Crackdown on N.Y. No-Fault Fraud Reportedly Begins to Pay Dividends as Costs Show Slight Decline

The vigorous crackdown on insurance fraud and abuse spearheaded by New York’s insurance companies, law enforcement agencies and prosecutors, and supported by tough insurance department regulations and a statewide public information program is beginning to put a small dent in the costs of New York State’s no-fault insurance system, according to the New York Alliance Against Insurance Fraud (NYAAIF).

Although New York reportedly remains the insurance fraud capital of the country, NYAAIF noted some recent progress. For example, the Insurance Information Institute (I.I.I.) reported that:

· After a long period of soaring growth, the average injury claim cost (known as PIP claims) under New York’s no-fault system declined 8.7 percent during the 12 month period ending June 30, 2003.

· The average injury claim cost (known as PIP claims) in 2003 is $7,514, down from $8,518 in 2002, according to the I.I.I.

· While New York’s PIP costs are 12 percent above the national average in 2003, they were 34 percent above the countrywide average in 2002.

“In spite of this progress, the criminal activities of sham medical clinics, corrupt medical professionals, attorneys and others who loot the no-fault insurance system still levy a “fraud tax” on auto premiums of $1 million per day,” said Bernard Bourdeau of NYAAIF.

Bourdeau cited several reasons for the positive trends, including greater recognition on the part of law enforcement and prosecutors of the costs of fraud.

These developments included the creation of a special fraud-fighting unit in the New York City Police Department, a fraud prosecutor’s office by the state Attorney General, a medical fraud task force by the National Insurance Crime Bureau, the filing of civil suits under the Racketeer Influenced and Corrupt Organizations (RICO) act and the indictments by the Suffolk County, Long Island district attorney of more than 500 people associated with a massive fraud ring.

He also reported that the courts have permitted the New York Insurance Department to implement a tough anti-fraud measure, known as Regulation 68. The measure requires people injured in auto accidents to notify their insurance company within 30 days of an accident, rather than 90 days, and submit proof of medical, wage loss and other expenses within 45 days, rather than 180 days.

“The prolonged notification periods allowed corrupt medical professionals to generate masses of bogus treatment bills before the insurance company had a chance to thoroughly investigate them,” said Bourdeau.

He pointed out that Governor Pataki and the insurance department have proposed a package of anti-fraud measures to close other legal loopholes that make it difficult for insurers to combat fraud.

“Tough anti-fraud measures are required to build on the progress made to date and secure future gains,” commented Bourdeau. “With budgets of law enforcement and prosecutors under pressure, we cannot afford to retreat in this effort.”

These include criminal penalties for “runners” who solicit participants in fraud scams, medical protocols, and decertification of corrupt medical providers.

He also pointed out that the public now has a greater awareness of costs of fraud both through higher insurance premiums and as potential victims of staged accidents.

Bourdeau said that millions of New Yorkers have seen television commercials or heard radio ads produced by NYAAIF which demonstrate the impact of insurance fraud on New Yorkers.

The media also has reported vivid accounts of how police officers and hospital workers have been lured into providing fraud rings and bogus medical clinics with phony accident reports and victims.

“The more people are aware of the costs and consequences of insurance fraud, the greater the likelihood they will not commit this crime or report it to law enforcement when they suspect it,” added Bourdeau.