Meanwhile, law enforcement figures estimate that all those crooks who slithered through the bureaucratic morass cost American families an average of $1,030 annually in higher car, health and life insurance premiums.

Bridging the gap between those numbers was the goal of a bill in the General Assembly last year aimed at toughening penalties, creating a civil enforcement unit and allocating more money to investigate fraud. That bill died a slow death, but some lawmakers and industry officials are hoping to resurrect it when the Legislature reconvenes in January. If something isn't done soon, many worry, the Palmetto State is going to become a magnet for scammers.

"If you were picking a state to run scams from, why wouldn't you pick South Carolina?" asked Lynn Szymoniak, a lawyer who specializes in fighting fraud for the insurance industry in Florida and South Carolina. "If the penalties aren't tough enough, the prosecutors and law enforcement agents are understaffed, then that is the state you'll go to."

The South Carolina attorney general's office last year fielded 844 complaints of insurance fraud, totaling about $3.7 million in reported losses. To investigate and prosecute those cases, the fraud division relies on a budget of about $300,000 that covers the cost of two State Law Enforcement Division agents, one prosecutor and one assistant. That's too few agents, argue industry insiders, to adequately fight fraud, which each year runs about $80 billion nationally.

One of the key points of the proposed legislation was the creation of a civil enforcement unit under the state Insurance Department that would have streamlined the workload of the attorney general's office. To help pay for the division, the bill called for assessing carriers $2.5 million to provide seed money for hiring about nine more staffers, including lawyers, paralegals and investigators. Fraud penalties also would have increased dramatically, from what is now mostly misdemeanor fines to felony offenses that include substantial jail time. Fines collected from fraud perpetrators also would have gone back into the division to pay for hiring more staff.

"The criminal side is a big hammer, but it is hardly ever used. You need civil enforcement," said Dean Kruger, the Insurance Department's chief actuary. "We have a lot of expertise. We know insurance in-and-out. Bringing that unit closer to us would probably enhance its capability."

State Rep. Daniel L. Tripp, R-Greenville, said he plans to re-introduce the bill, which died in committee after infighting among industry officials over who should shoulder what percentage of the burden, when the General Assembly reconvenes in January. Tripp and others interviewed in recent weeks said the fear is that as other states allocate more resources and toughen laws, criminals will migrate to South Carolina.

Civil penalties in Florida, for example, run about 10 times the amount of money stolen. Other states, such as New Jersey, have fraud bureaus with hundreds of investigators and annual budgets that run in the tens of millions of dollars. Even neighboring North Carolina boasts more than two dozen staffers in its fraud division and a budget last year of about $1.8 million.

"Crime rings are constantly looking for the soft underbellies of the insurance industry," said James Quiggle, spokesman for the Washington-based Coalition Against Insurance Fraud, a nonprofit watchdog group that tracks fraud. "If a state gets too hot, often the criminals will leave and find another state or region with a softer touch."

One of the advocates this year for cracking down on fraud is the South Carolina Small Business Chamber of Commerce, which hopes that ferreting out fraud will help keep premiums lower on businesses. Organization President Frank Knapp said 85 percent of businesses in South Carolina have fewer than 20 employees, meaning insurance costs are a big expense for most companies. On top of that, businesses that cheat on insurance premiums can offer a better rate or lower bid on jobs or contracts, undercutting honest businesses.

"If a competitor isn't paying insurance premiums, then they have a competitive edge. They are competing unfairly," Knapp said. "It is not a level playing field."

Few people understand that better than Phil Wilson, owner of Control Management Inc. in Columbia. Wilson's business installs computer systems for hospitals and schools, including The Citadel and the College of Charleston, that control heat and air systems. Wilson spends about $450,000 a year to cover insurance, ranging from workers' compensation to general liability, for his more than 50 employees.

"We got some kids in jail for robbing a 7-Eleven store for $200," said Wilson, who also is president of the Midlands Chapter of the Mechanical Contractors Association of South Carolina. "Then you got a guy who didn't use a gun, but stole a lot more money. It was unarmed robbery."

There are also scores of fraud victims each year, like Murrells Inlet resident Mike Cook, who has about $10,000 in unpaid medical bills after he was injured in a fall while working in a restaurant only to find out later that the insurance company supposedly covering him was fake. "I don't understand it," Cook said. "It's not fair."

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