Inflated Medical Bills and Bogus Claims Drive Up Cost of No-Fault Auto Insurance in New York, I.I.I. Finds

ALBANY, N.Y., Feb. 3 /PRNewswire-USNewswire/ -- Fraud and abuse in New York's no-fault auto insurance system cost consumers and insurers nearly $230 million in 2009, constituting a "fraud tax" of $1,561, or 22 percent of every no-fault claim, according to Dr. Robert Hartwig, an economist and president of the Insurance Information Institute (I.I.I.).
Since 2005, no-fault fraud has cost the state's consumers and insurers more than $600 million, Dr. Hartwig estimates, pointing out that the average cost of a no-fault auto insurance claim in New York State soared 55 percent between 2004 and 2009 as dishonest medical providers submitted inflated and sometimes bogus bills for services rendered to insurers.
"The scale of fraud and abuse in New York State's no-fault auto insurance system today is truly breathtaking," Dr. Hartwig stated, in remarks scheduled for delivery tomorrow to the New York State Senate's insurance committee.  "These medical providers partner with equally unscrupulous lawyers who sue insurers that dare to challenge these bogus claims -- choking New York's court system in the process."
If auto insurers are paying out more than they should in no-fault claims, their policyholders are paying out more in premiums, Dr. Hartwig observed. This 'fraud tax,' namely what New York's insurers are billed by medical providers versus what other pricing benchmarks indicate they should be charged, totaled nearly $1,600 per claim in 2009, a 20-plus percent surcharge medical providers are extracting from the system for every single accident.
"The average policyholder in New York spent $1,047 in 2007 to insure their vehicle compared to $795 nationally, a difference of $252 or 31.7 percent. The state ranks as the third most expensive in the country," Dr. Hartwig said, noting that 2007 is the most recent year for which definitive premium data is available.
The average cost of a no-fault auto insurance claim skyrocketed to $8,690 in the third quarter of 2009, up $3,075, or 55 percent, from $5,615, the average cost of a no-fault claim in the third quarter of 2004. Only Michigan and New Jersey auto insurers, which also operate in deeply troubled no-fault states, paid higher average no-fault claims as of year-end 2009, an I.I.I. analysis found.
"While the cost drivers influencing the price of auto insurance in New York are similar to those in other states in most respects, there is one glaring exception -- its $50,000 threshold for no-fault auto insurance claims is the highest dollar threshold in the United States. It should come as no surprise that the richest benefits in the country come with the highest costs," Dr. Hartwig said.
Recognizing the generosity of this $50,000 cap, and the absence in New York of safeguards such as medical treatment guidelines or utilization reviews and controls, Dr. Hartwig noted that the cost of the average no-fault Personal Injury Protection (PIP) claim rose 47.1 percent in New York between 2004 and 2009. Medical costs in the U.S. rose by 21.1 percent over this same time frame. PIP is the portion of an auto insurance policy that covers the treatment of injuries to the driver and passengers of the policyholder's car.
"Solutions for containing New York's emerging crisis must necessarily focus on cost drivers and you will hear about many of these solutions from the other panelists speaking here today," Dr. Hartwig concluded. "But because the state has the highest no-fault dollar threshold in the country, it remains attractive to those who perpetrate fraud based on the perception that the insurers who pay the bills are a 'deep pocket.'"


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CURE Auto Insurance Lists Tips for Safe Driving on New Year's Eve

 According to a recent national survey conducted by the National Institute on Alcohol Abuse and Alcoholism (NIAAA), more than four times as many people are likely to be fatally injured in alcohol-related traffic crashes on New Year's Eve than on other mid -week winter evening. CURE Auto Insurance offers the following tips to help drivers and their families ring in 2010 safely and soundly.

1. Check with your local bars for safe rides home. Safe rides are free and a good way to get home safe. In addition to safe rides from your local bar, some community organizations such as your church or college will offer safe rides home. Research these options ahead of time to have all the phone numbers written down and with you for the evening. If none are offered, look to use public transportation or taxi service.

2. Be alert on the roads and highways. Even if you have not had anything to drink, you must be most cautious on New Year's Eve in the event that you cross paths with someone who is driving under the influence. Call officials if you spot what you suspect to be a drunk driver on the road. Make sure to give the police the location of the driver and his or her license plate number. For your own safety, follow a good distance behind.

3. Plan ahead. When planning your evening make sure to take in to account transportation. Always designate a sober driver before the party or celebration begins or make plans to stay overnight at the location of the party. Planning ahead is not only responsible but is your best defense against drunk driving.

4. Watch the weather. Winter conditions can prove to be dangerous even for sober drivers. Freezing temperatures increase the chances for black ice. Stay alert and obey the speed limit. Also check the weather forecast before you head out to your New Year's celebration to make sure you are prepared.

5. If hosting a party, make sure to set rules on drinking and driving. Offer to provide a ride home or a place for guests who drink to sleep. Always offer alcohol-free beverages during the event, and make sure all of your guests leave with a sober driver.


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Two More Charged with Insurance Fraud

The ongoing investigation by the Pennsylvania Attorney General Tom Corbett into an insurance fraud has resulted in another arrest of a women and her brother. Elsa Perez-Delossantos, 38 , a resident of Pennsylvania and the her brother Antonio Perez-Delossantos, 37, of Brooklyn, have been charged with insurance fraud after she allowed her brother to use her address in order to obtain a cheaper auto insurance rates.

The arrested were among the other 24 people arrested in the ongoing investigation of New York and New Jersey residents providing false residency information to the State Department of Transportation to get a Pennsylvania license or vehicle registration rates and obtain cheaper Pennsylvania insurance rates.

Pennsylvania insurance rates are $2,000 to $4,000 per year cheaper in comparison to other two states.

Claiming a false Pennsylvania address helps some save $4,000 a year in premiums. The practice, better known as rate evasion, annually leads to $12 million to $15 million in claims on Pennsylvania policies that should not have been written, Corbett said.

The defendants have been charged with felony count of insurance fraud that carries a maximum prison sentence of seven years and a $15,000 fine.

The investigation helped break up a scam of a Philadelphia title company that signed up numerous New York City drivers as Pennsylvanians between January 2005 and September 2006 in order to fraudulently obtain cheaper insurance rates.


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Reading woman, brother charged with insurance fraud

A Reading woman and her brother have been charged with insurance fraud after the woman allowed the man, who lives in New York, to use her address to obtain auto insurance at cheaper Pennsylvania rates, authorities said Thursday.

Elsa Perez-Delossantos, 38, allowed Antonio Perez-Delossantos, 37, of Brooklyn to use her address to obtain a Pennsylvania driver's license and insurance at Pennsylvania rates, according to the Pennsylvania attorney general's office.

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The two were among 24 people arrested in an investigation of New York and New Jersey residents using false addresses to obtain Pennsylvania insurance rates.

Pennsylvania insurance rates are $2,000 to $4,000 per year cheaper than in the other two states, authorities said.

All 24 defendants have been charged with insurance fraud, a third-degree felony that carries a maximum sentence of seven years in prison and a $10,000 fine, said Nils Fredericksen, a spokesman for the Pennsylvania Attorney General's office.

All were arraigned in Harrisburg and released to await further court action.

Fredericksen said agents broke up a scam in which a Philadelphia title company was busing people in from New York and New Jersey to apply for Pennsylvania driver's licenses and registrations for their vehicles in order to fraudulently obtain cheaper insurance.

"After going through the files of that company we came up with this (Perez-Delossantos) case," Fredericksen said.

Insurance fraud drives up the rates Pennsylvanians pay for auto insurance because New Jersey is first in the nation in auto theft and New York is eighth in accidents staged to make auto insurance claims, Fredericksen said.


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