It is very likely that in New York, motorists would experience a major overhaul in their auto insurance system.
For about 36 years now, the State of New York has been using a no-fault system. Simply put, it is an arrangement between an insurer and the insured that in case of damage or loss, the latter must be indemnified regardless of who is at fault.
This no-fault scheme also allows victims of road mishaps to be directly reimbursed by their insurance provider. Conceptualized to avoid expensive litigation and lower premium costs, some industry experts feel that it is outdated and needs to be re-checked.
James Wrynn, State Insurance Superintendent, expressed that this current system is being used to commit fraud and abuse. With this, he submitted a draft whose aim is to amend pertinent provisions of the no-fault policy.
He is hopeful that changes may take effect before the end of this year for the betterment of all.
In the outline he submitted, Wrynn described the draft as having in mind the economic hardships that everyone is facing. It aims to free vehicle owners and drivers who are paying correctly vis-à-vis those who commit tax fraud and payment abuse.
In its 2009 database, The Insurance Department Bureau had to deal with 11,000 complaints which basically all dealt with fraud and felony related to the no-fault system. Its records also revealed that said number is significantly higher than that of 2008; an increase of 7% in 2008, or a substantial rise of 52% since 2007.
This kind of fraud includes staged or arranged automobile accidents. The fake victim is then referred to shady medical clinics, who in turn, churn-out questionable, unnecessary, or redundant medical costs.
It is important to note that Wrynn’s proposal also includes reform in the current insurance forms to make release of payments faster. Verification for claims would be expedited and so is processing for payments. Moreover, it is the reduction in costs per no-fault claim that consumers must look into.
Wrynn further stated that unlike today’s program, medical exams would be located on areas which are geographically accessible and convenient for drivers and car owners.
Insurance companies, on the other hand, agree on the timeliness of this proposal. They report that since 1974, this no-fault system has provided a leeway for fraudulent claims. This in turn, they say, had put insurers exposed.
Wrynn’s draft proposal may be summed-up as two-fold: One is the reduction of insurance costs for consumers. The other is to put an end to abusive motorists who commit fraud using an inherent weakness in the systems no-fault policy.
