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Auto insurance fraud strangles New York

"Rampant fraud and abuse and excessive attorney involvement in claims" are to blame in large part for rate increases, says Robert Hartwig, Insurance Information Institute vice president and chief economist, whose assertions are supported by studies by the Insurance Research Council (IRC).

Becoming most expensive is personal injury protection (PIP), which pays for any medical costs that you or your passengers incur if you are in an accident. Since New York is a "no-fault" state in which your own insurance pays for your medical expenses regardless of who is at fault, you are required to buy PIP. The IRC says the average amount paid for PIP claims rose by 20 percent in New York in 2000, compared with only 6 percent in other states with no-fault laws.

Auto insurance fraud is forcing up insurance costs for everyone in New York, but those who are hit particularly hard are in the high-risk auto insurance pool. According to the III, applications for the New York Auto Insurance Plan — the insurer of last resort for high-risk drivers in the Empire State — increased 62 percent from 1999 to 2000.

Specifically, the incidence of fraud went up in New York City, which drives up rates for the state as a whole. According to the IRC, one out of every four New York City PIP claims "appeared to involve some kind of fraud or buildup, either the exaggeration of medical expenses, unnecessary treatments, or padding claim-related costs."

In New York City, claimants were much more aggressive when making claims, from the number of injuries in an accident, to the use of specialists, to the speed with which they hired a lawyer. They were also more likely to take advantage of longer time limits allowed for filing claims.

Under New York law, claimants have 90 days to report an injury and 180 days after treatment to submit a medical bill, but insurers have only 30 days in which to pay a bill or dispute it, even if fraud is suspected.

New York Gov. George Pataki has proposed addressing at least one of these issues by reducing the time allowed for submitting no-fault medical bills from 180 days to 45, but that proposal continues to be tied up in court challenges.

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