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More than 20 Percent of NYC-Area Auto Injury Claims Appear to be Fraudulent

More than 20 percent of NYC-Area auto injury claims appear to be fraudulent, according to IRC analysis.

Residents of the city that never sleeps evidently are using some of that awake time to perpetrate insurance fraud, if the findings of a new study from the Insurance Research Council (IRC, Malvern, Pa.) are any indication. IRC reports that roughly one in every five no-fault auto insurance claims closed in the New York City area in 2010 appears to have elements of fraud, and as many as one in three claims appears to be inflated. From 2007 to 2010, the percentage of no-fault claims in the New York City area with the appearance of claim abuse rose from 29 percent to 35 percent, according to the IRC research.

"The apparent amount of fraud and excessive billing by some healthcare providers in the New York City metropolitan area is truly stunning when compared to the rest of the state," said Elizabeth Sprinkel, SVP of the IRC, in a press release.

The IRC's study, "New York's No-Fault System: Preliminary Findings From Closed Auto Injury Claims," found that elements of fraud appeared in 22 percent of all New York City metropolitan area no-fault auto insurance claims (personal injury protection, or PIP claims) closed in the fall of 2010. Under New York's statewide no-fault auto insurance system, PIP is the portion of an auto insurance policy that covers the treatment of injuries to the driver and passengers of the policyholder's car.

The study also revealed that another 14 percent of the New York City-area claims appear to involve either overbilling or excessive utilization of medical services, otherwise known as claims buildup. "While this may not rise to the level of criminal fraud, New York's honest drivers are essentially subsidizing unscrupulous healthcare providers when instances occur," said Sprinkel.

When the IRC looked at PIP claims filed in New York state outside of the New York City metropolitan area, elements of fraud were found in only 4 percent of closed claims. In addition, signs of claim buildup were found in just 4 percent of all upstate PIP claims, according to the study. Other key downstate/upstate discrepancies documented in the IRC report include the following:

- In 2010, the typical PIP claims payout for claimants in the New York City area was nearly two times the payout for claimants in the rest of the state.

- 44 percent of New York City-area PIP claimants visited four or more healthcare providers in 2010, whereas only 14 percent of claimants elsewhere in the state did the same.

- In 2010, New York City area claimants were much more likely to seek treatment from chiropractors, physical therapists, and acupuncturists than were their upstate counterparts.

- For the majority of claimants, healthcare providers charged auto insurers far more than the state's established fee schedule for their services.

- Compared to claimants in the rest of the state, New York City area claimants were significantly more likely to have their healthcare providers represented by attorneys.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio

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