Senator Charles J. Fuschillo, Jr. recently proposed tough legislation to combat auto insurance fraud, which costs New Yorkers more than $1 billion a year, and called on the assembly to act on important insurance laws that expired in 2001.

"It's estimated that as many as one-third of all auto insurance claims contain some element of fraud and is a major reason why auto rates in New York are the fourth highest in the country," Fuschillo said. "This proposal would help to reduce premiums by making it tougher to commit fraud and increasing penalties on people who commit fraud."

Fuschillo's auto insurance fraud package includes tougher penalties against scam artists, more time to challenge potentially fraudulent insurance claims, greater antifraud enforcement, and measures to ensure that consumers receive a savings as a result of the fraud crackdown.

There were almost 15,000 reports of auto insurance fraud in New York State in 2002, or more than 41 fraud reports every single day. According to the Insurance Information Institute, auto insurance fraud adds $124 to the cost of each consumer's personal injury protection costs - an amount that is expected to grow to $300 a year without immediate legislative action.

To ease insurance fraud prosecutions and ensure punishment better fits the crimes, Senator Fuschillo's legislation would cut in half the value of property obtained through a fraudulent insurance act in order to be convicted of insurance fraud.

Insurance fraud in the 4th degree, a Class E Felony; Value reduced from $1,000 to $500

3rd degree, a Class D Felony: from $3,000 to $1,500

2nd degree, a Class C Felony: from $50,000 to $25,000

1st degree, a Class B Felony: from $1 million to $500,000

In addition, the bill would crack down on repeat offenders by establishing three levels of the crime of aggravated insurance fraud for people who commit fraud more than once in a five year period.

Included in Fuschillo's package is a bill (S.555), sponsored by Senator Dean G. Skelos (9th Senate District), that would make the use of "runners" illegal in New York.

A "runner" is a person who receives 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 toward unnecessary medical treatments. Insurance companies have to pay the fraudulent claims and must make up the cost through higher auto insurance premiums.

The bill would make it a class E felony to act as a runner or hiring another person to act as a runner.

Medicaid mills submit fraudulent medical claims for unnecessary tests for phony accident victims. Under the state's no-fault insurance law, accident victims, can build up $50,000 worth of medical bills that must be paid by insurance companies. Sometimes clinics steal identities and policy numbers to commit fraud, even using information of people who are deceased.

As a result of a recent court decision, insurers must now pay or deny a claim within 30 days and may not use fraud as a defense for not paying the bill unless alleged within that time frame. It is often difficult for insurers to determine within a month whether fraud exists.

Fuschillo's proposal would allow insurers to allege fraud after this 30-day period. Claims not paid within 30 days would bear interest at 2 percent a month and claimants would be entitled to recover attorney's fees for securing payment of overdue claims, if no fraud is subsequently found.

Also, Fuschillo's plan complements a regulation issued by the State Insurance Department that, among other things, reduced the six month time period during which health care providers must submit proof of the claim to an insurer, down to 45 days.

The regulation, which was upheld by a state court, was in response to concerns that the existing time frames facilitated no-fault insurance fraud because the length of time to submit a claim was too long. The Senate bill would put the regulation into state law.

"Scam artists manipulate insurance companies into paying for unnecessary medical treatments, often staging car accidents and steering phony victims toward medical mills that generate up to $50,000 worth of medical bills for a single accident victim," Fuschillo said. "The claims are submitted just under the 90 day limit and insurance companies only have 30 days to investigate all the claims. The combination of this regulation and my proposal to give insurers more time to pursue potentially fraudulent claims, goes after both sides of the problem by giving less time to develop fraudulent claims and more time to investigate them."

In addition, Fuschillo's plan would include knowingly making false statements in medical reports in connection with a no-fault claim, as grounds for a health care provider to be decertified by the State Insurance Department. Fuschillo is also proposing an increase in the amount of money distributed to local law enforcement agencies and prosecutors to combat auto theft and insurance fraud. The 2002-03 budget included $4.7 million for this project, the Senate is proposing increasing the distribution of funds to $6.7 million.

Fuschillo's proposal includes adding 10 new insurance fraud investigators to the State Insurance Department's existing 50 investigators. The increased enforcement staff would be paid for entirely from the assessments on insurance companies that are used to finance the state Insurance Department.

Fuschillo will also propose increasing the powers of insurance fraud investigators to make them more effective by giving them the authority to independently execute search and arrest warrants. The investigators currently have to coordinate with local law enforcement agencies, resulting in delays and hindering their ability to apprehend individuals committing insurance fraud.

Fuschillo's initiative would establish a task force comprising insurance, medical, legal and consumer representatives to study issues relating to medical treatment under the state's no-fault system and recommend improvements to the system to reduce fraud and abuse and speed payments for legitimate injuries. Fuschillo's legislation would require the Superintendent of Insurance to consider the impact of these fraud fighting measures when making determinations about future rate filings for no-fault insurance and require that savings resulting from these measures be reflected in auto insurance rates.

Fuschillo will act on legislation to extend important insurance laws that help stabilize auto insurance rates.

Prior to Aug. of 2001, the state law allowed insurance companies to not renew up to 2 percent of policy holders per year in any region. This enabled companies to write policies for high risk drivers. Since the law expired, auto insurance has become less accessible to hundreds of thousands of drivers who have been pushed into the high-cost "assigned risk pool" that is subsidized by all drivers. The number of drivers in the assigned risk pool doubled in 2001 to almost 400,000 drivers and the rates they pay for auto insurance increased by 20 percent last year.

Also in August 2001, a law expired that allowed insurers to decrease or increase rates by up to 7 percent without prior approval by the state Insurance Department, however, any rate change must still be reviewed and approved by the department.

Known as "flex rating," this law allowed insurers to stay competitive, respond to market conditions and adjust their rates, up or down, in a timely manner. In effect, flex rating helps moderate rate adjustments because without the timeliness of flex rating insurers tend to seek larger rate hikes.