Sen. Schumer Targets New York Car Insurance Fraud
Fraud and auto insurance scams are costing New York drivers millions in inflated insurance premiums, U.S. Senator Charles E. Schumer (D-N.Y.) warned. New York drivers pay the second highest car insurance rates in the country, in part because of costly auto insurance fraud.
Schumer released a new report showing that car insurance fraud is costing upstate New York drivers $300 million a year and detailed a new proposal to create tough criminal penalties for fraud in an effort to deter scam artists from ripping off New Yorkers.
“These scam artists don’t just defraud the insurance companies, they defraud every day New Yorkers who at the end of the day are paying more to cover the costs of these cons,” Schumer said. “Fraud hits us all in the pocketbook, stealing money from every New York driver every year. We already have the second highest rates in the country for car insurance- enough is enough. We should treat these criminals like the crooks they are. This means going after them at every level of the government.”
He said that throughout the state, criminals are staging false accidents and submitting false claims to their insurance companies to get insurance companies to pay them money, driving up the bottom line for New York auto insurance companies by an estimated $1 billion annually. Auto insurance fraud schemes can range from “no-fault” accidents that are staged by highly organized webs of con artists including doctors, claims adjusters and others in on the scam to false claims filed after legitimate accidents to stolen car reports when no car has been stolen.
To pay for the $1 billion in fraudulent claims, insurance companies in turn charge customers to defray these costs, at an average of $60 per car insured according to the Insurance Information Institute. These costs are built into New York’s high auto insurance premiums which were up to $1,186 for car insurance including personal injury coverage in 2003, second only to New Jersey. According to a study by the Insurance Research Council, one in four personal injury protection claims appeared to involve some kind of fraud.
Despite some progress in breaking up fraud rings, these scams persist in New York City and are spreading throughout the state, the senator added. Earlier this year, state investigators said that they had arrested criminals involved in auto insurance fraud throughout upstate New York communities. In one of the cases, two men from Lackawanna, who had previously been jailed for forgery and armed robbery, staged an accident and filed no-fault claims with their insurers for $27,000. In March, a man in Rochester was charged with auto insurance fraud for false claims totaling more than $72,000 filed after a drunk driving accident in which he was the driver. State officials maintain that auto insurance fraud is a persistent problem in upstate New York have suggested in statements that the cost to the average New York driver could be as high as $150-$300 per year.
To illustrate the impact of auto insurance fraud on New York drivers, Schumer released a report showing that upstate New York drivers are paying an extra $300 million per year because of auto insurance fraud. Specifically:
• In the Capital Region, auto insurance fraud costs drivers $37 million a year in inflated premiums to insure 617,000 cars;
• In Central New York, auto insurance fraud costs drivers $31.5 million a year in inflated premiums to insure 526,000 cars;
• In Rochester/Finger Lakes, auto insurance fraud costs drivers $44.4 million a year in inflated premiums to insure 740,000 cars;
• In the Hudson Valley, auto insurance fraud costs drivers $93.4 million a year in inflated premiums to insure 1.5 million cars;
• In the North Country, auto insurance fraud costs drivers $17.8 million a year in inflated premiums to insure 297,000 cars;
• In the Southern Tier, auto insurance fraud costs drivers $23.1 million a year in inflated premiums to insure 385,000 cars;
• In Western New York, auto insurance fraud costs drivers $51.9 million a year in inflated premiums to insure 865,000 cars;
Schumer said that the best way to deter criminals from defrauding New York drivers is to improve investigation and impose stiff penalties for auto insurance fraud. Schumer said he will introduce new legislation, the Cheaper Car Insurance Act of 2004, that would set up new federal penalties. Specifically the Cheaper Car Insurance Act would:
• Make the Criminals foot the bill: Schumer’s proposal would impose fines, decided by a judge, of up to $100,000. If the cost of the fraud exceeds $100,000, the fines can cover the fraud’s total cost.
• Lock up perpetrators forinsurance fraud rings: Schumer’s proposal would create a three tiered system of harsh penalties including jail time for the insurance fraud ring masterminds, organizers, and participants.
• Make it a separate crime to serve as a “runner,” “capper” or “steerer” – such as a person who gets paid to simply set up an auto accident by cutting off another driver, a person who directs the victim of an accident to a particular health clinic or doctor knowing that they are involved in the insurance fraud or a person who promises someone money in exchange for lying about the circumstances of a car accident or car theft in order to fraudulently obtain insurance money. These participants would face up to 5 years in jail for each offense.
• Make it a separate crime to employ or solicit a “runner,” “capper” or “steerer” to help set up fake auto accidents or make false auto insurance claims for the ringleader of an auto insurance scam. These fraud ring organizers would face up to10 years in jail for each offense.
• Make it a separate crime to conceive of and mastermind an auto insurance scam. Under Schumer’s proposal, the leader of an auto insurance scam would face up to 15 years in jail for each offense.
• Prevent fraud by allowing the insurers to require inspections of certain cars before insuring them: Schumer’s proposal would allow auto insurance companies to require inspections for cars they suspect could be used for fraud before insuring them under certain circumstances to prevent insurance fraud by criminals who buy cars in bad condition and falsely claim that they were damaged in a car accident.
In addition, Schumer urged the Department of Justice to set up a Federal-State-Local Task Force to break up and prosecute auto insurance fraud rings, and investigate fraudulent chop shops and salvage yards and authorized $25 million for the Task Force in his bill. These units will be staffed by prosecutors who will do nothing but investigate, root out, and prosecute auto insurance fraud. Schumer said that the Department of Homeland Security should work with this task force to deport any illegal aliens who are committing these crimes. Schumer said that since so many auto insurance scams cross state lines, bringing in the resources of federal law enforcement may be the only way to effectively deal with the problem.
Schumer said that while insurance premiums have reportedly dropped by 2% for certain high risk drivers this month, auto insurance fraud remains a serious problem in New York. “Auto insurance fraud is serious business, and until we get serious with it, insurance rates won’t go down much,” Schumer said. “This bill sends a very simple, very strong and very clear message to anyone even thinking of committing auto insurance fraud: expect to be arrested, expected to be tried in federal court by federal prosecutors, and don’t make any plans for the next five to fifteen years.”
While Schumer was a member of the House of Representatives, he wrote one of the few federal laws on the books dealing with auto fraud. The law required every auto part to have a serial number, so police could help trace stolen cars and parts and bust rings of car thieves and chop shops.
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