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New Directives Will Lead to Long Term Stability and De-population of the Auto Insurer of Last Resort

  Superintendent of Insurance Gregory V. Serio today announced a series of significant changes to the New York Automobile Insurance Plan, (the Plan), New York’s assigned risk insurer of last resort, and challenged New York’s insurance community to reduce the Plan’s population to 200,000 policies or less – levels where enrollment stood just 2 years ago.

Included in the new directives for the Plan are the implementation of a full anti-fraud unit within 60 days, 100% automation of the application process to reduce fraud, expansion of the voting membership on the Governing Committee by adding 12 new members-- including a consumer representative-- and a requirement of bi-annual public meetings of the Plan--one to be held upstate and one downstate.

"In May of last year, the Department laid out plans for a wide-reaching auto insurance reform package and we have made good on our promises," said Serio. "The Attorney General was named Special Prosecutor by Governor Pataki and we have already seen tangible results from that initiative. We have fought an over two-year battle for amendments to Regulation 68, and remain committed to seeing the fraud–fighting regulation through until the end. And we introduced sweeping legislative changes and remain optimistic that 2002 will be the year that the legislature institutes real meaningful reform for New York State’s drivers."

"No-fault insurance fraud costs New York’s drivers $1 billion annually," said Serio. "My new directives will go a long way to fight fraud, increase Plan accountability, lower costs to all drivers, and once again de-populate the Plan."

The Plan, which had over 1.5 million New York policies in 1995, was reduced by almost 90% to just 175,000 policies in 2000.

The Plan will be directed to institute a full fraud-fighting unit within its offices in the next two months that will be consistent with the special investigations units currently operating in all of New York’s auto insurance companies. The Plan will also be instructed to add 12 new members including 5 company representatives, 6 new producers representatives, and a consumer representative to its Governing Committee. There are currently 15 members, composed of 8 insurers and 7 producers. Additionally, in order to better inform and educate the public at large, the Plan will be directed to hold two public meetings annually, one in Albany and one in New York City.

"I challenge the Plan’s Governing Committee and the insurance community to take advantage of the single best way to control the insurance industry’s costs—de-populate the Plan," said Serio. "In 2000, there were about 175,000 policies in the Plan. Today, the Plan has in excess of 350,000 policies. I call on the Committee and Insurers to immediately reverse this trend and to reduce the number of policies to 200,000."

Additionally, the Department will be directing the Plan to modify its procedures to provide enhanced documentation on voluntary market declinations of coverage in order to decrease the number of insureds who are placed in the Plan. The Plan offers auto insurance to those who cannot find coverage in the voluntary market.

The Department also slashed the rate hike requested by the Automobile Insurance Plan by 75%--approving a statewide increase of 19.5% for the Plan.

"No-fault insurance fraud is currently the number one cost driver in auto insurance in New York State," said Serio. "The Department has seen reports of no-fault fraud skyrocket from approximately 5,000 reports in 1996 to over 15,000 in 2001. The creation of a fraud unit within the Plan together with the efforts of the Insurance Department, Attorney General, and local DA’s will help to suppress these criminal acts and punish those who commit fraud. However, it is only by implementation of Regulation 68 and meaningful action from the Legislature that we will bring long-term stability to the marketplace, preserve the affordability and availability of auto insurance in New York, and put a stop to this theft from the pockets of New York’s drivers."

Department of Financial Services


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