New Yorkers Face Stricter Auto Fraud Penalties

On March 23, the New York State Senate passed a bill, sponsored by Sen. James Seward, meant to deter criminals who stage auto accidents in order to collect insurance payouts. A felony conviction now awaits those committing insurance fraud in this manner, a change applauded by the New York Insurance Association (NYIA).

The Insurance Information Institute (I.I.I.) estimated in 2010 that the previous no-fault auto system in fact cost drivers $241 million in 2009. The I.I.I. also claims that fraud and abuse account for 20 percent of the cost of every no-fault claim in the state.

According to Ellen Melchionni, president of the New York Insurance Association (NYIA), “Something needs to be done as soon as possible to rein in auto accident fraud and stop the illegal billing for medical treatments that were never performed, unnecessary or excessive. If there is not comprehensive reform, we are concerned that the present crisis will progressively become worse, leading to a system that is not only broken, but beyond repair.”

Melchionni gave an example of New York’s “broken auto no-fault system” from March 22 where eight people were arrested in the Bronx after staging an accident and attempting to fraudulently collect $39,000. “This is not an isolated incident,” Melchionni said. “Criminals are making millions of dollars a year at the expense of New Yorkers.”

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