By JONATHAN D. EPSTEIN
News Business Reporter
6/19/2005
Efforts to fight auto insurance fraud in New York state seem to be working, with fraud reports to the state down 17 percent last year, according to the New York Alliance Against Insurance Fraud.
Citing statistics from the industry-funded Insurance Information Institute, the insurer group said the cost of no-fault personal injury protection claims is down 32 percent since 2000.
It also said the frequency of those claims, while still above the national average, is down 21 percent. Even more, the average cost of such claims in New York, at $5,867, is now below the national average of $7,060.
The improving situation is in contrast to 2000, when no-fault claim costs in the state were growing faster than in any other no-fault state, rising 28.5 percent annually, with losses increasing by 121 percent – twice the national average.
“The remarkable turnaround is the result of aggressive efforts to combat fraud,” said Bernard Bourdeau, president of the group and the New York Insurance Association, the trade group for property and casualty insurers. “. . . But the battle is far from over. Insurance criminals will continue to exploit every loophole in the system unless we act to close them.”
Auto insurance fraud has been one of the biggest problems hitting both the insurance industry and consumers in New York, as perpetrators have targeted the state’s no-fault system by overwhelming insurers with paperwork so they can’t investigate claims.
Coordinated rings of fraudsters, often consisting of doctors, lawyers and “runners” who stage accidents, have been causing hundreds of millions of dollars in losses for insurers every year – about $1.2 million a day just in 2003, according to the NICB.
In response, police, prosecutors, and companies have teamed up to crack down on the rings, while regulators adjusted the rules to give insurers more time to investigate claims before paying them. They also launched campaigns to teach consumers how fraud impacts them in higher premiums.
The result has been a dramatic drop. According to the state Insurance Department late last year, just 61 cents of every dollar in premiums went to pay claims as of June 2004, a drop from from 86 cents in 2002. And the average personal injury protection losses per claim fell to $6,229 in June 2004 from $8,489 at the end of 2002.
Consumers have already benefited. Former Insurance Superintendent Gregory V. Serio in November sent letters to the 13 biggest auto insurers in the state, calling on them to lower their rates or justify to him why they shouldn’t. A second batch of letters went to the next tier of companies shortly afterwards.
So far, Serio and his successor, Howard Mills, have reached agreements with 16 large and small insurers, generally cutting rates by 5 percent and saving consumers at least $349 million. Talks with others are continuing, and Mills said Friday that “we’ll have several other significant premium rate cuts to announce shortly.”
However, both he and the industry are still calling for additional steps to decertify fraudulent doctors and clinics, give insurers even more time to investigate claims, and increase penalties for the “runners” who coordinate accidents and solicit people to participate.
“We’ve done quite a bit with our regulatory power, but the bottom line on this is that the penalties for insurance fraud in New York state are laughable and are not an effective deterrent,” Mills said. “They need to be dramatically toughened.”
Mills said the state should eliminate the statute of limitations on auto insurance fraud and allow insurers “proper time for exhaustive investigations.” But he said there would still have to be guarantees in place to prevent insurers from simply stalling on paying legitimate claims.
The superintendent sent a letter to every state lawmaker recently, urging them to pass the runners’ bill and other legislation before the session ends.
e-mail: jepstein@buffnews.com