Propose overhaul
of no-fault auto
insurance rules

In order to “more effectively combat abuse and fraud,” the state’s Insurance Superintendent, James J. Wrynn, has issued a draft of revised rules covering no-fault automobile insurance.

“Especially in these difficult economic times, we have to be vigilant in protecting the pocketbooks of consumers,” Wrynn said on Tuesday, November 24. “New Yorkers should not have to pay a fraud and abuse tax in their auto insurance premiums,” he added.

No-fault automobile insurance, in effect in New York since 1974, allows an accident victim to collect directly from their insurance company for medical and hospital expenses and lost wages, regardless of who was at fault.

Wrynn’s rules aim to help reduce fraud and abuse in no-fault claims, while making the system more user-friendly. This will be the first significant revision since 2002.

“No-fault reform is desperately needed, and this proposed regulatory reform is a step toward that goal,” he said.

According to Wrynn, one of the biggest factors in increasing automobile insurance claim costs has been the explosion of disputed no-fault claims by providers of health services. This has led to long delays and to the payment of unnecessary claims, undermining the very purpose of the no-fault system, he said.

The change would modify insurance forms to require more information, to help ensure medical necessity and reduce the need for additional verification. This should hasten claims processing and payments.

Insurers would have greater latitude to deny health services that are not provided or are not billed in compliance with the applicable fee schedule. This would reduce payment of fraudulent claims and instances of over-billing, Wrynn indicated.

Another provision simplifies procedures for insurers to suspend all payments submitted by medical clinics suspected of fraud, while they’re being investigated.

Other provisions would directly benefit policy holders when it comes to scheduling and location of medical examinations – they couldn’t be geographically inconvenient, or multiple exams scheduled on the same day.

The proposed regulation would also raise the maximum attorney fee to reflect inflation and to help ensure adequate representation for applicants and assignees, and eliminate the minimum attorney fee, to encourage the consolidation of claims in arbitration and litigation.

“These regulatory changes are just one part of the no-fault reforms needed,” Wrynn said. “We also need legislative remedies.”

One such rule, Wrynn pointed out, is that an insurer who does not deny a claim within 30 days must pay it, even if it turns out to be fraudulent or abusive. That encourages cheats to flood the system with multiple claims, knowing any claims not denied within 30 days have to be paid, he said.

Wrynn also indicated that improper and illegal activity, including staged accidents, appear to be on the rise. He called for legislation providing tools to better police improper activities by health providers and claimants.

“We stand ready to work with interested parties and with the Legislature to protect New York drivers from waste and fraud,” Wrynn said. “The Department has stepped up the fight against no-fault fraud, and we will continue to fight fraud with all the tools at our disposal,” he added.

The Insurance Department’s Bureau has received more than 11,000 complaints alleging no-fault fraud this year to date, which is a seven percent increase over the total for all of 2008. The number of no-fault arrests in 2008 was 52 percent greater than in 2007.

The proposed revision is available at www.ins.state.ny.us/r68/r68_draft_trk_chg.pdf.

Comments on the draft may be sent to the Department through its website, www.ins.state.ny.us, or emailed to [email protected] on or before January 8, 2010.

“The cost of each no-fault claim has gone up by more than half in the past five years, and all New Yorkers with auto insurance are paying that tab,” Wrynn said.


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