Numbers Reveal Continuing High Incidence of Auto Insurance Fraud in New York


Amidst the introduction of a bill seeking to cut auto insurance costs and minimize fraudulent acts relating to motor insurance, new information which was released by the New York State Insurance Department would confirm that fraud cases have indeed soared these past few years.

Numbers Reveal Continuing High Incidence of Auto Insurance Fraud in New YorkThe fraud is usually a two-step scheme. As in reported cases before, the strategy employed by fraudsters involve corrupt medical clinics and “staged accidents.” After arranging for a fake mishap, dubious medical clinics would produce excessive and unnecessary treatment fees and medical expenditures. These, in turn, would be presented to insurers for indemnification.

Industry insiders have estimated that since 2006, suspected fraud cases in New York went to as high as 33 percent. From about 10,117 three years ago, the number of complaints filed by insurance providers jumped to as high as 13,433 – all relating to the state’s no-fault auto insurance policy. According to the department’s statistics, much of the scams occurred particularly in the Brooklyn and Bronx area.

Deputy Insurance Superintendent Steven Nachman said that there are bad guys who are figuring out ways to game and circumvent the system illegally for their own gains. These, in turn, have caused average payouts for auto insurance injury claim. Since 2004, claims have risen to as much as 55 percent or double than that of the national average. In 2009, the costs per claim average $8,690 as compared to only $5,615 in 2004. The current U.S. average stands at $4,152.

Robert Hartwig, president of the Insurance Information Institute, stated that the high occurrence of scams could be compared to the earlier parts of the decade. It is estimated that the no-fault related fraud had turned into a $1 billion dilemma. Hartwig added that in 2009 alone, scams have cost insurer and drivers alike the amount of $229 million.

As such, it had prompted the legislature to push for reforms to reduce and clamp down on the reported abusive practices. The state’s Senate Insurance Committee chairman, Senator Neil Breslin, vowed to actively pursue such reforms. He stated that in order to generate easy money, “ruthless thieves are deliberately causing car accidents.” He cited that such illegal act not only places unsuspecting drivers at risk or place them in danger, but more so, those who pay insurance would have to foot the bill on the rising cost of premiums. Last year, it has been recorded that auto insurance rates hike in the state of New York had risen to an average of 6.3 percent.