March 21, 2012

The Effect Of Fraud On New York Auto Insurance Coverage Premiums

Fraud affects the cost of individual and family car insurance policies throughout the United States but, in certain states, the effects of fraud are notably more pronounced. In the state of New York, insurance companies may pay far more in fraudulent claims due to the state's strict guidelines and requirements for "no fault" personal injury protection auto insurance coverage.

Over the past decade, there have been numerous reports of insurance fraud in the state. Insurance experts believe that the most serious offenses have caused hundreds of millions of dollars in damages. The NYPD and federal investigators broke up a massive insurance fraud ring in March of 2012, arresting 10 doctors and dozens of other individuals who allegedly defrauded insurance providers by taking advantage of New York's strict no fault law. In the state of New York, insurance companies must answer personal injury protection (PIP) claims quickly and issue payments regardless of which driver was at fault in an accident. Members of the ring allegedly submitted false claim reports, creating fake medical records in the process to back up their claims.

There are likely other fraud rings in the state of New York, but insurance companies cannot say how many. All insurance experts do agree that New York drivers are paying much more because of fraud. Although insurance companies often have trouble estimating the real costs of fraud, many New York insurers believe that the cost of auto insurance coverage in New York has risen substantially due to abuse of PIP insurance laws. Insurance fraudsters often submit large claims, with the largest hovering around $50,000. Insurance companies base their rates around the number of claims in each zip code, so many New York drivers' insurance rates were unfairly raised in reaction to the fraudulent claims. Individual and family car insurance policies in New York are expensive compared to similar policies in other states, with the average policy costing about $800 per year as of 2007.

New York drivers can decrease their car insurance rates by looking into safe driving programs, by asking for discounts, and by comparing policy costs online. Many New York drivers don't take the time to regularly look for insurance quotes, but occasionally taking the time to compare insurance costs often yields significant savings without any sacrifice in coverage. State lawmakers are also looking for ways to eliminate the incentives that lead to insurance fraud, which could ultimately lead to better auto insurance coverage costs for New York drivers. In the meantime, New York residents will simply have to look for affordable policies and take advantage of insurance company discount programs to avoid higher-than-average car insurance coverage costs.