New York’s No-Fault Auto Insurance Policy Reaches Epidemic Proportions


The ‘epidemic’ of auto insurance fraud in New York has prompted a number of insurance trade groups to call the attention of state lawmakers for urgent no-fault insurance reform. This comes amidst the record increases in rates which residents currently have to deal with.

New York’s No-Fault Auto Insurance Policy Reaches Epidemic ProportionsAt a New York State Senate Standing Committee on Insurance hearing in Albany last February 4, several groups opened up regarding the disturbing trend and gave some proposals to halt it.

Kevin M. Ryan, president of the Professional Insurance Agents of New York State, expressed that their group supported the no-fault system, but urged for reform.

Ryan said that their members have benefited from the state’s policies which enabled quicker resolutions to ‘prove their value’ when an accident occurs. However, he admitted that the ‘abuse’ of the system has resulted in record high insurance rates in New York. Thus, Ryan highlighted the dire need for comprehensive reform.

The Insurance Information Institute, in a study, revealed that the auto insurers in New York experienced a rise of 56% for medical costs of accident victim claims during April to June 2009.

Currently, New Yorkers pay 111% higher than the national average for premium rates. This is largely attributed to the no-fault policy.

Gary Henning, assistant vice president of American Insurance Association’s Northeast Region, expressed that there is indeed a need to address fundamental problems in the system. Henning cited the ISO Fast Track and AIA analysis in revealing that the state presently ranks third in the U.S. for average no-fault claims costs. He urged the legislature to act swiftly to ‘reverse the trend’ which has been increasingly burdensome for consumers.

Henning observed that lawyers are ‘clogging the courts with no-fault cases.’ He cited that the Insurance Information Institute showed that about 1/3 of the cases in New York City are no-fault cases.

Ryan explained that despite the advantages of the system, such as quickened payment without the need to prove culpability in a road mishap, can be corrupted by unscrupulous individuals. Some persons have been known to stage accidents and fake injuries. There have also been allegations that some healthcare providers and lawyers exploited the system for ‘personal gain.’

Insurance Information Institute president Robert Hartwig said that although the New York system is identical as other states, there is ‘one glaring exception.’ Hartwig pointed out that the policy’s $50,000 threshold for no-fault automobile insurance claims is actually the highest threshold in the nation.

Hartwig added that the National Insurance Crime Bureau, the New York State Insurance Department’s Frauds Bureau, and other agencies continue to vigorously investigate ‘suspicious claims.’