Seward Continues Fight Against "Fraud Tax"

ALBANY, NY May 3, 2011 – Senator James L. Seward joined forces today with King County District Attorney Charles Hynes, Senator Martin Golden and Assemblyman Joseph Morelle in support of reforming New York’s no-fault auto insurance laws.

New Yorkers now pay the fourth highest premiums in the nation for auto insurance, due in large part to an outdated system that is rife with fraud and abuse.  In 2010, for the second consecutive year, no-fault fraud cost New Yorkers more than $200 million—this cost is a ‘Fraud Tax’ that is absorbed by all drivers across the state in the form of higher insurance premiums.

“New York’s no-fault auto insurance system is broken and needs to be fixed now,” said Senator Seward, chairman of the Senate’s Insurance Committee.  “Our bill (S-2186/A-6286) would bring fundamental change by cracking down on criminals who fleece the system for their own personal gain and leave New Yorkers to foot the bill by way of a ‘fraud tax.’ These are tough times for New York, but this is one tax we can all agree must get cut.”

“The ‘fraud industry’ has ballooned into a multi-million dollar a year criminal enterprise. No-fault auto insurance fraud not only costs New Yorkers hundreds of millions of dollars annually, but it also poses a considerable threat to public safety,” said District Attorney Hynes. “Time and again, innocent bystanders are injured or killed as a result of staged auto accidents. This is simply unacceptable. We need real reforms that will finally stop the ‘fraud tax’ and allow law enforcement to prosecute these criminals to the fullest extent of the law and keep our streets safe.”

With fraud costing New York drivers nearly to $1 billion dollars over the last five years, the state of New York is an insurance fraud crisis. Last month, Seward and Morelle introduced legislation that would reduce fraud and abuse and help fix New York’s broken no-fault system.

“New York’s working families are hurting in the face of this difficult economy, as prices for everything from bread and milk to gas and heating oil are on the rise,” said Assemblyman Morelle, Chair of the Assembly’s Insurance Committee. “The burden of a ‘fraud tax’ is not only wrong, it is unsustainable and unaffordable. I urge my colleagues to join me in passing legislation that will reform this broken system and relieve the unnecessary financial burden that rampant fraud and abuse places on the shoulders of New Yorkers.”The proposed bill (S-2186/A-6286), which maintains strong protections for individuals involved in car accidents, aims to reform a system that is not working as cost-effective and efficiently as its originators intended.  The reform measures include:

• Implementing tougher penalties on criminals who cheat the no-fault system;• Modifying the “30-day rule” in order to allow for more thorough investigations of suspicious claims;• Combating excessive and unnecessary medical charges;• Decertifying medical providers who commit insurance fraud;• Encouraging fast and fair settlements by requiring medical providers to submit disputed no-fault claims to an arbitrator.

“I applaud District Attorneys Hynes for stepping up and calling for reforms which will increase penalties for those criminals and unscrupulous medical providers who rip off honest, hard working New Yorkers time and again,” said Kristina Baldwin, assistant vice president for Property Casualty Insurers Association of America. “It’s time Albany institutes reforms which provide insurance companies with sufficient time to investigate suspicious no-fault claims, require medical providers to submit claims to an arbitrator and ensure that health care providers submit sufficient evidence that all services billed were performed and were medically necessary. Senator Seward and Assemblyman Morelle’s bill (S-2186/A-6286) will do just that and I encourage their colleagues in Albany to act swiftly. Stop the ‘fraud tax’ and stop it now.”

Fraud Costs New York is a coalition of community groups, small businesses, elected officials and law enforcement committed to reforming the State’s no-fault auto insurance system and stopping insurance fraud and lawsuit abuses that drive up costs for consumers.