The best way to put a stop to rampant auto insurance fraud in New York is to aggressively address the state’s flawed no-fault insurance system by going after the criminals who perpetrate the fraud, according to the National Association of Independent Insurers (NAII).
“New York’s no-fault insurance laws actually encourage auto fraud by failing to crack down on the criminals behind the scams,” Gerald Zimmerman, senior counsel for the NAII, commented. “New York needs strong medicine to stop fraud, and that means tough legislation that will generate real reform and end fraud, abuse and overtreatment.” Zimmerman’s comments were echoed at a Senate press conference on auto fraud.
In 2002, the Senate passed a number of tough measures but they reportedly became bogged down by politics in the Assembly.
The root of New York’s fraud problem reportedly lies with state’s personal injury protection (PIP) laws, which refer to the part of an auto insurance policy that provides coverage for medical bills and other expenses for auto accident injuries suffered by a policyholder, regardless of fault.
Current law allows insurers only 10 days to review suspicious claims and request verification. It further hobbles fraud-fighting efforts by restricting them to 30 days to pay a no-fault claim, or face 2 percent interest per month and attorneys’ fees. Insurers and prosecutors could even be precluded from raising the issue of fraud if evidence is later detected, or from questioning whether a treatment was appropriate or medically necessary.
In contrast, medical providers have a full 45 days to submit bills – giving crooked providers ample time to bombard the insurer with many bills at once, leaving no time for investigation.
Insurers in New York have seen the cost of an average PIP claim rise by more than 70 percent from 1995 to $8,300 in 2000, while the rest of the country saw an average PIP loss of only $4,523.
The New York State Fraud Bureau indicates that almost 60 percent of the reports of suspected insurance fraud in 2001 involved no-fault auto insurance. Reports of no-fault fraud increased from 489 in 1992 to a staggering 15,219 in 2001.
The NAII says real reform legislation could correct New York’s fraud problem by specifically focusing on fraud, abuse and overutilization. Solutions include:
· Establishing flexible treatment guidelines to avoid the abuses rampant within the current system, produce more certainty for legitimate providers, and reduce disputes for insurers and claimants;
· Decertifying fraudulent practitioners and get them out of the no-fault system once and for all;
· Establishing mandatory arbitration to keep cases out of court;
· Making the practice of insurance “running” a felony rather than a
· Devising a fix to the Presbyterian court case, which held that insurers must
pay meritless PIP claims if they miss the 30-day deadline.
“By adopting a real reform law with some teeth to it, the New York legislature will send a clear signal that PIP fraud in the state will not be tolerated,” Zimmerman added.
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