New Study Reportedly Shows Lack of Reform is Corrupting N.Y. Auto System

July 31, 2003

The Alliance of American Insurers reports that a recently completed new study shows that a lack of anti-fraud safeguards in New York State’s auto insurance system has caused New Yorkers to develop more permissive attitudes toward committing insurance fraud than their counterparts in others states across the U.S.

The Alliance said that the study, done by the Insurance Research Council based on scientific sampling methodologies, shows “New Yorkers not only have more lenient attitudes toward committing insurance fraud but also have a higher tolerance for fraudulent auto insurance activities in general compared to residents of other states surveyed countrywide.”

Alliance spokesman John Cucci called the findings “a damming indictment of New York’s no-fault auto insurance system, which encourages unscrupulous attorneys and medical providers to manipulate no-fault medical claims and mislead policyholders into entering into fraudulent schemes that either go unpunished or are allowed to continue unabated due to legal loopholes.

“No-fault medical fraud is a thriving business in New York, costing all drivers an extra $177 annually on their car insurance bills. If the problem is not addressed soon by the legislature, this annual fraud tax will jump to $242 in 2004 and to $321 by 2005.” Cucci noted that, “the overwhelming majority of policyholders want to do the right thing, but the public is so confused about the current auto insurance system that it is no surprise many fall prey to those who want to manipulate the system for their own financial gain.”

Crooked medical mills are reportedly easy to set up under current law and flourish when so-called runners stage phony accidents or converge on real accident scenes to steer the injured to these entities, which routinely overcharge and over-treat, pumping out bills for non-existent injuries. At present there are no laws on the books to put these runners in jail where they cannot continue their fraudulent operations.

“Moreover, under present law there is no limit or definition on what medical tests and procedures can be legitimately used. Consequently, phony tests and procedures are allowed adding millions of dollars to New York policyholders’ insurance bills and encouraging a climate of deceit and fraud,” he said.

“To add insult to injury, current law allows auto insurers only 30 days to withhold payment of suspected fraudulent claims. This is clearly insufficient time to make the case and after the 30 days have elapsed, fraud perpetrators are forever free from any prosecution,” Cucci said.

“You can spend millions on public education programs, but as long as the laws are what they are, it’s difficult to effect any change in public attitude toward no-fault medical fraud in New York State,” he declared. “Only the legislature can correct these problems, and the Alliance urges them to return to Albany in September to address these long-simmering auto insurance issues. It’s not rocket science. A simple five-point program can cure these present ills and restore sanity to the no-fault system that served the public well before this onslaught of fraudulent activity.”

The program the Alliance recommends would:
·Criminalize the act of serving as a runner. These are the people who steer auto accident victims to unscrupulous attorneys and submit phony medical claims.
·Reform the present system where insurers are allowed only 30 days to withhold payment of suspected fraud claims or lose their right to prosecute them.
·Establish a system of certified and approved protocols to eliminate phony medical tests and bogus treatments.
·Establish a decertification process to put fraudulent medical mills and healthcare providers out of business. Such schemes currently add millions of dollars to consumer car insurance bills.
·Provide for arbitration of disputed no-fault medical claims.
Restore the flex-rating law, which allows insurers to react appropriately to cope with inflation and bad claims experience and to lower rates for good claims experience.

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