AIA Says N.Y. No-Fault Auto Reform Won’t Work

March 5, 2003

The New York State Assembly Majority’s no-fault auto insurance reform proposal seeks to improve the marketplace by creating a new bureaucracy, an approach that will not work, according to the American Insurance Association (AIA).

The Assembly’s bill (A 4807) would reportedly create an expensive, duplicative and unnecessary new bureaucracy called the Office of Public Insurance Consumer Advocate.

“The way to reduce the cost of auto insurance in New York is to eliminate fraud, abuse and over-utilization in the no-fault system,” Gary Henning, AIA assistant vice president, northeast region, commented. “Creating a new bureaucracy would cost insurers, motorists and taxpayers money.”

The true arbiter of insurance rates is the frequency and severity of claims. When claims activity goes up, rates must follow. New York must focus on reducing costs to reduce rates, according to the AIA.

The New York Senate passed a bill (S 683A) that reportedly provides a much better basis for reform.

“The Senate bill advances real reform. The Assembly plan has some similar elements. The Assembly should drop its plan to create new bureaucracies and negotiate with the Senate and Governor for real reform that will reduce the costs of auto insurance in New York,” Henning said.

Real reform will reportedly give insurers more time to investigate fraudulent claims, establish reasonable guidelines for medical treatment, increase the use of arbitration, and increase the criminal penalties for fraud.

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