New York Regulator Proposes Changes to No-Fault Insurance Coverage

The New York State Insurance Department is proposing new regulations for no-fault auto insurance coverage in Empire State, in a move the state’s top regulator says will help reduce fraud.

“We have to be vigilant in protecting the pocketbooks of consumers,” said Superintendent James J. Wrynn. “New Yorkers should not have to pay a fraud and abuse tax in their auto insurance premiums. The cost of each no-fault claim has gone up by more than half in the past five years, and all New Yorkers with auto insurance are paying that tab.

The proposed regulations increase information required on medical forms, and reduce the need for additional verification by the insurer, in a move the department said would hasten claims processing.

Insurers would also have greater latitude to deny health services that are not provided or are not billed in compliance with the applicable fee schedule.

Another provision makes it easier for insurers to suspend all payments for claims submitted by the owner or owners of medical clinics suspected of fraud.

The new regulations would also raise the maximum attorney fee.

“Protecting consumers means stopping those who would exploit the system for personal gain and unnecessarily drive up costs for all New Yorkers. No-fault reform is desperately needed, and this proposed regulatory reform is a step toward that goal.”

The move follows comments earlier this month by Robert Hartwig, president of the industry-affiliated Insurance Information Institute, during the annual meeting of the New York Insurance Association. Hartwig called on lawmakers to rein in fraud and abuse in the state’s no-fault coverage, which he said the system’s combination of poor controls and high limits have created a “‘no-fault industry’ of corrupt medical professionals, attorneys, and street-level criminals who work on their behalf.”

Legislative action would be required to change some no-fault related proposals. The includes legislation to curtail mandatory claim payments – even if the claims are eventually ruled fraudulent – and improvements that would allow police to better investigate staged accidents.

No-fault fraud is thought to be a growing problem in New York State. The department said its fraud investigations bureau received more than 11,000 complaints alleging no-fault fraud this year to date, a 7 percent increase over the total for all of 2008. The number of no-fault arrests in 2008 was 52 percent greater than in 2007.

“New Yorkers are paying the second highest auto insurance premiums in the country — nearly 50 percent more than the countrywide average,” said Paul Magaril, regional manager for the Property Casualty Insurers Association of America (PCI) in response to the department’s proposal. “Our research indicates that the fraud in the system is costing New York’s insured drivers an estimated $1.2 million per day. The problems inherent in the current no-fault system are most acute in New York City where fraud in the form of over-utilization of health services by medical providers contributes significantly to higher costs. Insurance is far more expensive than it should be in New York in large part because some medical providers game the system — that’s not right and it’s time to crack down.”