Filed Under:Markets, Personal Lines

Insurance Groups Stress Need For N.Y. No-Fault Reform At Hearing

NU Online News Service, April 26, 3:34 p.m. EDT

Insurance groups again made their case during a New York legislative hearing for reforms to the state's no-fault system, which the groups say is riddled with fraud and costs citizens hundreds of millions of dollars a year.

The hearing, being held today by the New York State Senate Insurance Committee, is similar to a hearing the committee held in February 2010. Additionally, the state Assembly held a roundtable discussion on no-fault reforms days before the Senate held its 2010 hearing.

A statement released by the Insurance Information Institute (I.I.I.) in advance of today’s hearing states: “Due to the absence in New York of safeguards, such as medical-treatment guidelines or utilization reviews and controls, the cost of the average no-fault personal injury protection (PIP) claim soared 48 percent between 2004 and 2010, a time frame during which medical costs in the U.S. rose by 25 percent.” The I.I.I. says the average cost of a no-fault auto-insurance claim in New York State was $8,664 in 2010.

“The scale of fraud and abuse in New York State’s no-fault auto-insurance system today remains at crisis levels,” I.I.I. President Robert Hartwig says in his scheduled testimony. “Not only are New York’s courtrooms filled with no-fault cases, but an Insurance Research Council (IRC) study found that over one in five of all downstate New York no-fault closed claims showed signs of fraud, and more than one in three appeared to be inflated.”

Ellen Melchionni, president of the New York Insurance Association (NYIA), says her association supports legislation (S2816A/A6286) introduced by Sen. James Seward (R-Chanango) and Assemblyman Joseph Morelle (D-Irondequoit) that “contains numerous remedies, including giving insurance carriers adequate time to investigate fraud, encouraging efficient and fair settlement of disputes and creating tougher penalties for fraud.”

She says NYIA also supports additional bills meant to address staged auto accidents. One, she says, would allow insurers to cancel new policies purchased with phony checks or credit cards.

“If there is not comprehensive reform, we are concerned that the present crisis will become progressively worse, leading to a system that is not only broken but beyond repair,” Melchionni says.

Kristina Baldwin, assistant vice president for the Property Casualty Insurers Association of America, says: “It is clear that something must be done to put a stop to no-fault fraud for the benefit of the hard-working men and women of this state who are struggling to pay their high auto-insurance bills. Although insurers will continue to employ great efforts to fight fraud, changes in the law are necessary to stem this growing problem.”

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