More than one-third of no-fault auto insurance claims closed in the New York City area last fall appear to be inflated or contain elements of fraud, according to a new study by the Insurance Research Council. The percentage of no-fault claims with an appearance of fraud or inflation rose to 35 percent in 2010 from 29 percent in 2007.
Fraud and overbilling in auto insurance personal injury protection claims
The study, "New York's No-Fault System: Preliminary Findings from Closed Auto Injury Claims," found elements of fraud in 22 percent of the metropolitan area's auto insurance personal injury protection claims. Another 14 percent of New York City area claims appear to involve either overbilling or excessive use of medical services, the study said.
Under the state's no-fault auto insurance system, medical treatment of injuries to the driver and passengers of the policyholder's car are covered under personal injury protection provisions. No-fault laws are designed to help people get quick access to treatment, but critics say they have the unintended consequence of encouraging fraud.
City is fraud hotbed
The fraud problem is not as extreme throughout New York state, the study said. Elements of fraud and signs of inflated claims were found in only 8 percent of closed claims for personal injury protection outside of the New York metropolitan area. In 2010, the typical personal injury protection claim payout in the New York City area was almost two times the payout for claimants in the rest of the state, according to the IRC study.
"Fraud and excessive billing by some health care providers in the New York City metropolitan area is truly stunning when compared to the rest of the state," Elizabeth Sprinkel, IRC senior vice president, said in a statement. "The preliminary findings from this study confirm that the New York City area is a hotbed for auto insurance fraud and that the problem has grown worse in recent years."
Fraud drivers up costs for insurers and car insurance rates for consumers.