NICB/NYIA New York Insurance Fraud Summit

I attended the NICB/NYIA New York Insurance Fraud Summit at the LaGuardia Airport Marriott in East Elmhurst, New York, yesterday.  A capacity crowd heard industry and law enforcement representatives speak about the tremendous and again growing impact organized no-fault insurance fraud and abuse has on New York automobile insurance consumers.  New York Insurance Superintendent James Wrynn and Queens County District Attorney Richard Brown led off the program with remarks about what their respective offices are doing to combat and prosecute no-fault fraud in New York.   Their and the other speakers' remarks made it clear that:

1. In spite of the regulatory changes that went into effect in 2002, New York no-fault fraud has increased so much over the past several years that, unless checked, may necessitate the Insurance Department's approval of substantial auto premium increases, especially for consumers living in the five boroughs of New York City.
   
   
2. Certain New York court decisions have crippled auto insurers' ability to detect, deny and defend fraudulent no-fault insurance claims.
   
   
3. Despite the industry's best efforts to manage an exponential increase in no-fault litigation over the past 15 or so years, the unimpeded inundation of the New York City civil courts with small no-fault suits, most being for far less than what an average New York state resident sues for in a typical small claims court matter, substantially increases no-fault claim costs and indirectly incentivizes fraud.
   
   
4. There can and will be no stopping the alarming upward trend of no-fault insurance fraud in New York unless comprehensive and coordinated regulatory and legislative changes addressing the underwriting, claims, and law enforcements functions are made now.  All agree that the goal of these changes should be to ensure that legitimately injured parties and legitimately organized and operating  health care providers receive prompt payment of no-fault benefits. 
   
   
5. More money and resources would enable law enforcement to prosecute more insurance fraud in New York.  Such prosecutions have been very successful in the past, but are complex and expensive. 

With Dr. Robert Hartwig's return trip from Europe having been delayed by a volcanic ash cloud over that continent, Dr. Steven Weisbart, chief economist at the Insurance Information Institute (I.I.I.), delivered Dr. Hartwig's presentation entitled "Fraud & The P/C Insurance Industry -- Focus on No-Fault Auto Insurance".  According to the I.I.I.'s analysis, fraud and abuse in New York's no-fault auto insurance system equate to about 20 percent of every no-fault claim paid.  The presentation's slides can be viewed here:

There has been much debate over whether the New York auto insurance industry has created or claimed a crisis that doesn't exist for the purpose of achieving regulatory and legislative changes favorable to the industry.  The I.I.I.'s numbers and statistics, however, are compelling and appear to validate the industry's concerns.  Legislative changes aimed only at law enforcement will not solve the problem that no one can deny exists, since prosecutors currently lack sufficient monetary resources to prosecute any sustained volume of insurance fraud cases, and state and local governments themselves are experiencing severe budgetary constraints and reportedly have no more money to commit to the prosecution of insurance fraud.

Band-aids will not stop the bleeding.  Something more and more comprehensive is needed.  Right now.