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Home / MCNTalk / No fault, but not "no fraud"

January 6, 2011

No fault, but not “no fraud”

New York’s no-fault auto insurance system, instituted in 1974, allows someone injured in a crash to file up to $50,000 worth of claims for medical costs or lost wages with their own insurer no matter who is to blame for the accident. The system was designed to speed payment for medical treatment by eliminating disputes between insurance companies over who was at fault.

This article in The Wall Street Journal explores the downside of “no fault” as detailed through a study to be released this week, conducted by the Insurance Research Council, a nonprofit organization funded by insurance companies.  The study illustrates one of the primary reasons why car insurance is more expensive in New York than in most other states — and why it costs more in the city than it does upstate. The no-fault portion of a driver’s coverage, called personal injury protection, cost $754 in the Bronx in 2009 on average, compared with a statewide average of $202, according to the Property Casualty Insurers Association of America.

Insurance companies aren’t alone in worrying about fraud: The state insurance department has been working for more than a year on a revision of the state’s no-fault insurance regulation. The state’s Insurance Fraud Bureau reports no-fault fraud increased from 10,117 instances in 2006 to 13,433 in 2009.

“Fraud is pervasive under no-fault, unfortunately,” said Steven Nachman, the New York insurance department’s deputy superintendent for fraud. “The bad guys have figured out how to game the system.” Read more…

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