Update on New Yorks NoFault Fraud

1
Update on New Yorks No-Fault Fraud Abuse
Problem

• New York Alliance Against Insurance Fraud
• Insurance Fraud Briefing
• Albany, NY
• March 25, 2003

Robert P. Hartwig, Ph.D., CPCU, Senior Vice
President Chief Economist Insurance Information
Institute ? 110 William Street ? New York, NY
10038 Tel [phone] ? Fax [phone]
? bobh_at_iii.org ? www.iii.org
2
Insurance Fraud in the U.S. Costs Billions!
Total Fraud Costs 96.2 Billion
Source Conning Co.
3
Comparative Statistics PIP Claims Costs
4
Growth in Total PIPClaims Costs
Four Quarters Ending 20003rd
PIP Claims Costs PIP Costs in New York are
growing faster than in any other no-fault
stateby far .
Change in pure premium Source Insurance
Information Institute from ISO Fast Track Data
5
Growth in Total PIPClaims Costs
Four Quarters Ending 20004th
PIP Claims Costs PIP Costs in New York grew
faster than in any other no-fault stateby far .
Change in pure premium Source Insurance
Information Institute from ISO Fast Track Data
6
Growth in Total PIPClaims Costs
Four Quarters Ending 20012nd
PIP Claims Costs Growth NYs PIP Costs slowed
significantly during the first half of 2001.
Change in pure premium Source Insurance
Information Institute from ISO Fast Track Data
7
Growth in Total PIPClaims Costs
Four Quarters Ending 20023rd
PIP Claims Costs Growth NYs PIP Costs are began
to rise again after slowing during late 2001,
early 2002
Change in pure premium Source Insurance
Information Institute from ISO Fast Track Data
8
Private Passenger Auto6 Least Profitable
States, 2000(Profit as a of Direct Premium
Earned)

• NY ranked 44th in terms of profitability in 2000
• FL ranked 48th

Source NAIC Insurance Information Institute
9
Return on Net WorthPrivate Passenger Auto (),
1991-2000
Source NAIC.
10
PIP Fraud and Abuse in New York State
11
Change in PIP Loss CostsNew York vs.
US1987-2000
By 2000, growth in New York PIP loss costs were
more than twice (121) the national average.
Through 4 quarters ending 20003rd. Source
American Insurance Association/ISO FastTrack
Insurance Information Institute
12
Change in PIP Loss CostsNew York vs.
US1993-2002
In 2002III, cumulative growth in New York PIP
loss costs were nearly twice (89 above) the
national average.
Through 4 quarters ending 20023rd. Source
American Insurance Association/ISO FastTrack
Insurance Information Institute
13
Personal Injury Protection Paid Claim Frequency
PIP frequency was 42 above the US average
Source Insurance Information Institute and
Insurance Services Office.
14
Personal Injury Protection Paid Claim Frequency
PIP frequency is 19 above the US average
Source Insurance Information Institute and
Insurance Services Office.
15
Change in NY Personal Injury Protection Paid
Claim Frequency
PIP frequency has fallen steadily since early
2001, but
Average over four previous quarters. Source
Insurance Services Office, Insurance Information
Institute.
16
Change in NY Personal Injury Protection Average
Loss (Severity)
PIP severity is rising at double-digit rates
again after a brief lull, more than offsetting
lower frequency
Average over four previous quarters. Source
Insurance Services Office, Insurance Information
Institute.
17
Change in NY Personal Injury Protection Claim
Frequency Average Loss
PIP frequency and severity were falling by the
2nd half of 2001 now diverging
Average over four previous quarters. Source
Insurance Services Office, Insurance Information
Institute.
18
PIP Claim Severity 1995-2000 New York vs. United
States
Average PIP Claim
New York
Other No-Fault States
Source Fast Track Monitoring System, Fourth
Quarter 2000 Report
Excluding Michigan
19
PIP Claim Severity 1995-2002 New York vs. United
States
Average PIP Claim
New York
The average PIP claim in NY is 1,555 or 23
above the US average
Other No-Fault States
Source Fast Track Monitoring System, Third
Quarter 2002 Report
20
Impact on Cost of Auto Insurance in New York State
21
Projected Average Auto Insurance Expenditure in
NY State Assuming (March 2003 Est.)
Source Insurance Information Institute
22
Projected Per Vehicle Average Cost of No-Fault
Auto Insurance Fraud, (March 2003 Est.)
Cost per Vehicle

• Decrease in PIP claim frequency severity in
  latter half of 2001 (amplified by 9/11 effect)
• Administrative reforms
• High-profile crackdowns

NYs PIP Fraud tax is 46/vehicle and rising
sharply!
Source Insurance Information Institute
23
Annual Cost of No-Fault Auto Insurance Fraud in
NY, (March 2003 Est.)
Millions
No-fault fraud will cost drivers in NY state 432
million in 2003, or 1.2 million per day.
Source Insurance Information Institute
24
Cumulative Cost of No-Fault Auto Insurance Fraud
in NY, (March 2003 Est.)
Millions
No-fault fraud has cost NY insurers and
policyholder more than 1 billion dollars so far
through 2002.
Source Insurance Information Institute
25
No-Fault Fraud Statistics in New York State
26
New York Insurance Fraud Reports, 1995 - 2002
Source New York Department of Insurance
Insurance Information Institute.
27
New York Insurance Fraud Reports, 1995 - 2002
Source New York Department of Insurance
Insurance Information Institute.
28
New York Insurance Fraud Reports, 1995 - 2002
Source New York Department of Insurance
Insurance Information Institute.
29
Composition of Fraud Reports, 1995 vs. 2001
2001
1995
Source New York Department of Insurance
Insurance Information Institute.
30
Composition of Fraud Reports, 2001 vs. 2002
2002
2001
Source New York Department of Insurance
Insurance Information Institute.
31
No-Fault Fraud A Growing Problem
PIP fraud reports accounted for 61 of all fraud
reports in 2002 compared with 22 in 1995
Source New York Department of Insurance
Insurance Information Institute.
32
Insurance Information Institute On-Line
WWW.III.ORG
33
Projected Average Auto Insurance Expenditure in
NY State Assuming No Meaningful Reform(Jan. 2002
Est.)
Source Insurance Information Institute
34
Projected Average Cost of No-Fault Auto Insurance
Fraud in NY State Assuming No Meaningful Reform
(Jan. 2002 Est.)
Cost per Vehicle
Source Insurance Information Institute