According to the article “New York No-Fault Auto Insurance Leads to Inflated Claims” by Ryan Fields on e-wisdom.com, New York auto insurance could be experiencing higher rates because of their insurance model. New York is one of many states in the US using the no-fault auto insurance system. The purpose of this type in insurance model is to reduce costly legal costs from deciding who is at-fault for an accident.
Since no-fault auto insurance has auto insurance companies paying out claims directly to their customers regardless of fault, fraud can be an issue. According to the Insurance Information Institute, about 20% of each no-fault auto insurance claims made are fraudulent. That adds up to approximately $1561 per claim and cost insurers and their customers over $600 million since 2005.
Chief economist, Dr. Steven Weisbard, ties the increase to medical providers who submit claims that are much higher than they should be. He says the amount of fraud in New York’s auto insurance system is so severe that payouts for claims are currently the 2nd highest they have been since the late 1990’s. This excess translates to higher auto insurance rates for drivers in New York obtaining auto insurance. Costs rise for everyone as fraud claims rise.
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