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New York’s Insurance Consumers to Save Money From Reduced ‘Fraud Tax’

Superintendent of Insurance Gregory V. Serio announced that the Department has submitted to the Department of State its comprehensive insurance fraud-fighting regulation for final promulgation. Regulation 68 will be effective as of September 1, 2001.

"Regulation 68 will provide important weapons to fight fraud and abuse in our continuing effort to control automobile insurance costs," said Serio. "Regulation 68 provides better safeguards for the consumer and returns the no-fault automobile insurance system to its roots as a system that provides for the prompt and fair adjudication of automobile insurance claims."

Regulation 68 institutes new timeframes for accident victims to report a claim and medical providers to submit claims for payment--eliminating existing loopholes that have been exploited as opportunities for fraud and abuse. It reduces the time medical providers have from each treatment to submit claims for payment from 180 days to 45 days while it maintains the amount of time the carrier has to pay on claims.

"The current system has resulted in unnecessary costs from insurance fraud and abuse that are ultimately passed on to all automobile insurance consumers. The enactment of Regulation 68 will go far to eliminate this ‘fraud tax.’ However, we need the Legislature to do its part and adopt our entire Auto Insurance Reform package which will further combat fraud and stabilize auto insurance premiums over the long term," added Serio.

Regulation 68 is a critical component of the Department’s Auto Insurance Reform package. This sweeping legislative and regulatory package is the most comprehensive overhaul of auto insurance in New York State in almost 30 years. The proposed legislation will protect honest New Yorkers from the mounting costs of fraud and abuse by putting insurance crooks out of business and provides consumers with more auto insurance choices, combined with expanded consumer protections.

The Auto Insurance Reform package includes an Executive Order issued by Governor George E. Pataki on May 9, 2001 naming the Attorney General as Special Prosecutor to coordinate investigatory and prosecutorial efforts at the State level to combat auto insurance fraud. The Special Prosecutor will work with local prosecutors, law enforcement officials and the Insurance Department Frauds Bureau to augment their efforts to stop fraud and abuse by putting criminals behind bars.

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.

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.

Regulation 68 was filed August 2nd with the Department of State and will be published in the State Register August 22nd. The Regulation is final upon publication and the provisions of Regulation 68 will be effective as of September 1st. This revised Regulation 68 was published in the State Register on May 9, 2001 after the original regulation was struck down in court last year. On June 6, 2001 the Department extended the public comment period for the proposed Regulation 68 for an additional 15 days to June 22.

Department of Financial Services


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