Tolerance of Fraud, Abuse Reportedly Makes N.Y. Auto Insurance Among the Costliest

Too many New Yorkers tolerate auto insurance fraud and abuse, helping make auto insurance premiums here nearly the highest in the country, according to the New York Alliance Against Insurance Fraud (NYAAIF).

A survey by the Insurance Research Council found that 25 percent of New Yorkers believed it was acceptable to increase an insurance claim by a small amount to make up for insurance premiums paid and 32 percent said it was alright to increase a claim to make up for a deductible.

The IRC reported in an earlier study that one in four New York no-fault personal injury protection (PIP) claims involved some kind of fraud or claim padding.

New York drivers paid an average of $1,014.96 for their auto insurance in 2001, according to the most recent data available from the National Association of Insurance Commissioners, only slightly less than the most expensive state, New Jersey ($1,027.71), which recently enacted tough anti-fraud measures.

The average auto liability insurance premium of $681.48 in New York – the mandatory insurance that includes PIP coverage – is the highest in the country, Bernard Bourdeau, president of NYAAIF pointed out.
In fact, auto liability premiums in New York are 65 percent higher than the national average, according to a new report by the National Association of Insurance Commissioners which reviewed 2001 data. Liability insurance pays other people’s losses — injuries and property damage — which are caused unintentionally or through negligence.
The average premiums in New York for optional coverages also were among the nation’s highest. The average premium for collision coverage was eighth highest in the country and the average premiums for comprehensive coverage (which covers theft and fire) ranked 11th.

“Most people are aware that organized insurance fraud rings are pushing auto insurance premiums through the roof,” said Bernard Bourdeau, president of the New York Alliance Against Insurance Fraud. “But fewer realize that adding a few dollars here and a few dollars there is a substantial component of the fraud problem as well.”
The Insurance Information Institute estimates that fraud will cost New York drivers $432 million in 2003, or nearly $1.2 million every day.
“Fraud in New York’s no-fault system is pushing the cost of auto insurance to unaffordable levels for many,” said Bourdeau. “Ironically, as premiums increase, so does the public’s willingness to pad claims – which only fuels even higher premiums. We have to break this vicious cycle.”

He noted that while the auto liability insurance premium increased 5.6 percent in New York between 1997 and 2001, it dropped by more than six percent countrywide. Bourdeau also cited findings from other IRC studies of New York’s no-fault system:

· The average amount paid by insurers to doctors, chiropractors, physical therapists, medical equipment and transport vendors, acupuncturists and other providers soared 20 percent in New York in 2000 (the most recent year available), in contrast to six percent in other states. This increase is five times the medical inflation rate for metropolitan New York.
· The frequency of PIP claims rose seven percent in New York, while declining two percent in other no-fault states
· New York City residents reported twice as many auto accident injuries, particularly neck and back sprains, as the statewide average and were more likely to seek treatment from a larger number of medical professionals, receive diagnostic procedures like MRIs and hire attorneys to represent them than the rest of the state.
Bourdeau noted that loopholes in the state’s no-fault law have created a lucrative business for organized fraud rings, including corrupt professionals – lawyers, doctors, chiropractors, owners of medical clinics and others – to loot the system by creating staged accidents and operating medical mills which bill insurers for bogus treatments.