NU Online News Service, Nov. 6, 3:18 p.m. EST

As state fraud bureaus across the nation face increasing economic pressures, Arizona officials are considering eliminating their fraud bureau completely.

Dennis Jay, executive director of the Coalition Against Insurance Fraud, an alliance of private insurers, government agencies and consumer groups, said an upcoming study will show that insurance fraud bureaus across the country are experiencing stress in the face tight state budgets, but none as bad as Arizona, where officials are floating the idea of eliminating its fraud bureau.

"Arizona, budget wise, is in more dire straits than other states," said Mr. Jay, noting that Republican Gov. Jan Brewer has asked departments to cut 15-percent from the general fund and 15-percent out of the non-general fund.

The bureau has already been cut from 14 to 4 prosecutors and the Department of Financial Services is floating the idea of eliminating additional investigators who look into agent licensing, claims adjustors and bail bondsman.

"The state is telling consumers to go fend for yourself," said Mr. Jay, adding that Arizona is already home to fraud rings that are gaining ground. What is ironic, he continued, is that elimination of the bureau would be negligible to the budget because insurers reimburse the state for what is spent to uncover fraud.

"Three or four good fraud cases and you recoup all that money," he noted.

In its letter to Gov. Brewer, the National Insurance Crime Bureau, the Coalition Against Insurance Fraud and the International Association of Special Investigation Units, urged her to resist the cutback citing the increase in fraud throughout the state during the current economic downturn.

"Since criminals seek the path of least resistance, any further cuts to the Fraud Unit would put the economic health of Arizona and its residents at risk," the groups warned.

Organized fraud rings will rush to fill the enforcement void left by the Fraud Unit's demise, the three groups predicted. "Without question, there will be an eventual and inevitable rise in insurance costs for Arizona businesses and Arizona residents," the letter to the governor further warned.

The groups note that 47 state bureaus around the country have been created to investigate and prosecute insurance fraud. Several have faced budget cuts this year, but none have been wholly eliminated. Arizona would be the first.

The closest any state has come is Florida which considered terminating its prosecutors to close budget holes, but didn't.

In the Coalition report to be released next week, Mr. Jay said that of 37 bureaus that responded to the survey, 63 percent have had their budgets cut, 23 percent saw positions eliminated and 35 percent have not been allowed to fill vacant posts.