Legislative Analysis
Phone: (517) 373-8080
INSURANCE FRAUD
http://www.house.mi.gov/hfa
House Bills 5191 and 5192 as reported from committee Analysis available at
Sponsor: Rep. Brenda Carter http://www.legislature.mi.gov
House Bill 5193 as reported
Sponsor: Rep. Cynthia Neeley
House Bill 5194 (H-1) as reported House Bill 5196 as reported
Sponsor: Rep. Mike Harris Sponsor: Rep. Joseph A. Aragona
House Bill 5195 as reported House Bill 5197 (H-1) as reported
Sponsor: Rep. Mike McFall Sponsor: Rep. John Fitzgerald
Committee: Insurance and Financial Services
Complete to 5-23-24
SUMMARY:
House Bills 5191 to 5197 would amend the Insurance Code and other acts to modify penalties
for acts of fraud under the code and to make various other changes related to insurance fraud.
House Bill 5195 would amend the Insurance Code to increase the penalties for acts of fraud as
described in section 4503 of the code. 1
Currently, a person who commits a fraudulent insurance act under section 4503, or who enters
into an agreement or conspiracy to commit such an act, is guilty of a felony punishable by up
to four years in prison or a fine of up to $50,000, or both. In addition, they must be ordered to
pay restitution as provided by the Code of Criminal Procedure 2 and the William Van
Regenmorter Crime Victim’s Rights Act. 3
In addition, if a practitioner is found to be guilty of a fraudulent insurance act, the court must
notify the appropriate licensing authority in Michigan.
The bill would remove the above penalties and establish different penalties based on the
magnitude of the violations, as shown in the table below. However, the bill’s penalties would
apply only to fraudulent insurance acts under section 4503 that involve a fraudulent claim. Any
claims of fraud made within any 12-month period would be aggregated to determine the total
number of claims and fraudulent claim amount. The penalties would be determined based on
the highest level in which one of the conditions is met. For example, a person whose fraud
involved fewer than five claims for a total amount of more than $1,000 would face the
punishments applicable to claims of more than $1,000, rather than those applicable to fewer
than five claims.
1
http://legislature.mi.gov/doc.aspx?mcl-500-4503
2
http://legislature.mi.gov/doc.aspx?mcl-769-1a
3
http://legislature.mi.gov/doc.aspx?mcl-Act-87-of-1985
House Fiscal Agency Page 1 of 6
 Conditions Category Imprisonment Fine (the greater of:)
Amount of less than $1,000 OR Misdemeanor Up to 1 year Up to $2,000 or 3
fewer than 5 fraudulent claims times the amount of
the fraudulent claim(s)
Amount of $1,000 or more but Felony Up to 3 years Up to $10,000 or 3
less than $20,000 OR 5 to 19 times the amount of
fraudulent claims the fraudulent claim(s)
Amount of $20,000 or more but Felony Up to 10 years Up to $15,000 or 3
less than $50,000 OR 20 to 49 times the amount of
fraudulent claims the fraudulent claim(s)
Amount of $50,000 or more but Felony Up to 15 years Up to $25,000 or 3
less than $100,000 OR 50 to 99 times the amount of
fraudulent claims the fraudulent claim(s)
Amount of more than $100,000 Felony Up to 20 years Up to $50,000 or 3
OR 100 or more fraudulent times the amount of
claims the fraudulent claim(s)
A person that entered into an agreement or conspiracy to commit fraudulent acts would be
subject to punishment under the next higher category (except for an agreement or conspiracy
to commit fraudulent acts involving either an amount of more than $100,000 or 100 or more
fraudulent claims). For example, a person that entered into a conspiracy to commit fraud
totaling between $20,000 and $50,000 and involving 20 to 49 claims would face up to 15 years
in prison and a fine of up to $25,000 or three times the amount of the claims, whichever is
greater, or both imprisonment and a fine.
A person found guilty would still be required to pay restitution as currently provided in the act.
Enhanced sentences
The bill would allow for enhanced sentences for certain persons with prior convictions 4 for
fraudulent insurance acts as follows: 5
• A person with one or more prior convictions that commits or attempts to commit an
offense that involves either an amount of less than $1,000 (however many claims) or
fewer than five fraudulent claims (whatever the total amount) would be guilty of a
felony punishable by up to three years in prison or a fine of up to $10,000 or three times
the total amount of the claims, whichever is greater, or both imprisonment and a fine.
• A person with two or more prior convictions that commits or attempts to commit an
offense that involves either an amount of less than $20,000 (however many claims) or
4
A prosecuting attorney intending to seek an enhanced sentence based on a defendant’s prior conviction or convictions
under the bill would have to include on the complaint and information a statement listing the prior convictions. The
existence of the prior convictions would be determined by the court, without a jury, at sentencing or a separate
presentencing hearing. A prior conviction could be established by any relevant evidence, such as a copy of the
judgment of conviction; a transcript of a prior trial, plea-taking, or sentencing; information in a presentence report; or
the defendant’s statement.
5
A person with two or more prior convictions that commits or attempts to commit an offense involving either an
amount of less than $1,000 or fewer than five fraudulent claims would fall under both of the two penalty enhancements
described here.
House Fiscal Agency HBs 5191 to 5197 as reported Page 2 of 6
 fewer than 20 fraudulent claims (whatever the total amount) 6 would be guilty of a
felony punishable by up to 10 years in prison or a fine of up to $15,000 or three times
the total amount of the claims, whichever is greater, or both imprisonment and a fine.
MCL 500.4511
House Bill 5191 would make complementary changes to the Code of Criminal Procedure by
adding the felonies created by HB 5195 to the sentencing guidelines as crimes against the
public trust. Felonies punishable for imprisonment for up to five years would be designated
Class E felonies; for up to 10 years, Class D; for up to 15 years, Class C; and for up to 20 years,
Class B.
The bill cannot take effect unless both it and House Bill 5195 are enacted.
MCL 777.15a
House Bill 5196 would amend the Insurance Code to provide that the civil fines that can be
imposed for violations for which a specific penalty is not provided under the act may also, for
violations of section 4503, be assessed in addition to the penalties prescribed by House Bill
5195. Those civil fines are up to $1,000 per violation, or up to $5,000 per violation if the person
knew or reasonably should have known that they were violating the act.
MCL 500.150
House Bill 5194 would amend the Michigan Penal Code to include a violation of section 4503
of the Insurance Code in the definition of racketeering under the act. Specifically, under the
bill, racketeering would include committing, attempting to commit, conspiring to commit, or
aiding or abetting, soliciting, coercing, or intimidating a person to commit, for financial gain
by obtaining money, property, or any other thing of value, an offense involving a fraudulent
insurance act described in section 4503 of the Insurance Code.
The bill would also add violations of sections 254 7 and 257 8 of the Michigan Vehicle Code to
the definition of racketeering. The sections prohibit knowingly making a false statement on an
application for title of a stolen vehicle and altering, forging, or falsifying certain documents.
Generally speaking, a person who engages in a pattern of racketeering activity is guilty of a
felony punishable by imprisonment for up to 20 years or a fine of up to $100,000, or both, in
addition to costs, and may be subject to criminal forfeiture proceedings.
The bill would take effect 90 days after its enactment.
MCL 750.159g
6
The bill does not provide an enhanced sentence for a person who, with any number of prior convictions, commits or
attempts to commit an offense involving both an amount of $20,000 or more and 20 or more fraudulent claims.
7
https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-257-254
8
https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-257-257
House Fiscal Agency HBs 5191 to 5197 as reported Page 3 of 6
 House Bill 5192 would amend the Insurance Code to allow individuals to share information
concerning suspected or completed insurance fraud with the National Insurance Crime Bureau
and provide that the bureau and its employees or agents are not subject to civil liability for their
official duties.
Currently, the act allows people to share this information with various entities without liability
if they are acting without malice, unless they know that any of the information is false
pertaining to a material fact or thing. It also shields these entities and their employees or agents
from civil action because of a publication or bulletin related to their official activities or duties,
unless they know that the information is false.
The bill would add the National Insurance Crime Bureau to the covered entities.
MCL 500.4509
House Bill 5193 would amend the Health Care False Claim Act to include automobile insurers
that provide personal injury protection (PIP) coverage under Chapter 31 of the Insurance Code9
in the definition of health care insurer.
The act penalizes fraud and various other acts related to obtaining payments or benefits from
health care insurers.
MCL 752.1002
House Bill 5197 would amend the Insurance Code to require an insurer that reasonably
believes or knows that a fraudulent insurance act involving a Michigan policyholder or a claim
for benefits submitted through an assigned claims plan has occurred to provide the information
to the director of the Department of Insurance and Financial Services (DIFS) on a form
prescribed by the director. The director could also require them to provide any additional
information related to the factual circumstances of the alleged act and the parties claiming loss
or damages.
If, after investigation, the director determines it appropriate, they could report the suspected
fraudulent activity to the insurer, the authorized agency, the prosecuting attorney of the county
where the act occurred, or the attorney general.
The bill provides that it would not require an insurer to submit information to the director in
either of the following circumstances:
• The insurer's initial investigation indicated a potentially fraudulent insurance act, but
further investigation revealed that the act was not a fraudulent insurance act.
• The insurer does not have reasonable grounds to believe that a fraudulent insurance act
occurred.
Further, the bill would not relieve an insurer of its obligation to also report suspected violations
of law to an authorized agency. 10
9
https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-218-1956-31
10
Authorized agency means the Department of State Police; a city, village, or township police department; a county
sheriff's department; a United States criminal investigative department or agency; the prosecuting authority of a city,
House Fiscal Agency HBs 5191 to 5197 as reported Page 4 of 6
 Finally, the bill would require an authorized agency to submit all papers, documents, reports,
complaints, or other facts or evidence to the director upon request and to otherwise assist and
cooperate with the director’s investigation of a report filed under the bill.
Proposed MCL 500.4506
BRIEF DISCUSSION:
According to committee testimony, the bills are intended to update various provisions in statute
to better equip the DIFS Fraud Investigation Unit to detect and deter insurance fraud in
Michigan, such as increasing penalties and allowing for better coordination with other states.
Supporters of the bill relayed FBI statistics that estimate insurance fraud to cost the average
family between $400 and $700 dollars per year nationally. They argued that the bills would
help to reduce this impact by reducing the amount of fraud in Michigan.
FISCAL IMPACT:
House Bill 5191 is a companion bill to House Bill 5195. The bill would amend the sentencing
guidelines chapter of the Code of Criminal Procedure to include the proposed felonies included
in HB 5195 as crimes against the public trust. Class E felonies are punishable by a statutory
maximum of five years; Class D felonies are punishable by a statutory maximum of 10 years;
Class C felonies are punishable by a statutory maximum of 15 years; and Class B felonies are
punishable by a statutory maximum of 20 years. The bill would not have a direct fiscal impact
on the state or on local units of government.
House Bills 5192, 5193, and 5197 would have no fiscal impact on the state or local units of
government.
House Bill 5194 would have an indeterminate fiscal impact on the state and on local units of
government. Under the bill, a person committing an offense involving a fraudulent insurance
act would be guilty of racketeering, which is a felony punishable by imprisonment, fines, or
both. The number of convictions that would result under provisions of the bill is not known.
New felony convictions would result in increased costs related to state prisons and state
probation supervision. In fiscal year 2023, the average cost of prison incarceration in a state
facility was roughly $48,700 per prisoner, a figure that includes various fixed administrative
and operational costs. State costs for parole and felony probation supervision averaged about
$5,400 per supervised offender in the same year. Those costs are financed with state general
fund/general purpose revenue. Any increase in penal fine revenue would increase funding for
public and county law libraries, which are the constitutionally designated recipients of those
revenues. The fiscal impact on local court systems would depend on how provisions of the bill
affected court caseloads and related administrative costs. Because there is no practical way to
determine the number of violations that would occur under provisions of the bill, an estimate
of the amount of costs related to state prisons, penal fine revenue collections, or costs to local
courts cannot be made.
village, township, county, or state or of the United States; the Department of Insurance and Financial Services; or the
Department of State.
House Fiscal Agency HBs 5191 to 5197 as reported Page 5 of 6
 House Bill 5195 would have an indeterminate fiscal impact on the state and on local units of
government. Under the bill, penalties for acts of insurance fraud would be increased. Violations
could be either misdemeanors or felonies, depending on the circumstances. Misdemeanor
convictions would increase costs related to county jails and/or local misdemeanor probation
supervision. Costs of local incarceration in county jails and local misdemeanor probation
supervision, and how those costs are financed, vary by jurisdiction. Felony convictions would
result in increased costs related to state prisons and state probation supervision. In fiscal year
2023, the average cost of prison incarceration in a state facility was roughly $48,700 per
prisoner, a figure that includes various fixed administrative and operational costs. State costs
for parole and felony probation supervision averaged about $5,400 per supervised offender in
the same year. Those costs are financed with state general fund/general purpose revenue. Any
increase in penal fine revenue would increase funding for public and county law libraries,
which are the constitutionally designated re