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California may reduce penalties for phony car insurance claims

A proposal by California governor Arnold Schwarzenegger to reclassify fraudulent car insurance claims and other insurance fraud as misdemeanor crimes has drawn protest from anti-fraud groups.

Schwarzenegger has proposed reclassifying 73 property and drug crimes, including most insurance crimes, as misdemeanors rather than felonies in order to reduce the state prison population amid the state's severe budget crisis.

California's insurance commissioner, Steve Poizner, and four anti-fraud groups warned that reclassifying fraudulent car insurance claims and other fraud would erode the state's efforts to prosecute insurance fraud.

"Insurance fraud is a serious crime that demands serious consequences," the Coalition Against Insurance Fraud, National Insurance Crime Bureau, National Health Care Anti-Fraud Association and the International Association of Special Investigation Units said in a joint letter to Schwarzenegger.

Poizner, who has announced his intention to run for governor next year, criticized the proposal, saying it would hurt investigations and prosecution of insurance fraud. Search warrants cannot be executed in misdemeanor cases, he said.

"This proposal would severely limit [law enforcement's] ability to go after career criminals," he said.

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