Insurance Groups Testify on Need for No-Fault Fraud Reform in N.Y.

Representatives of insurance company fraud investigative units and others testified at a public hearing yesterday before the New York Senate Standing Committee on Insurance on the need for serious no-fault fraud reform in the state.

“No-fault fraud is costing New York drivers more than $1 billion a year in increased premiums,” said Gerald Zimmerman, assistant vice president and regional manager for the Property Casualty Insurers of America Association (PCI), which testified before the committee. “That means the cost of no-fault fraud adds an estimated $177 to every auto policy in the state. We urge the legislature to stop nibbling around the edges of this serious problem and take aggressive action to stop the fraud epidemic in New York.”

The Committee, chaired by Sen. James Seward, heard testimony from a variety of sources, including representatives from PCI members Liberty Mutual and Allstate, the New York Insurance Fraud Bureau, and a man whose sister was killed in a staged accident.

For the past several years, the insurance industry has been recommending several steps that New York could take to help stem no-fault fraud. These include:

 Establishing a system of certified and approved protocols for auto no-fault medical treatment to help reduce the number of phony tests, treatments and procedures that currently cost New York drivers millions in premium increases;

 Establishing a decertification process to bar fraudulent medical mills and health care providers that abuse the system from treating no-fault accident cases;

 Reforming the current system, which allows insurers only 30 days to raise legitimate defenses, including the withholding of payment due to suspected fraud. Under the current system, an insurer cannot deny payment if a fraudulent claim is discovered more than 30 days after it is submitted. If an insurer is found to have improperly withheld payment, the claim must be paid with annualized interest of 24 percent and attorneys’ fees;

 Providing for mandatory arbitration of disputed no-fault medical claims;

 Criminalizing the act of serving as a “runner,” or steering participants into staged accidents and to unscrupulous attorneys and medical mills. Runners should face a felony indictment;

 Establishing a flex-rating plan for auto insurance premiums, which would make it easier for insurers to adjust rates;

“Elements of these recommended reforms are pending before the legislature in several different bills,” continued Zimmerman. “By adopting one or all of them, New York lawmakers would be dealing fraud a serious blow and reducing the ‘fraud tax’ that all drivers now pay.”

PCI member companies write about 53 percent of all the personal auto insurance business in New York.