Printer Friendly

PUBLISHED ESTIMATES OF AUTO INSURANCE FRAUD AND ITS IMPACT ON INSURANCE RATES ARE GREATLY EXAGGERATED SAYS MAJOR INSURANCE ASSOCIATION

 NEW YORK, March 18 /PRNewswire/ -- A national insurance industry group told the New York state legislature here today that "auto insurance fraud is difficult to quantify and define and its impact on auto insurance premiums has been grossly exaggerated by the use of imprecise and inaccurate measures.
 "However, whatever incidence of auto insurance fraud is out there it has to be dealt with and corrected and the corrective process is underway," said Alliance of American Insurers Vice President John Cucci in testimony before the Assembly Insurance Committee.
 The committee, chaired by Alexander B. Grannis (D/L-NY), is investigating the effect of consumer fraud on auto insurance rates in New York state.
 "The fact is that it is presently impossible to determine precisely how much of the auto insurance premium or claims dollar is attributable to fraud. Fraud by its very nature defies quantification. It is a societal problem that the insurance industry has been charged with solving without adequate resources or authority," the Alliance spokesman said.
 "Recent talk and media reports about auto insurance fraud have been loose-lipped with unsubstantiated charges that from 10 to 40 percent of all claims dollars paid out are attributable to fraud. Upon closer examination of what hard evidence there is, these estimates prove to be highly inflated.
 "For instance, studies from Massachusetts indicate that active criminal fraud accounted for 3 to 4 percent of annual auto insurance claims. Equally important was the finding that from 15 to 20 percent of annual claims involved a buildup of medical expenses to meet the state's requirement that $2000 in medical costs be incurred before an auto accident victim could sue for `pain and suffering.' Insurance company Special Investigative Units (SIUs) are used to help investigate the problem but they really cannot get the legal authorities to do anything about it since prosecutors are only interested in patterns of repeated criminal behavior over time and not in individual instances," the Alliance said.
 "In Massachusetts, when the medical injury threshold for lawsuits was changed from $500 to $2000, chiropractic visits for suspicious neck strains and back strains jumped from an average of 15 visits to 30 visits in an effort, in many cases no doubt, to reach the new minimum limit. The answer here is to enact a verbal threshold like New York's and that has been an industry goal for the past several months.
 "There is undoubtedly medical fraud in New York state's auto system, but the legislature has been instrumental in holding it to a minimum through passage of a strong no-fault law, effective anti-fraud initiatives, and the mandated use of medical fee schedules to help contain costs and discourage padded medical bills.
 "What is needed to zero in on the problem is research that as a first step describes the nature of fraudulent activities from buildup of medical bills, hardcore criminal fraud, staged accidents, filing of multiple claims for the same injuries, paper claims, auto arson, and out-and-out scams. Incidence of each type of such activity can then be tallied and quantified. Even then we will have an elusive figure and at best a rough indication of why fraud happens and how it can be prevented.
 "Such a project is now being structured by the Insurance Research Council, a nonprofit organization founded by the property/casualty insurance industry. It will be completed by the end of 1993 and based on a nine-state closed claims study where indications of fraudulent and suspicious claims will be categorized and quantified. But even these results will not be ironclad measurements because of the elusive nature of the problem," Cucci said.
 The Alliance said that "the property/casualty industry spends more than $200 million per year that is directly allocated for fraud deterrence and that figure is probably underestimated since fraud control is embedded in many aspects of the operation of an insurance company.
 "Training of personnel, special investigative unit investigations, support of claims management, public awareness and media attention, are the major factors contributing to successful fraud detection and deterrence by insurance companies. An indication of the emphasis that companies are placing on Special Investigative Units is the change in the percentage of companies who have SIUs. Insurers representing about two-thirds of the property/casualty insurance market now have SIUs, up from 50 percent in 1983," the Alliance said.
 The Alliance representative also said that "time frames in the state's Unfair Claim Settlement Practices regulation are counterproductive to the intensive investigation of automobile insurance fraud."
 He urged the forestalling of these time limitations on claim settlements "where a recognized investigative body or law enforcement agency acknowledges that the information submitted by a claimant indicates a suspicious claim.
 The Alliance also said that it had begun a national campaign to enact anti-fraud legislation in states lacking such statutes, and to date such legislation has been introduced in eleven states and already enacted in one. Ten other states are expected to introduce anti-fraud legislation this year.
 -0- 3/18/93
 /CONTACT: Sara Phillips of Alliance of American Insurers, 212-953-0008/


CO: Alliance of American Insurers ST: New York IN: INS SU:

AH-OS -- NY017 -- 7389 03/18/93 10:27 EST
COPYRIGHT 1993 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Mar 18, 1993
Words:857
Previous Article:BARNETT BANK PRESENTS FORT LAUDERDALE AUTO SHOW HOSTING JAMES BOND EXHIBIT
Next Article:JAMES B. LOCKHART JOINS SMITH BARNEY'S CORPORATE FINANCE INSURANCE GROUP
Topics:


Related Articles
Auto insurance industry turns up heat on government plan.
INSURANCE CROOKS COME IN MANY FORMS: LAW ABIDING CITIZEN, COMMON CRIMINAL, MURDERER
CONSUMERS, INSURERS AND GOVERNMENT AGENCIES LAUNCH NEW CAMPAIGN TO FIGHT INSURANCE FRAUD; AUTO INSURANCE FRAUD STUDY RELEASED
AIA Cites Storm Damage as Major Cause of Homeowners Insurance Claims
Allstate Asks Judge to Delay Action on Hundreds of Fraudulent PIP and Bodily Injury Claims in New Jersey
Auto insurance rates to drop; first since 1973.
One in Three Americans Say It's Acceptable to Inflate Insurance Claims, But Public Acceptance of Insurance Fraud Is Declining.
USAA to lower auto rates by 5% in New Jersey.
A welcome reprieve: auto rates are leveling out as claims volume shrinks.
Turning the corner: how the New York State Insurance Department lowered auto insurance rates, slashed loss costs for insurers and reduced fraud.

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters