Paying for Insurance Fraud

There has been a lot of auto insurance fraud news in recent months, with stories of scam artists going after big payouts from insurance companies.

In New York State, such fraud is raising the auto insurance cost for many residents, especially those who live in New York City’s five boroughs and nearby suburbs, according to the Insurance Information Institute. Some people are paying four times more for no-fault auto insurance than the state average and seven times more than drivers in Albany, which has fewer cases of fraud.

So what can be done? The I.I.I. notes that it is the New York State’s auto insurance system itself that is contributing to the problem. New York is one of 12 states that have a “true” no-fault system, one that pays for injury claims by the victim’s own insurer and imposes restrictions on filing a lawsuit for non-economic damages, such as emotional suffering. Policyholders in no-fault states are entitled to a certain dollar amount of medical expenses, lost earnings and incidental costs — up to $50,000 in New York — under the no-fault coverage part of a policy known as personal injury protection.

According to Allstate Insurance, no-fault insurance frauds are costing New Yorkers and coverage providers more than $200 million every year. Allstate is one of a growing number of insurers that are urging legislators to tackle this growing problem. Meanwhile, no-fault fraud can be very lucrative for unethical medical providers and their accomplices.

Insurers and law enforcement agencies say that some unscrupulous medical service providers are filing inflated and often bogus medical claims with auto insurers. In New York, medical bills can reach $10,000 to $20,000 per passenger and can go as high as $50,000 per passenger under the no-fault law. A single staged accident with multiple claimants can results in billings for hundreds or even thousands of treatments.

A news report that recently aired on CBS News last month also highlighted the auto fraud problem. In an undercover video, the report tracked organizers who own bogus clinics and hire recruiters to find people that are willing to participate in staged auto accidents for hundreds of dollars in cash. The accomplices sign insurance forms for medical treatments that they will never receive.

The report noted that the rising number of insurance frauds appears to be linked to the weak U.S. economy. In this tough economy, some people are willing to participate in staged car crashes, lured by the prospect of fast money.

“Insurance crime is causing billions of dollars in economic harm to the nation, the insurance industry and to individual consumers every year,” according to Joe Wehrle, CEO of National Insurance Crime Bureau, a leading nonprofit group dedicated to preventing, detecting and defeating insurance fraud. “The schemes have evolved and have become more complex, but there is one constant through the ages; someone is getting something to which they are not entitled and for which all of us must pay.”

Topics New York Auto Fraud