After Senate Passage, NY Takes Another Stab at Anti-Fraud Bills

A New York senator is calling on the state Assembly to pass three bills approved out of the Senate Wednesday he says would deal with auto insurance fraud that costs drivers millions of dollars in inflated premiums.

In all, the bills harden penalties for criminals perpetrating coverage-related crimes and empowers insurers “to prevent criminals from getting policies” that allow them to continue their schemes, according to the New York State Senate.

Three similar bills were passed out of the Senate last year but none made it past Assembly committees.

This year, Dean Skelos, the conference leader for Republicans in the Senate, said that “it’s time the Assembly pass these bills so that they can be signed into law.”

“The Senate has been passing bills to combat auto insurance [fraud] for more than a decade, yet, the Assembly has not acted on them while the problem has only grown worse,” Skelos said in a statement. “[C]onsumers can save money by not having to pay the exorbitant rates that are caused by fraud.”

Such trends spur lawmakers to begin crime-fighting efforts meant to curb the large number of claims brought by organizations perpetrating insurance-related crimes that generally pump up premiums for all motorists.

Bills Stiffen Penalties, Empower Insurers

S3547 criminalizes staged car crashes, imposing a maximum 25-year prison sentence for the crime if it results in serious injury or death.

S3033 criminalizes the act of being a “runner” in an insurance-related scheme. Runners, which senators said were “key members” of criminal groups, typically recruit an operation’s crash victims whose injuries are the basis for inflated medical bills and phony claims.

Similar versions of those two bills, S1685 and S2004, never made it past the Assembly Committee on Codes when they were assigned there in March. S7451, which like S1685 targeted runners, made it to that same Assembly committee in June but also never made it past there.

This year, S3547 and S3033 are again in the same committee.

S1959A allows insurers to retroactively cancel policies in which a bank account or credit card bounces back for the first premium payment.

According to the proposal, criminals take advantage of “a gold mine” in New York by buying policies through bogus credit cards and bank accounts and then filing claims during the coverage period, since current law does not allow insurers to retroactively cancel the coverage.

There is “ample opportunity” for criminals in “the time between the policy is ‘purchased’ to the time it is cancelled,” senators said in their proposal.

Last year, S4507 proposed the same provisions but never saw action past the Assembly Committee on Insurance; S1959A was referred to the same committee Wednesday.

New York Grapples with Crime

The National Insurance Crime Bureau (NICB) reported on claims linked to organized crime rings and groups earlier this year. The report found that, between 2008 and 2012, New York generated the fifth-highest number of those claims out of states in the U.S.

In that same time period, New York City generated the second-highest number of such claims out of cities in the U.S., trailing only Los Angeles. More than three-fourths of those claims in New York came from New York City.

At a January hearing, authorities told the New York City Council that laws were needed to curb the rising tide of crime.

Daniel Alonso, chief assistant district attorney, promoted passage of laws criminalizing the act of being a runner, saying that doing so would weaken a vital part of fraud-related enterprises.

Jeff Ferguson, Brooklyn’s assistant district attorney, said at the hearing that 36 percent of insurance claims in New York are either inflated or completely phony.

Both pointed to New York’s no-fault system as especially vulnerable to bogus claims. The state’s no-fault system, where an insurer reimburses its own policyholder for crash-related medical expenses regardless of fault, requires personal injury protection (PIP) coverage and caps it at $50,000, the second-highest level in the country.

Michigan holds the highest level with no current cap on benefits, but lawmakers there are considering major reforms they say are needed to deal with the system’s rising costs.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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