SB2948 HD1

PART I

SECTION 1. The legislature finds that insurance fraud is not a victimless crime and imposes substantial costs on policyholders, insurers, and state economies by increasing premiums, distorting insurance markets, and undermining public confidence in systems designed to provide protection during times of vulnerability. National data compiled by insurance regulators and industry oversight organizations estimate that insurance fraud results in annual costs exceeding $300,000,000,000 across the United States. State-level data demonstrates significant financial impact from fraudulent and abusive insurance claims over the past decade, including billions of dollars paid in bodily injury and related claims in multiple states.

The legislature further finds that regions exposed to natural disasters experience heightened risk of opportunistic fraud following emergency declarations, including unlicensed contractor activity, litigation driven by false or inflated claims, and coordinated schemes involving improper financial inducements.

The legislature recognizes that insurance fraud increasingly operates across jurisdictional boundaries and that effective prevention and enforcement require coordinated, modernized, and data-driven responses. Florida, Kentucky, Louisiana, and North Dakota have enacted or proposed comprehensive insurance fraud reforms, including expanded statutory definitions, enhanced penalties, mandatory reporting requirements, and advanced analytic tools, that have resulted in substantial fraud recoveries and improved market stability. These other states' initiatives have been informed by collaborative, multi-state policy development efforts, including model frameworks and recommendations advanced through the National Council of Insurance Legislators and the National Association of Insurance Commissioners, which emphasize cross‑agency coordination, standardized reporting, fraud analytics, and strong enforcement authority as essential components of effective insurance fraud prevention.

The purpose of this Act is to align the State's Insurance Code with these multi-state legislative and enforcement efforts by establishing comprehensive insurance fraud prevention and enforcement mechanisms. The following new and amended sections are intended to deter fraudulent conduct, strengthen investigative and prosecutorial capacity, promote data sharing and modern enforcement tools, protect policyholders and insurers, and ensure market integrity, particularly during periods of heightened risk following declared emergencies.

PART II

SECTION 2. Section 431:2-401, Hawaii Revised Statutes, is amended by adding three new definitions to be appropriately inserted and to read as follows:

""Disaster-related insurance activity" or "disaster-related service" means any adjustment, construction service, insurance claim, legal service, repair, remediation, or solicitation arising from or related to a declared state of emergency, natural disaster, or catastrophic event.

"Fraud analytics" means the use of artificial intelligence, data mining, statistical modeling, or other analytical techniques to identify anomalies, indicators, patterns, or trends of insurance fraud.

"Litigation financing arrangement" means any agreement under which a person or entity that is not a party to an insurance claim or legal action provides funding or financial assistance in exchange for a contingent interest in the proceeds of a claim or settlement."

PART III

SECTION 3. Chapter 431, Hawaii Revised Statutes, is amended by designating sections 431:2-401 to 431:2-410, as subpart A and inserting a title before section 431:2-401, to read as follows:

"A. General Provisions"

SECTION 4. Chapter 431, Hawaii Revised Statutes, is amended by adding two new sections to article 2, part IV, subpart A, to be appropriately designated and to read as follows:

"§431:2- Prohibited solicitations and inducements. (a) No person shall engage in the following conduct:

(1) Soliciting insurance claims or potential claims through false or misleading representations;

(2) Offering or providing anything of value, including cash, gifts, services, fee reductions, or other consideration, in exchange for the assignment of insurance benefits, the referral of a claimant, or the execution of a claim-related agreement;

(3) Using call centers, door-to-door solicitations, disaster-response canvasing, runners, or social media campaigns to obtain insurance claims through deception or coercion; or

(4) Misrepresenting licensure, qualifications, affiliations, or authority to induce a person to file or transfer an insurance claim.

(b) Each prohibited solicitation or inducement made in violation of this section shall constitute a separate violation.

§431:2- Litigation-related insurance fraud. (a) No person shall initiate, finance, support, or maintain litigation arising from an insurance claim using false, inflated, or unverified information.

(b) A litigation financing arrangement related to an insurance claim shall be prohibited if the arrangement:

(1) Is contingent upon the pursuit or maintenance of a fraudulent or unverified claim;

(2) Encourages inflated damages, unnecessary medical treatment, or manufactured injuries; or

(3) Obstructs disclosure of material information to an insurer or tribunal.

(c) Participation in a litigation financing arrangement in violation of this section shall constitute insurance fraud pursuant to this part."

PART IV

SECTION 5. Chapter 431, Hawaii Revised Statutes, is amended by adding a new subpart to article 2, part IV, to be appropriately designated and to read as follows:

" . Disaster Related Insurance Fraud

§431:2- Post-loss assignment; prohibited. (a) A post-loss assignment of insurance benefits or rights shall be void and unenforceable if obtained through fraud, misrepresentation, coercion, or material nondisclosure.

(b) No person or insurer shall:

(1) Execute or enforce a post-loss assignment without providing clear written disclosure of the scope, duration, and financial impact of the post-loss assignment;

(2) Require or induce execution of a post-loss assignment as a condition of emergency or disaster-related services; or

(3) Use a post-loss assignment to circumvent licensing, bonding, or regulatory requirements.

§431:2- State of emergency fraud protections. Upon the issuance of a proclamation declaring a state of emergency or local state of emergency, the provisions of this part shall apply to all disaster-related insurance activity and shall be subject to heightened enforcement standards pursuant to chapter 127A, if applicable, to prevent fraud, abuse, and exploitation of policyholders.

§431:2- Prohibition on emergency assignment coercion. No person or insurer shall require or induce a policyholder to execute a post-loss assignment of insurance benefits or rights as a condition of receiving emergency or disaster-related services. Any post-loss assignment obtained in violation of this section shall be deemed void and unenforceable. Each violation shall constitute insurance fraud under this part.

§431:2- Advertising and solicitation restrictions during emergencies. (a) During a state of emergency or local state of emergency declared pursuant to chapter 127A, no person or insurer shall advertise or solicit disaster-related services in a manner that is false, misleading, or deceptive, including:

(1) Representing affiliation with an insurer, government agency, or emergency management agencies without authorization;

(2) Guaranteeing claim approval or specific settlement outcomes; or

(3) Using high-pressure tactics to obtain insurance assignments or contracts.

(b) Each prohibited advertisement or solicitation shall constitute a separate violation.

§431:2- Coordination with emergency management agencies, law enforcement agencies, and licensing boards. The commissioner may coordinate with state and county emergency management agencies, law enforcement agencies, and licensing boards to monitor, investigate, and enforce compliance with this part during declared states of emergency or local states of emergency."

PART V

SECTION 6. Section 431:2-211, Hawaii Revised Statutes, is amended to read as follows:

"§431:2-211 Annual report. The commissioner[~~, as early each year as accurate preparation enables,~~] shall [~~prepare and~~] submit a report of findings and recommendations, including any proposed legislation, to the legislature [~~a report which shall contain:~~] no later than twenty days prior to the convening of each regular session, which shall include but not be limited to:

(1) The condition of all insurers authorized to do business in this State during the preceding year[.];

(2) A summary of abuses and deficiencies in benefit payments, the complaints made to the commissioner and their disposition, and the extent of compliance and noncompliance by each insurer with the provisions of this code[.];

(3) The number and types of insurance fraud investigations, as well as referrals for prosecution of insurance fraud, enforcement outcomes for insurance fraud prosecutions, amounts recovered from insurance fraud, and emerging fraud trends; and

[~~(3)~~] (4) Such additional information and comments relative to insurance activities in this State as the commissioner deems proper."

SECTION 7. Section 431:2-402, Hawaii Revised Statutes, is amended to read as follows:

"§431:2-402 Insurance fraud investigations branch. (a) There is established in the insurance division the insurance fraud investigations branch for the purposes set forth in this part.

(b) The branch shall:

(1) Conduct a statewide program for the prevention of insurance fraud under this title [24], including chapters 431, 432, and 432D; provided that the branch shall not have jurisdiction over workers' compensation under chapter 386;

(2) Notwithstanding any other law to the contrary, investigate and prosecute in administrative hearings and courts of competent jurisdiction all persons involved in insurance fraud violations; and

(3) Promote public and industry-wide education about insurance fraud.

(c) The branch may review and take appropriate action on complaints of fraud relating to insurance under this title [24], including chapters 431, 432, and 432D, but excluding workers' compensation insurance under chapter 386. The branch may deploy fraud analytics and case flagging systems to identify anomalies, indicators, patterns, and trends of insurance fraud; to prioritize investigations; and to allocate enforcement resources; provided that the use of fraud analytics shall not create a presumption of wrongdoing nor shall it be used as the sole basis for enforcement action.

(d) The commissioner shall employ or retain, by contract or otherwise, attorneys, investigators, investigator assistants, auditors, accountants, physicians, health care professionals, paralegals, consultants, experts, and other professional, technical, and support staff as necessary to promote the effective and efficient conduct of the branch's activities. The commissioner may hire these employees without regard to [~~chapters~~] chapter 76 or 89.

(e) Notwithstanding any other law to the contrary, an attorney employed or retained by the branch may represent the State in any criminal, civil, or administrative proceeding to enforce all applicable state laws relating to insurance fraud, including criminal prosecutions, disciplinary actions, and actions for declaratory and injunctive relief. The attorney general may designate an attorney as a special deputy attorney general for purposes of this subsection.

(f) Investigators appointed and commissioned under this part shall have and may exercise all of the powers and authority of a police officer or of a deputy sheriff.

(g) Funding for the branch shall come from the compliance resolution fund established by section 26-9(o).

(h) The commissioner may adopt rules pursuant to chapter 91 to implement and administer this part, including rules governing reporting thresholds, data submission standards, and analytic methodologies."

SECTION 8. Section 431:2-403, Hawaii Revised Statutes, is amended to read as follows:

"§431:2-403 Insurance fraud. (a) A person commits the offense of insurance fraud if the person:

(1) Intentionally or knowingly misrepresents or conceals, or attempts to misrepresent or conceal, material facts, opinions, intention, or law to obtain or attempt to obtain coverage, benefits, recovery, or compensation:

(A) When presenting, or causing or permitting to be presented, an application, whether written, typed, or transmitted through electronic media, for the issuance or renewal of an insurance policy or reinsurance contract;

(B) When presenting, or causing or permitting to be presented, false information on a claim for payment;

(D) When presenting, or causing or permitting to be presented, multiple claims for the same loss or injury, including knowingly presenting [~~such~~] multiple and duplicative claims to more than one insurer;

(E) When presenting, or causing or permitting to be presented, any claim for payment of a health care benefit;

(F) When presenting, or causing or permitting to be presented, a claim for a health care benefit that was not used by, or provided on behalf of, the claimant;

(G) When presenting, or causing or permitting to be presented, improper multiple and duplicative claims for payment of the same health care benefit;

(H) When presenting, or causing or permitting to be presented, for payment any undercharges for benefits on behalf of a specific claimant unless any known overcharges for benefits under this article for that claimant are presented for reconciliation at the same time;

(I) When fabricating, altering, concealing, making an entry in, or destroying a document whether typed, written, or through an audio or video tape or electronic media;

(J) When presenting, or causing or permitting to be presented, to a person, insurer, or other licensee false, incomplete, or misleading information to obtain coverage or payment otherwise available under an insurance policy;

(K) When presenting, or causing or permitting to be presented, to a person or producer, information about a person's status as a licensee that induces a person or insurer to purchase an insurance policy or reinsurance contract; [~~and~~]

(L) When making, or causing or permitting to be made, any statement, either typed, written, or through audio or video tape or electronic media, or claims by the person or on behalf of a person with regard to obtaining legal recovery or benefits; and

(M) When presenting, causing or permitting to be presented, or preparing with knowledge or belief that it will be presented, any statement, application, estimate, invoice, record, or document containing false, incomplete, misleading, or deceptive information in support of an insurance claim, policy application, premium calculation, or benefit determination;

(2) Intentionally or knowingly aids, agrees, or attempts to aid, solicit, or conspire with any person who engages in an unlawful act as defined under this section; [or]

(3) Intentionally or knowingly makes, causes, or permits to be presented, any false statements or claims by any person or on behalf of any person during an official proceeding as defined by section 710-1000[.];

(4) Intentionally or knowingly offers or provides anything of value, including cash, gifts, services, or fee reductions, in exchange for the assignment of insurance benefits, the referral of a claimant, or the execution of a claim-related agreement;

(5) Intentionally or knowingly initiates, supports, or benefits from a litigation financing arrangement arising from an insurance claim using false, inflated, or unverified information;

(6) Knowingly conceals, suppresses, or omits any material fact that affects an insurer's evaluation, adjustment, settlement, or payment of a claim; provided that an insurance professional who reasonably relies on information from a third-party shall not be found to have knowingly omitted material facts; or

(7) Knowingly benefits directly or indirectly from the proceeds of insurance fraud.

If a person commits or attempts to commit any of the offenses under this subsection at any stage of the insurance transaction, including but not limited to policy issuance, underwriting, claims solicitation, claims adjustment, payment, litigation, or settlement, each offense, omission, transaction, or claim submitted in furtherance thereof shall constitute a separate offense.

(b) [~~Violation~~] Insurance fraud under this part, including a violation of subsection (a) [is], shall be a criminal offense and shall constitute:

(1) A class B felony if the value of the benefits, recovery, or compensation obtained or attempted to be obtained exceeds $20,000[;] or if the offense involves a pattern or practice of insurance fraud;

(2) A class C felony if the value of the benefits, recovery, or compensation obtained or attempted to be obtained exceeds $750; or

(3) A misdemeanor if the value of the benefits, recovery, or compensation obtained or attempted to be obtained is not in excess of $750.

Each act of insurance fraud under this part shall constitute a separate offense regardless of whether an insurer sustains a financial loss. A pattern or practice of insurance fraud exists when a person commits two or more acts of insurance fraud within five years. A pattern or practice of insurance fraud shall constitute an aggravating factor for purposes of penalties, enforcement actions, and prosecutorial discretion.

(c) This section shall not supersede any other law relating to theft, fraud, or deception. Insurance fraud may be prosecuted under this part, or any other applicable statute or common law, or through civil actions or administrative enforcement, and all [~~such~~] applicable remedies shall be cumulative.

(d) A business entity shall be liable for insurance fraud committed by an officer, employee, agent, or contractor acting within the scope of the entity's business or for the benefit of the entity. Lack of direct knowledge by the entity shall not preclude liability if the entity failed to implement reasonable compliance or oversight measures."

SECTION 9. Section 431:2-405, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a) In addition to or in lieu of criminal penalties under section 431:2-403(b), any person who commits insurance fraud [~~as defined under section 431:2-403,~~] under this part, may be subject to the administrative penalties or civil fines established in this section.

(b) If a person is found to have knowingly committed insurance fraud under this part, the commissioner may assess any or all of the following penalties:

(1) Restitution to any insurer, policyholder, or any other person, including the State or county for costs incurred related to investigation or enforcement, of benefits or payments fraudulently received or other damages or costs incurred;

(2) A fine of [~~not~~] no less than $5,000 and no more than [~~$10,000~~] $50,000 for each violation; [~~and~~]

(3) Reimbursement of attorneys' fees and costs of the party sustaining a loss under this part; provided that the State shall be exempt from paying attorneys' fees and costs to other parties[.];

(4) Sanctions, including but not limited to license suspension, license revocation, or probationary licensing conditions; and

(5) Disgorgement of profits obtained through insurance fraud."

SECTION 10. Section 431:2-408, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) An insurer or other licensee shall have a civil cause of action to recover payments or benefits from any person who has [~~violated section 431:2-403;~~] committed insurance fraud under this part; provided that no recovery shall be allowed if the person has made restitution pursuant to section 431:2-404 or 431:2-405(b)(1)."

SECTION 11. Section 431:2-409, Hawaii Revised Statutes, is amended to read as follows:

"[[]§431:2-409[]] Mandatory reporting[.]; whistleblower protection. (a) Within sixty days of an insurer or other licensee's employee or agent discovering credible information indicating a violation of section 431:2-403, or as soon thereafter as practicable, the insurer or licensee shall provide to the branch information, including documents and other evidence, regarding the alleged violation of section 431:2-403. The [~~insurance fraud investigations~~] branch shall work with the insurer or licensee to determine what information shall be provided.

(b) Information provided pursuant to this section shall be protected from public disclosure to the extent authorized by chapter 92F and section 431:2-209; provided that the branch may release the information in an administrative or judicial proceeding to enforce this part to federal, state, or local law enforcement or regulatory authorities, the National Association of Insurance Commissioners, the National Insurance Crime Bureau, or an insurer or other licensee aggrieved by the alleged violation of section 431:2-403.

(c) An insurer or a person that submits a report of suspected insurance fraud to the branch or a law enforcement agency in good faith shall be immune from civil or administrative liability arising from the report. Any retaliation from an employer against an employee who makes a report of suspected insurance fraud in good faith shall constitute a violation of section 378-62. This subsection shall not apply to knowingly submitting false or malicious reports of suspected insurance fraud."

SECTION 12. Section 431:2-410, Hawaii Revised Statutes, is amended to read as follows:

"[[]§431:2-410[]] Deposit into the compliance resolution fund. All moneys that have been recovered by the department of commerce and consumer affairs as a result of prosecuting insurance fraud violations pursuant to this part, including civil fines, criminal fines, administrative fines, forfeitures, disgorged funds, and settlements, but not including restitution made pursuant to section 431:2-404, 431:2-405(b)(1), or 431:2‑408, shall be deposited into the compliance resolution fund established pursuant to section 26-9(o)."

SECTION 13. There is appropriated out of the compliance resolution fund the sum of $ or so much thereof as may be necessary for fiscal year 2026-2027 to support insurance fraud investigations.

The sum appropriated shall be expended by the department of commerce and consumer affairs for the purposes of this Act.

SECTION 14. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 15. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 16. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 17. This Act shall take effect on July 1, 3000.

THE SENATE	S.B. NO.	2948
THIRTY-THIRD LEGISLATURE, 2026		S.D. 2
STATE OF HAWAII		H.D. 1