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Update on New York’s No-Fault Fraud & Abuse Problem

This briefing explores the growing problem of insurance fraud and abuse in New York's no-fault system, highlighting the increasing costs and impact on auto insurance premiums. It discusses the need for administrative reforms and crackdowns to address the issue.

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Update on New York’s No-Fault Fraud & Abuse Problem

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  1. Update on New York’s No-Fault Fraud & Abuse Problem New York Alliance Against Insurance Fraud Insurance Fraud Briefing Albany, NY March 25, 2003 Robert P. Hartwig, Ph.D., CPCU, Senior Vice President & Chief Economist Insurance Information Institute 110 William Street New York, NY 10038 Tel: (212) 346-5520 Fax: (212) 732-1916 bobh@iii.org  www.iii.org

  2. Insurance Fraud in the U.S. Costs Billions! Total Fraud Costs = $96.2 Billion Source: Conning & Co.

  3. Comparative Statistics: PIP Claims Costs

  4. Growth in Total PIPClaims Costs* Four Quarters Ending 2000:3rd PIP Claims Costs PIP Costs in New York are growing faster than in any other no-fault state—by far . *Change in “pure premium” Source: Insurance Information Institute from ISO Fast Track Data

  5. Growth in Total PIPClaims Costs* Four Quarters Ending 2000:4th PIP Claims Costs PIP Costs in New York grew faster than in any other no-fault state—by far . *Change in “pure premium” Source: Insurance Information Institute from ISO Fast Track Data

  6. Growth in Total PIPClaims Costs* Four Quarters Ending 2001:2nd PIP Claims Costs Growth NY’s PIP Costs slowed significantly during the first half of 2001. *Change in “pure premium” Source: Insurance Information Institute from ISO Fast Track Data

  7. Growth in Total PIPClaims Costs* Four Quarters Ending 2002:3rd PIP Claims Costs Growth NY’s PIP Costs are began to rise again after slowing during late 2001, early 2002 *Change in “pure premium” Source: Insurance Information Institute from ISO Fast Track Data

  8. Private Passenger Auto:6 Least Profitable States, 2000(Profit as a % of Direct Premium Earned) • NY ranked 44th in terms of profitability in 2000 • FL ranked 48th Source: NAIC; Insurance Information Institute

  9. Return on Net WorthPrivate Passenger Auto (%), 1991-2000 Source: NAIC.

  10. PIP Fraud and Abuse in New York State

  11. Change in PIP Loss Costs:New York vs. US:1987-2000* By 2000, growth in New York PIP loss costs were more than twice (121%) the national average. *Through 4 quarters ending 2000:3rd. Source: American Insurance Association/ISO FastTrack; Insurance Information Institute

  12. Change in PIP Loss Costs:New York vs. US:1993-2002* In 2002:III, cumulative growth in New York PIP loss costs were nearly twice (+89% above) the national average. *Through 4 quarters ending 2002:3rd. Source: American Insurance Association/ISO FastTrack; Insurance Information Institute

  13. Personal Injury Protection Paid Claim Frequency PIP frequency was 42% above the US average Source: Insurance Information Institute and Insurance Services Office.

  14. Personal Injury Protection Paid Claim Frequency PIP frequency is 19% above the US average Source: Insurance Information Institute and Insurance Services Office.

  15. Change in NY Personal Injury Protection Paid Claim Frequency* PIP frequency has fallen steadily since early 2001, but… * Average over four previous quarters. Source: Insurance Services Office, Insurance Information Institute.

  16. Change in NY Personal Injury Protection Average Loss (Severity)* PIP severity is rising at double-digit rates again after a brief lull, more than offsetting lower frequency * Average over four previous quarters. Source: Insurance Services Office, Insurance Information Institute.

  17. Change in NY Personal Injury Protection Claim Frequency & Average Loss* PIP frequency and severity were falling by the 2nd half of 2001; now diverging * Average over four previous quarters. Source: Insurance Services Office, Insurance Information Institute.

  18. PIP Claim Severity 1995-2000: New York vs. United States Average PIP Claim New York Other No-Fault States* Source: Fast Track Monitoring System, Fourth Quarter 2000 Report * Excluding Michigan

  19. PIP Claim Severity 1995-2002: New York vs. United States Average PIP Claim New York The average PIP claim in NY is $1,555 or 23% above the US average Other No-Fault States Source: Fast Track Monitoring System, Third Quarter 2002 Report

  20. Impact on Cost of Auto Insurance in New York State

  21. Projected Average Auto Insurance Expenditure in NY State Assuming (March 2003 Est.) Source: Insurance Information Institute

  22. Projected Per Vehicle Average Cost of No-Fault Auto Insurance Fraud, (March 2003 Est.) Cost per Vehicle • Decrease in PIP claim frequency & severity in latter half of 2001 (amplified by 9/11 effect) • Administrative reforms • High-profile crackdowns NY’s PIP Fraud tax is $46/vehicle and rising sharply! Source: Insurance Information Institute

  23. Annual Cost of No-Fault Auto Insurance Fraud in NY, (March 2003 Est.) $ Millions No-fault fraud will cost drivers in NY state $432 million in 2003, or $1.2 million per day. Source: Insurance Information Institute

  24. Cumulative Cost of No-Fault Auto Insurance Fraud in NY, (March 2003 Est.) $ Millions No-fault fraud has cost NY insurers and policyholder more than $1 billion dollars so far through 2002. Source: Insurance Information Institute

  25. No-Fault Fraud Statistics in New York State

  26. New York Insurance Fraud Reports, 1995 - 2002 Source: New York Department of Insurance; Insurance Information Institute.

  27. New York Insurance Fraud Reports, 1995 - 2002 Source: New York Department of Insurance; Insurance Information Institute.

  28. New York Insurance Fraud Reports, 1995 - 2002 Source: New York Department of Insurance; Insurance Information Institute.

  29. Composition of Fraud Reports, 1995 vs. 2001 1995 2001 Source: New York Department of Insurance; Insurance Information Institute.

  30. Composition of Fraud Reports, 2001 vs. 2002 2001 2002 Source: New York Department of Insurance; Insurance Information Institute.

  31. No-Fault Fraud: A Growing Problem PIP fraud reports accounted for 61% of all fraud reports in 2002 compared with 22% in 1995 Source: New York Department of Insurance; Insurance Information Institute.

  32. Insurance Information Institute On-Line WWW.III.ORG

  33. Projected Average Auto Insurance Expenditure in NY State Assuming No Meaningful Reform(Jan. 2002 Est.) Source: Insurance Information Institute

  34. Projected Average Cost of No-Fault Auto Insurance Fraud in NY State Assuming No Meaningful Reform (Jan. 2002 Est.) Cost per Vehicle Source: Insurance Information Institute

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