AUGUSTA – Maine is seeing an increase in insurance fraud, and Rep. Anne Perry, D-Calais, wants a fraud unit created in the Bureau of Insurance to reduce fraud and its costs to businesses and consumers.

“We all pay for insurance fraud, we all pick up that cost,” she said last week. “Massachusetts instituted a similar unit a few years ago, and they have seen significant savings as a result of that unit.”

Maine has collected statistics on insurance fraud since 1999, and the latest report, for 2003, indicates significant growth in fraud. One overall indicator is the amount of money not paid out on suspected fraudulent claims. That increased from nearly $9 million in 1999 to almost $15.7 million in 2003.

“That’s a significant increase, and it really only gets the tip of the iceberg,” said Kevin Surette, president of the Maine Licensed Private Investigator’s Association, a trade group of private investigators that is pushing for passage of the legislation. “We see it every day in our work, and we all know we are paying for it in our insurance bills.”

Perry said her legislation would establish a unit with a director, a chief investigator as well as field investigators, support staff and an assistant attorney general to prosecute fraud cases. She is proposing it be funded by a 25-cent fee on each policy issued in the state, with the exception of policies for credit insurance and home warranty or title insurance.

“Fraud occurs in all types of insurance, “she said. “That’s why this proposes a fee on most types of insurance policies.”

The Massachusetts unit has 28 staff members and worked on 863 cases in 2003, out of 1,775 referrals. Auto fraud cases were nearly two-thirds of all cases. Workers’ compensation made up most of the remainder.

“I think the experience in Massachusetts shows the need for this type of unit,” Perry said.

Insurance Superintendent Al Iuppa was not available for comment after the bill was introduced last week, but in his report to the Legislature last year, he said Maine does have insurance fraud. He said the two largest fraud categories in Maine are automobile and workers’ compensation.

“The IRC [International Research Council] estimates that one-third of all bodily injury claims from auto accidents contain some amount of fraud,” he wrote. “According to the Bureau of Insurance’s 2003 survey results, there were only 34 cases in Maine where an insurance company was provided with incorrect information to obtain a policy or reduce an insurance premium.”

In his report, Iuppa said the most common form of workers’ compensation fraud in Maine is a faked or exaggerated injury. He said there also is fraud by employers that misrepresent the nature of their employees’ work or the number of employees in order to reduce their insurance premiums.

Perry said the data indicated to her that Maine has a problem with insurance fraud and policy-holders would be helped by having fraud reduced.

“There are things the Bureau of Insurance is doing now to reduce fraud, ” she said. “This will help coordinate all that is being done now and expand what is being done.”

Surette said simply having the unit will encourage insurance companies to be more aggressive in pursuing fraud. He said too often companies weigh the cost of the claim against litigation costs and decide not to pursue some cases.

“We see it all the time in our business, ” he said. “They decide it’s just not worth pursuing, and we all end up paying for it.”

Surette said with a fraud bureau, companies will have a place to report their suspicions, even if they may have settled the claim.

Deputy Insurance Superintendent Eric Choppia said the bureau had just received a copy of the legislation Friday and is reviewing the bill. He said the agency will need to prepare an estimate on the cost of staff and how much the 25-cent policy fee will raise.

“There is not much we can say about the bill until we have a chance to analyze it,” he said.

Perry hopes the bureau will provide advice on how to make the unit work. She said her legislation only lays out a framework of staffing and not the specific budget that would be needed for the program.

“We will have work to do in committee,” she said,” but this is important to get through.”

Perry is the co-chair of the Legislature’s Insurance and Financial Services Committee, the panel that will hold hearings on the proposal.