Alliance Cold To N.Y. Anti-fraud Bill; Sees It Increasing Costs, Accomplishing Little Deterrence.


A bill before the New York state legislature (A.8913-A) intended to help combat insurance fraud "will have the unintended consequence of raising insurance costs while doing very little to curb and prevent fraudulent insurance claims," according to the Alliance of American Insurers, whose member companies write ten percent of the New York auto insurance market. "Assembly Bill 8913-A is an expensive step in the wrong direction," the Alliance said in a statement released in New York. [Comments on the bill by its sponsors appear on this page -ed.]

The alliance statement asserts that the proposed legislation "... concentrates on auto vehicle damage fraud and virtually ignores inflated and fraudulent medical bills which contribute to increased auto insurance costs in New York state. Moreover, the legislative proposal attempts to micro-manage the auto insurance fraud investigation process by mandating that there be special investigators assigned for each of 25,000 policies in force. This arbitrary requirement will result in increased insurance company and policyholder costs with no guarantee there will be an actual decrease in the incidence of fraud."

"What we need are measures to deter fraud and prosecute fraudulent activities, not just something that requires merely the reporting of fraudulent activity," the trade group said.

The Alliance pointed out that "mandating inflexible ratios of Special Investigative Units (SIU) for auto insurance claims ignores the reality and complexity of the insurance fraud problem in New York state. And while more carriers are adding SIU units and allocating more resources toward fighting medical fraud, their efforts could not be counted toward the rigid SIU mandate under A.8913-A."

The bill also contains a provision that any disputes involving an amount payable to a body shop under an auto collision or comprehensive policy can be put to binding arbitration, the alliance observes, adding that "this feature will also increase costs, and we feel it has no productive role in the auto insurance system."

"Moreover," the Alliance states, "A.8913-A requires a study of auto body shop labor rates throughout New York state. We are concerned that the study will be used to mandate universal regional labor rates established at a hypothetical rate higher than the going market rate. The result will be higher clams costs and insurance premiums for our customers, an increase they don't deserve and don't want." the trade association...

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