IRC: NYC’s Medical Claims Costs up 70 Percent Over Past Decade

Insurance claims filed by auto accident victims in New York City include losses for medical expenses, lost wages and other costs that are more than twice the average for the rest of the state, according to a new study from the Insurance Research Council (IRC).

New York skyline aerial viewThe losses have shot up 70 percent over the past 10 years—outpacing a 49 percent increase in medical care inflation during the same period—according to the study, which attributes the growth to questionable claims filing and rampant overbilling by medical providers.

“This report further details the problem of claim abuse in New York, especially unscrupulous medical providers who overtreat and overcharge claimants and their insurers,” Elizabeth Sprinkel, IRC senior vice president, said in a news release. “Even when the excessive charges can be mitigated, the costs of combating these … activities are further driving up the price of (coverage) for all consumers in the state.”

The study by IRC—a division of the American Institute for Chartered Property Casualty Underwriters—looked at more than 4,500 personal injury protection (PIP) claims that were closed in 2010. The 10 insurers who participated in the study represent about 70 percent of the private passenger auto coverage market in the state.

According to the analysis, the average loss per PIP claim in the New York metropolitan area was $15,086, dwarfing the $6,870 for the rest of the state. Researchers say that disparity is largely due to claimants in the city being far more likely to hire lawyers, be treated in pain clinics, visit acupuncturists, chiropractors and physical therapists and undergo pricey diagnostic procedures.

PIP claims filed in New York City were more than four times as likely—35 percent compared with 8 percent—to involve apparent abuse, according to the report, which suggests that drove the statewide average for apparent claims abuse up to 23 percent.

And researchers say 52 percent of questionable claims were tied to accidents that happened in two of the city’s five boroughs—Brooklyn and Queens—which accounted for 28 percent of all claims studied.

NYC Has History of Inflated Claims Costs

The IRC study supports earlier reports that staged accidents, exaggerated injuries, inflated billing and other dubious claims activity in New York City are driving coverage costs up for motorists statewide, making it difficult for residents to find low cost auto insurance policies.

The Insurance Information Institute (III) estimated that claims abuse in 2009 cost the state’s consumers and insurers $229 million.

According to III, New York state’s no-fault insurance system, the fourth largest nationwide, is part of the problem.

New York is one of a dozen states with no-fault systems that provide for the payment of injury claims by a policyholder’s insurer and impose restrictions on lawsuits for noneconomic damages, including emotional suffering.

The system was adopted in the 1970s in order to limit accident lawsuits and slow-rising coverage costs.

Insured motorists in New York are entitled to $50,000 in medical and other benefits under the no-fault coverage portion of their PIP policies. Those whose costs exceed those limits are entitled to go to court.

But according to III and other industry experts, dishonest claimants, attorneys and medical providers often try to game the system for as much of that $50,000 limit as possible.

About John Pirro
John Pirro is a licensed fire and casualty insurance agent specializing in various aspects of the auto insurance industry. He worked in the auto body repair industry before taking a reporting position at Online Auto Insurance News.

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