NAII Hears N.Y. Sen. Seward Cite Fraud as Cause for Auto Premium Increases

In an address at the National Association of Independent Insurers Fall Legislative Meeting, Sen. James L. Seward, chairman of the Senate Standing Committee on Insurance, stressed the need for serious fraud reform in New York.

“Insurance fraud costs New York drivers roughly $1 billion, or $124 annually per driver,” Sen. Seward stated. “This is totally unacceptable in a state that has high auto insurance premiums to begin with.” It also costs New Yorkers an additional $100 per vehicle “to subsidize the state’s burgeoning assigned risk plan.” Seward said that tough anti-fraud legislation could remedy the situation.

Although New York still trails New Jersey and Massachusetts as the state with the highest average auto premiums, the hard market has resulted in an explosion of the state’s assigned risk plan for auto insurance – one of the most pressing insurance issues this year, Sen. Seward indicated. In addition, the growth of lawsuits against insurers arising from the state’s no-fault system is also contributing to the problem.

“The insurance industry has a huge economic impact in New York, which is home to many top insurers and employs thousands of New Yorkers,” Sen. Seward continued. “We need to promote a climate of competition and consumer choice in order to make insurance affordable and available in the state.”

He blamed the ongoing stalemate between the New York Senate and Assembly for preventing passage of serious fraud reform legislation, noting that the “Senate supports a legislative package that would address insurance fraud on several fronts, including reinstating extenders, criminalizing insurance fraud to encourage prosecution, giving insurers more time to investigate suspected fraud, establishing a process to decertify fraudulent health care providers, and providing more funds to district attorneys to prosecute fraud.”

It also supports the reinstatement of “extenders” which expired in 2001, which would allow insurers to cancel or nonrenew up to 2 percent of policies and would allow flex rating of 7 percent without prior approval. The elimination of these provisions has contributed to the growth of the assigned risk plan because “insurers are less likely to take a chance on drivers without perfect records because they will be stuck with them for three years,” Sen. Seward stressed.

Sen. Seward noted that, although these reforms passed the Senate, they were once again blocked in the Assembly, which proposed a modified plan centering on the appointment of an independent insurance consumer advocate. he called this an unnecessary move as New York already has a consumer protection board.

Sen. Seward also supports regulatory changes to Regulation 68, which would reduce the time frame in which drivers can file claims. However, this regulation is currently under litigation and its fate is uncertain. He also noted that, although the Superintendent of Insurance has approved a 19.7 percent premium increase for auto, this alone will not solve New York’s auto insurance crisis. “The issue of fraud must be addressed,” he concluded.