IRC Cites Fraud as Cause of NYC Claims Jump

January 29, 2002

A new study by the Insurance Research Council (IRC) has concluded that a 20 percent increase in claims costs in the New York metropolitan area is primarily due to widespread fraud targeting the state’s no-fault insurance program, and predicted that New Yorkers could soon be paying the nation’s highest auto insurance rates as a result.

The study concluded that, “Soaring injury claims in the New York metropolitan area, far exceeding those in the rest of New York State and the country, suggest an increase in no-fault auto insurance fraud that threatens to make New York auto insurance rates the nation’s highest.” It found that “the average amount paid for personal injury protection claims jumped 20 percent in New York in the year 2000, in contrast to 6 percent in other states, including New Jersey, that also have no-fault systems.

This increase is five times the medical care inflation rate for metropolitan New York. The frequency of claims rose 7 percent in New York, while declining 2 percent in other no-fault states.”

According to the study as many as one-in-four personal injury claims in the New York area “appeared to involve some kind of fraud or buildup, either the exaggeration of medical expenses, unnecessary treatments, or padding claim-related costs.”

The study contrasted the behavior patterns of NYC residents and their upstate counterparts and found that claimants from the city:

Reported more injuries, particularly neck and back sprains and strains. Forty-seven percent reported three or more injuries, twice the statewide average.
— Were more likely to seek treatment from a larger number of medical professionals, including chiropractors, neurologists, physical therapists, psychotherapists, and alternate treatment providers, and were less likely to be treated in hospitals.
— Received diagnostic procedures using magnetic resonance imaging (MRIs) and electromyography (EMGs) more often than their upstate counterparts — and more than once.
— Hired attorneys at nearly four times the rate of the rest of the state.
— Were two to three times more likely to wait more than 30 days before reporting injuries to insurance companies.
— Were two times more likely to have more than 45 days pass before medical bills were submitted to insurers for payment.

The IRC concluded that these and other trends were behind the increase in claims payments. The cost of settling the average claim has been rising at around 17 percent a year since 1997, reaching $6,898 in 2000, compared to around a 6 percent annualized increase in the rest of the state.

“This data quantifies many of the sources of the dramatic run-up in New York claims costs in recent years,” stated Elizabeth A. Sprinkel, IRC Sr.VP. “The extraordinarily high use of medical resources, especially in the New York City area, is creating a crisis in the New York no- fault system. Also, the data raise serious concerns about the extent of fraud among New York PIP claims.”

For a full copy of the report or for further information contact Elizabeth Sprinkel by phone at (610) 644-2212, ext. 7568; by fax at (610) 640-5388; or by e-mail at irc@cpcuiia.org . Or visit IRC’s Web site at www.ircweb.org. Copies of the study are available at $35 each in the U.S. ($50 elsewhere) postpaid from the Insurance Research Council, 718 Providence Rd., Malvern, Pa. 19355-0725. Phone: (610) 644-2212, ext. 7569. Fax: (610) 640-5388.

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