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May 3, 2001

Assembly unveils plan for auto-insurance rates

The Assembly Majority has proposed a plan that couples a crackdown on auto-insurance fraud with a two-year freeze in insurance rates and a 17 percent cut in personal injury premiums.

The plan, announced May 2, also includes measures designed to crack down on fraud, which the Assembly release said costs New York drivers more than $1 billion a year. Specifically, the plan would authorize local district attorneys to appoint a special insurance fraud prosecutor to target the growing number of health-care providers, lawyers, and others that exploit the state's no-fault insurance system.

The plan also calls for greater oversight of medical benefits delivered under this program to injured drivers and passengers, as well as higher penalties for those who steal from the system.

And plan also calls for an outside audit of auto insurers' profits for the last five years and creation of a new Office of the Consumer Advocate to represent consumers' interest in rate-hike proceedings, the Assembly release said.

"Auto insurance is the last cash cow in the insurance market, and people have found out how to milk it," said Assemblyman Pete Grannis (D-Manhattan), chair of the Assembly Insurance Committee. "We need to act aggressively to root out abuses this year so that those cheating the system don't cripple the market and continue to drain premiums from New York's working families."

Citing the National Association of Insurance Commissioners (NAIC), the Assembly said New York soon will become the state with the nation's highest auto-insurance rates. NAIC attributes this ranking to rate hikes made necessary by the costs of fraud and abuse under the state's current no-fault insurance system.

The two-year suspension on rate increases would mean rates could not go up until Jan. 1, 2003. In addition, the government would require insurers to reduce fees for personal-injury protection 17 percent. If rates filed with the state Insurance Department did not show that increase, insurers would be required to provide a detailed explanation.

The Assembly release said its plan would also provide for "a more appropriate way to account for insurers' excess profits," and that the plan would ensure that insurers comply with the state Insurance Department's implementation of the state's excess profits law.

In April, the Senate majority released its own plan to combat auto-insurance fraud. The Senate proposal includes increasing criminal penalties, targeting insurance scam "runners," doubling state funds to help local law-enforcement agencies combat fraud, and other reforms.

"It's estimated that one-quarter to one-third of all auto insurance claims contain some element of fraud," said Senate Majority Leader Joseph Bruno. "We need to change our laws to make it tougher to commit fraud."

Specifically, the Senate proposal would lower the property-value thresholds that determine the class of fraud crime a person can be charged with. For every crime of fraud, from fourth-degree fraud through first-degree fraud, the value of property stolen that determines the crime would be halved.

The Senate bill would also establish three levels of aggravated insurance fraud for recidivists who are convicted of fraud more than once in a five-year period.

And it would also make it illegal to use "runners" - individuals who receive money for obtaining clients or patients to participate in insurance fraud. Runners are commonly used in the New York City metropolitan area to steer accident victims towards unnecessary medical treatments. The Senate proposal would also extend, from 30 to 45 days, the period within which insurers can challenge a claim as fraudulent.

The Senate has not proposed any rate freeze or cut to personal-injury premiums.