved more than $68 million in premiums since the Sept. 4, 2003 death of a 65-year-old Lawrence woman in a staged car crash triggered a crackdown on fraudulent accident claims.
A special task force assembled by Lawrence police and the Insurance Fraud Bureau of Massachusetts shortly after that tragedy continues a decade later, leading to 488 people being charged with insurance fraud and related crimes.
The task force was so successful from the outset that it became the model for nine other task forces initiated by the fraud bureau in a dozen fraud-prone communities. Collectively, the task forces have saved drivers in those communities $875 million since they were initiated. Criminal charges have been filed against 1,917 people.
Those are the major findings of a recent report issued jointly by the fraud bureau and the Automobile Insurers Bureau of Massachusetts titled “The Community Insurance Fraud Initiative (CIFI) A Ten Year Retrospective.”
“Lawrence, while identified as the worst hotbed of fraudulent claims in the state, was not the only one,” the report noted.
“Now 13 communities and their surrounding areas have in place task forces, labeled ‘Community Insurance Fraud Initiatives,’ or CIFI’s. These task forces have been a catalyst in the steady reduction of auto insurance losses and premiums in the Commonwealth,” it continued.
“Clearly, this CIFI effort has been a major contributor to a healthy auto insurance climate in Massachusetts over the past decade,” the report said.
Much of the report is based on detailed analysis of various insurance claims data generated in each of the communities with a task force since their initiation. It measured the impact of each task force on the number of claims filed and premiums paid in fraud-prone communities.
The report determined:
- A dramatic improvement in injury-to-accident ratios. Prior to 2003, Lawrence had an average of 141 reported injuries for every 100 accidents — considerably higher than any other community and four times the statewide average of 38 injuries per accident. This is a key statistic tool used by the insurance industry to determine “high fraud” areas. Lawrence’s ratio dropped from 134.4 to 60.2 in the first year after the crackdown and was at 49.4 for 2011.
- Significant reduction in “high volume” medical providers, those billing over $100,000-a-year for services. There were 22 “high volume” chiropractors and physical therapists in Lawrence before its task force was established. Only seven remain and their collective billing dropped by 90 percent ($8.1 million).
- A huge dollar drop in both claims and premiums. The average auto insurance premium in Lawrence has dropped from $1,613 in 2003 to $1,260 in 2011. The average annual savings per vehicle in Lawrence through 2011 was $335 — higher than any other task force community. Collectively, the task force communities had an annual savings of $185 per vehicle compared to $148 statewide. Total written premiums in Lawrence dropped from more than $43-million in 2003 to $36.7-million in 2011.
Overall, there has been a $266 million reduction in claims dollars ($19 million in Lawrence).
Altagracia Arias, a great-grandmother, was killed in a Sept. 4, 2003 crash that she helped plan to scam insurance money for needy relatives, The Eagle-Tribune reported. The story disclosed that just hours before her death, Arias approached several people at the Lawrence Senior Citizens Center offering them a seat in the car for $200 cash.
In the wake of the two-car crash at the intersection of Ferry and East Haverhill streets, Lawrence Police Chief John Romero assigned a handful of his detectives to team up with investigators from the fraud bureau, the fraud units of several insurance companies doing business in Lawrence, the Essex County District Attroney’s Office and the state Attorney General’s Office.
“This tragic event led to the creation of a unique and unprecedented task force dedicated to combating insurance fraud in the city, and eventually to the unraveling of a network of staged accident participants and facilitators that spanned ordinary citizens, runners, chiropractors, physical therapists and lawyers,” the insurance-funded report said.
“This scheme had saddled the insurance industry, and ultimately the auto insurance buying public, with hundreds of millions of dollars of escalated costs for years. The good news is that the trend has been halted and significantly reversed,” it concluded.
The Eagle-Tribune story about the fatal crash was part of an ongoing investigation by the paper which led to the publishing of a five-part series in July 2004 titled “At Fault: Inside the culture of auto insurance fraud.” The series sparked a grand jury investigation and 16 indictments, including lawyers and chiropractors. Then-Gov. Mitt Romney later credited the stories with helping to pass an “anti-runner law” that made it a criminal offense for lawyers and health-care professionals to pay “runners” to bring them clients.
Meanwhile, the Lawrence task force began individual investigations of suspicious cases referred by the fraud bureau and the insurance industry. The investigations led to numerous arrests. The 484 people charged as a result of the work of the Lawrence task force is second only to Boston’s unit (484), according the insurance report.
“In Lawrence, it seemed that most of the staged accidents had roots in runners working directly for local chiropractors who were feeding off the extra “patients” the accidents brought in,” the report stated.
“To this day, the task force is active, working through an inventory of possible staged accident cases that have come to light.”
“Staged accident activity in Massachusetts has been reduced dramatically as people around the state, who used to be involved in fraudulent activities, have taken notice of the crackdown and altered their activities,” the report said.
Estimated Policy Premium Savings Since CIFI Inception Community##Year CIFI Introduced##Cumulative Premium Savings##Average Annual Savings Per Vehicle Boston##2004##$346.9 million##$227 Brockton##2004##$49.6 million##$151 Chelsea/Revere##2005##$32.4 million##$151 Fall River/New Bedford##2006##$38.3 million##$79 Holyoke/Springfield##2004##$98.7 million##$161 Lawrence##2003##$68.4 million##$335 Lowell##2004##$73.6 million##$195 Lynn##2004##$56.8 million##$188 Randolph##2005##$31.7 million##$262 Worcester##2006##$78.4 million##$180 Total CIFI##2006##$874.9 million##$185 Editor's Note: information provided by Automobile Insurers Bureau of Massachusetts. Cumulative premium savings is estimated for each community by comparing the difference between the pre-CIFI average policy premium and the average policy premium for each subsequent year applied to the total number of vehicles in each community. Average annual savings is the cumulative premium savings divided by the number of years of savings and the current number of vehicles in each community. Data is through 2011. People Charged With Auto Insurance Fraud Community##Individuals Charged Boston##488 Lawrence##484 Brockton##295 Springfield/Holyoke##177 Lynn##133 Fall River/New Bedford##95 Randolph##76 Lowell##64 Chelsea/Revere##59 Worcester##46 Total##1,917