Auto insurance fraud is a crime that costs consumers and insurance companies millions of dollars a year in increased costs while directly contributing to higher insurance rates for consumers. In states with no-fault systems, where a person who is injured in an automobile accident recovers damages up to a specific amount from his own insurance company regardless of who was responsible, the capacity for fraud increases.
Opponents of the no-fault system have argued that when insurance companies assume the cost of paying for accidents and medical claims, claimants overcharge insurers for medical and repair services. Due to the rising cost of health care and auto repairs and the cost of fraud due to incidents including staged accidents, false repairs and unnecessary medical treatments, efforts to reform the no-fault system have been ongoing in several states.
The New York Senate recently passed several pieces of legislation designed to address the growing problem of auto insurance fraud. The bills are designed to both increase the penalties for conduction auto insurance fraud while also placing regulatory barriers which make financing and conducting the schemes more difficult.
The first of the individual laws allows for retroactive cancellation of a new auto policy if payment was later found to be fraudulent, preventing criminal rings from illegally financing the policies that allow them to enact a scheme.
It also allows victims of a no-fault accident to receive benefits from their own insurer. New York law did not previously provide benefits to victims and their families even if the accident was ruled to have been intentional.
The second piece of legislation makes faking an automobile accident, participating in a staged accident or submitting false claims to collect benefits a felony offense. The third makes the act of hiring another person to commit no-fault fraud, submitting or collecting its benefits a felony.
The laws also give law enforcement officials tools to investigate no-fault fraud schemes and prosecute those who planned and carried them out.
The new bills drew support from both sides of the aisle along with both the insurance industry and trial lawyers. New York has long suffered from problems with auto insurance fraud, an issue covered in Out of the Storm News in early 2011. Hopefully these bills will be the beginning of a joint effort by the government anf private industry to crack down on an important issue that, if not taken seriously, could keep insurance rates high for thousands of New Yorkers.
New York Insurance Association, Inc. President Ellen Melchionni says she is “extremely encouraged by what’s happened in the Senate”, mentioning that the trial bar supports the bills. Melchionni believes that the legislation should be passed shortly after the Assembly agrees on the state budget.
“In our opinion, these 3 bills really go after the individuals that are really, truly intending to commit fraud. It’s low-hanging fruit if they are intending to fight [this],” she says, citing a recent insurance-fraud bust which implicated 36 people and robbed the state’s no-fault system of more than $279 million.
“When they close one office, it pops up 3 blocks away with a different doctor and billing name,” says Melchionni of the “pervasive” nature of insurance fraud. Melchionni adds that a regulation adopted by Lawsky “requiring providers to sign a form to attest to the fact that their license is not used for fraud might go a long way in closing down medical mills.”
“Not to mention that the costs of these crimes are passed on to consumers, and we all end up paying,” she emphasizes.