New York State
Insurance Department

ISSUED: 5/9/2001


Targets No-fault Insurance Fraud, Establishes Special Prosecutor and Coordinates State’s Investigatory Efforts, Increases Consumer Options, Expands Consumer Rights

            Acting New York Insurance Superintendent Gregory V. Serio today proposed the most comprehensive overhaul of auto insurance in New York State in almost 30 years to combat fraud and reduce auto insurance premiums.

            The sweeping legislative and regulatory package includes an Executive Order issued by Governor George E. Pataki naming the Attorney General as Special Prosecutor to coordinate investigatory and prosecutorial efforts at the State level to combat auto insurance fraud. By marshaling the State’s resources and coordinating the State’s efforts to combat auto insurance fraud, the Special Prosecutor will complement the efforts of local district attorneys to reduce fraud.

            In addition, the package provides a variety of new options that will result in lower premiums for New York’s auto insurance consumers, as well as a comprehensive set of new consumer rights and protections concerning the no-fault independent medical examination system. If fully implemented, the package will ensure that all New Yorkers will have access to comprehensive auto insurance protection at an affordable cost.

            "By putting an end to the ‘fraud tax’ and providing consumers with more choice, this package will reduce auto insurance premiums," Serio said. "We must put an end to the rising incidence of insurance fraud and abuse. Fraud rings, staged accidents, medical mills, and bogus health treatment claims take hard earned money out of every insurance policyholder’s pocket.

            "This comprehensive package will protect honest New Yorkers from the mounting costs of fraud and abuse by putting insurance crooks out of business. Consumers must be confident that they are paying for the insurance coverage they need, not subsidizing the fraudulent activities of scam artists, unscrupulous lawyers, doctors, and medical providers," said Serio. "At the same time, New Yorkers should have a range of options to choose from that will allow them to reduce their auto insurance premiums."

            As part of the Governor’s Executive Order, the Governor has directed the New York State Police and the Insurance Department to authorize the Special Prosecutor to undertake investigations and prosecutions directly. The Special Prosecutor will also work with local prosecutors and law enforcement officials to augment their efforts to stop fraud and abuse by putting criminals behind bars. No-fault insurance fraud alone is estimated to cost New York drivers $1 billion dollars a year.

            In addition, Governor Pataki has directed the Insurance Department, the Division of State Police, the Division of Criminal Justice Services, and other State agencies and bodies to cooperate with and assist the Special Prosecutor, the State’s District Attorneys and other law enforcement agencies to root out insurance fraud. An annual report will be prepared by the Division of Criminal Justice Services to monitor the progress of this initiative.

            "This meaningful reform package will give our law enforcement officers and district attorneys much-needed tools to investigate, prosecute, and convict criminals involved in insurance fraud," said Katherine N. Lapp, Commissioner of Division of Criminal Justice Services. "Working in conjunction with the Attorney General’s Office we will be able to create a state-wide team to weed out the crime that costs every New York driver."

            A critical component of the Department’s Auto Insurance Reform package is a newly revised proposed regulation which will ensure that legitimate claims are paid on a timely basis, while fraud and abuse in the current no-fault system is reduced.

            Under the plan, accident victims will now have up to 30 days to report a claim and medical providers will have 45 days from each treatment to submit claims for payment -- eliminating existing loopholes that have been exploited as opportunities for fraud and abuse.

            At the same time, significant consumer safeguards are included by excusing noncompliance with the time frames where there is a clear and reasonable justification. In the past, failure to comply could be excused only in cases where it could be demonstrated that compliance was impossible. Moreover, insurers are required to implement objective criteria to guide reviews of late requests and an expedited arbitration process has been established to resolve disputed claims expeditiously.

            The new package also cracks down on fraud rings, forged insurance documents, and false and inflated automobile repair and medical service bills. The legislation would create a new felony crime for acting as, or soliciting the service of, a "runner." A "runner" is a person who obtains clients, patients or customers for health care providers and attorneys that file fraudulent insurance claims. Currently, while the fraudulent activity of runners could be prosecuted, no statute explicitly sanctions this insidious practice that fuels fraud rings, bilking consumers out of millions of dollars.

            Insurance costs will be further reduced by barring damage recoveries by those who engage in certain criminal activities or those who own or operate an uninsured vehicle. This change will put a stop to the free ride that law-breakers currently enjoy at the expense of New York’s law-abiding drivers.

            In addition, the proposed regulation provides important consumer protections for accident victims seeking benefits in the no-fault system. For the first time, New York’s auto insurance consumers will enjoy a comprehensive set of consumer rights when an insurer requests an independent medical examination.

            Such rights include: requiring that an examination be performed by a health care provider that has been authorized by the Superintendent, mandating that exams be held at a time and place reasonably convenient to the person being examined, providing written notice of such examination at least seven days in advance by mail, requiring that the independent medical examiner provide a sworn statement as to the accuracy of the medical examination report, and assuring that copies of any and all independent medical examination reports are provided to the injured person and their legal representative on a timely basis.

            "Currently New York’s auto insurance consumers do not have real options when purchasing auto insurance coverage. They simply have to buy the standard package of services," Serio said. "Under this new legislation, consumers will have new alternatives leading to reduced premiums."

            The Department’s proposed legislation provides extensive consumer choice for policyholders in the no-fault system. Consumers will be offered additional product options to reduce premiums.

            These options include: participation in Preferred Provider plans for auto-related medical treatments, additional deductible alternatives that are similar to what is currently available to New Yorkers when they purchase homeowner’s coverage, and optional co-payments. Managed auto repair will also be made available in which the consumer agrees to have their vehicle repaired by designated repair shops in return for a reduced premium. All of these alternatives are proven means to reduce the cost of auto insurance coverage.

The package includes:

New Special Prosecutor to Coordinate Investigative Efforts at State level:

Tough on Fraud:

New Consumer Rights:

New Consumer Choices: