Insurance Commissioner Ricardo Lara and Assemblywoman Lisa Calderon, Chair of the Assembly Insurance Committee, announced last week that the California Senate and Assembly passed Assembly Bill 2872, which would support the work of the California Department of Insurance’s sworn officers, who are the state’s leaders in preventing and combating insurance fraud. The bill would help close the wage gap between sworn detectives at the Department of Insurance and sworn officers at other state agencies, helping to strengthen employee retention and law enforcement efforts that protect public safety. AB 2872 is headed to Governor Gavin Newsom’s desk for consideration.

“Insurance fraud represents a multi-billion dollar loss to our state’s economy, perpetrated by organized crime and sophisticated financial schemes that harm our most vulnerable, including seniors and immigrant communities,” said Commissioner Lara, who sponsored AB 2872. “Stopping and preventing insurance fraud is critical to our state’s economy and community safety, and it is essential that we recruit and retain our committed and hardworking investigators charged with protecting consumers.”

AB 2872 would increase the compensation of the Department’s detectives to match that of California Department of Justice special agents who are part of the same bargaining unit. This will close the more than 20 percent pay gap that currently exists between the two departments and help the Department of Insurance recruit and retain more fraud detectives.

“This legislation not only supports the department’s efforts to protect our voters from fraud, but also is an important step in achieving gender pay equity,” said Rep. Calderon. “The department boasts one of the highest percentages of women in law enforcement, not only in the state but in the entire country.”

The Department of Insurance currently employs over 200 sworn officers to detect, investigate, and respond to insurance fraud throughout the state. However, current pay inequities among investigator classifications have consistently undermined the Department’s ability to recruit and retain experienced fraud investigators. The Department’s current vacancy rate for this classification is over 35 percent, with many investigators citing pay inequity as a reason for leaving the Department to move to other state and local law enforcement agencies that pay higher wages for comparable law enforcement work. In fact, over the past two years, over 75 percent of transfers out of the Department of Insurance have been to the Department of Justice.

The Coalition Against Insurance Fraud estimates that the national economic impact of insurance fraud is $308.6 billion per year, or nearly $1,000 per year for every American. For California, it also estimates that economic losses in the state are $17.2 billion each year due to insurance fraud, resulting in higher costs for California consumers and businesses.

The Department’s Fraud Division receives 22,000 reports of suspected fraud each year, representing more than $600 million in suspected losses.

Cases of insurance fraud include, but are not limited to: injured workers who do not receive proper medical care, innocent victims of staged automobile collisions, patients victimized by medical providers performing unnecessary medical procedures for profit, and drug addicted patients trafficked to collect insurance money.

The Department’s sworn investigators work directly with local, state and federal law enforcement partners, as well as the insurance industry, from detection to prosecution. Last year, the Department referred 860 cases to district attorneys’ offices for review.

“We train our investigators to be the best in the business and we want to keep them here at the California Department of Insurance to continue doing this vital public safety work,” Commissioner Lara added. “I believe AB 2872 is necessary to help recruit and retain these hard-working law enforcement officers so we can continue to protect consumers and bring perpetrators to justice.”

Governor Newsom has until September 30, 2024, to act on the bill.