who wants to be a millionaire? no-fault auto insurance fraud in new york march 2002 robert p....

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Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist Insurance Information Institute 110 William Street New York, NY 10038 Tel: (212) 346-5520 Fax: (212) 732-1916 [email protected] www.iii.org

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Page 1: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Who Wants to be a Millionaire?

No-Fault Auto Insurance Fraudin New York

March 2002

Robert P. Hartwig, Ph.D., Senior Vice President & Chief EconomistInsurance Information Institute 110 William Street New York, NY 10038

Tel: (212) 346-5520 Fax: (212) 732-1916 [email protected] www.iii.org

Page 2: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Insurance Fraud in the U.S. Costs Billions!

Prop./Casualty$22.4 billion

23%

Disability$0.5 billion

1%

Life$11.8 billion

12%

Health$61.4 billion

64%

Total = $96.2 Billion (1999)

Source: Conning & Co.

Page 3: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Comparative Statistics: PIP Claims Costs

Page 4: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

15.0%

14.9%

10.6%

10.3%

10.2%

4.3%

4.1%

3.3%

3.0%

2.2%

0.6%

0.2%

-7.4%

-8.9%

-12.2

%

-17.2

%

32.1%

-20%

-10%

0%

10%

20%

30%

NY FL DE UTCO HI M

IKS

MN TX PA KY

ND DC MA NJ

SC

Growth in Total PIPClaims Costs*

*Change in “pure premium”Source: Insurance Information Institute from ISO Fast Track Data

PIP Claims Costs

PIP Costs in New York are growing faster than in any other no-fault

state—by far .

Four Quarters Ending 2000:3rd

Page 5: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

18.0%

17.3%

14.2%

12.9%

10.5%

9.9%

4.3%

4.2%

4.1%

2.9%

-5.3%

-5.5%

-11.9

%

-13.9

%

28.5%

-1.6%-0

.1%

-20%

-10%

0%

10%

20%

30%

NYCO DE FL HI

UT MI

MA

MN TX PA KY KS

ND SC NJDC

Growth in Total PIPClaims Costs*

*Change in “pure premium”Source: Insurance Information Institute from ISO Fast Track Data

PIP Claims Costs

PIP Costs in New York grew faster than in any other no-fault state—by

far .

Four Quarters Ending 2000:4th

Page 6: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

24.7%

19.5%

14.4%

14.0%

13.0%

11.3%

5.8%

5.5%

5.4%

4.7%

0.7%

-3.6%

-3.0%-2

.4%

28.6%

1.1%2.6

%

-20%

-10%

0%

10%

20%

30%

SC MA

ND DECO FL M

IPA KY TX HI

MN UT NY

DC NJKS

Growth in Total PIPClaims Costs*

*Change in “pure premium”Source: Insurance Information Institute from ISO Fast Track Data

PIP Claims Costs

Growth NY’s PIP Costs slowed significantly during the first half of

2001 but costs remain extremely high.

Four Quarters Ending 2001:2nd

Page 7: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Comparative Statistics: Profitability

Page 8: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Return on Net WorthPrivate Passenger Auto (%),

13.9

6.2

-1.1

12.2

2.8

7.08.2

13.012.4

4.8

-3.6

10.6

14.3 14.2

11.6 12.1 12.4

7.7

2.2

9.8

16.2

13.5

10.77.3

8.6

7.5

10.0

8.0

10.1

11.4

-5

0

5

10

15

20

91 92 93 94 95 96 97 98 99 00

New York

Florida

U.S.

Source: NAIC.

1991-2000

Page 9: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Return on Net WorthPrivate Passenger Auto (%),

13.9

9.8

6.2

-1.1

12.2

2.8

7.08.0 8.2

13.0 12.4

10.0

4.8

-3.6

7.58.6

7.3

10.7

13.5

16.2

-4

1

6

11

16

21

91 92 93 94 95 96 97 98 99 00

New York

Florida

Source: NAIC.

1991-2000

Page 10: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Private Passenger Auto:6 Least Profitable States, 2000

(Profit as a % of Direct Premium Earned)

-1.2

-2.6-3.2 -3.3

-4.0

-9.8-10.0

-8.0

-6.0

-4.0

-2.0

0.0

New York Texas Montana Florida S. Carolina Louisiana

Source: NAIC; Insurance Information Institute

•NY ranked 44th in terms of profitability in 2000

•FL ranked 48th

Page 11: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Private Passenger Auto:6 Least Profitable States, 2000

(Profit as a % of Direct Premium Earned)

7.7

-1.2

-2.6-3.2 -3.3

-4.0

-9.8-10

-8

-6

-4

-2

0

2

4

6

8

U.S. New York Texas Montana Florida S. Carolina Louisiana

Source: NAIC; Insurance Information Institute

•NY ranked 44th in terms of profitability in 2000

•FL ranked 48th

Page 12: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

PIP Fraud and Abuse in New York State

Page 13: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

0%

50%

100%

150%

200%

250%

300%

U.S. New York

*Through 4 quarters ending 2000:3rd.Source: American Insurance Association/ISO FastTrack; Insurance Information Institute

Change in PIP Loss Costs:New York vs. US:1987-2000*

By 2000, growth in New York PIP loss costs were more than twice (121%) the national average.

Page 14: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

0%

50%

100%

150%

200%

250%

U.S. New York

*Through 4 quarters ending 2001:2nd.Source: American Insurance Association/ISO FastTrack; Insurance Information Institute

Change in PIP Loss Costs:New York vs. US:1993-2001*

In 2001:II, cumulative growth in New York PIP loss costs was more than twice (106%) the national average.

Page 15: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Year 20002.24 2.17 2.10

1.90 1.85 1.83 1.80 1.801.68

0.0

0.5

1.0

1.5

2.0

2.5

NY MA CO FL DE UT MN NJ US*

*US excludes New York

Personal Injury Protection Paid Claim Frequency

Source: Insurance Information Institute and Insurance Services Office.

PIP frequency is 33% above the

US average

Page 16: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Year Ending 2001:2nd2.27 2.26

2.11

1.90 1.87 1.86 1.801.68

1.60 1.60

0.0

0.5

1.0

1.5

2.0

2.5

NY MA CO FL DE UT MN NJ HI US*

*US excludes New York and Florida

Personal Injury Protection Paid Claim Frequency

Source: Insurance Information Institute and Insurance Services Office.

PIP frequency is 42% above the

US average

Page 17: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

$4,862 $4,969

$5,675$6,064

$6,700

$8,335

$3,976$4,183 $4,352

$4,699$4,963

$4,523

1995 1996 1997 1998 1999 2000

New York

Other No-Fault States*

* Excluding Michigan

Average PIP Claim

PIP Claim Severity 1995-2000:New York vs. United States

Source: Fast Track Monitoring System, Fourth Quarter 2000 Report

Page 18: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Impact on Cost of Auto Insurance in New York State

Page 19: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Projected Average Auto Insurance Expenditure in NY State Assuming No Meaningful Reform

$957

$1,096

$1,210

$1,317

$1,439

$1,578

$900

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600

2000 2001 2002 2003 2004 2005

Source: Insurance Information Institute

Page 20: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Projected Average Cost of No-Fault Auto Insurance Fraud in NY State Assuming

No Meaningful Reform

$81

$124

$177

$242

$321

$0

$100

$200

$300

$400

2001 2002 2003 2004 2005

Source: Insurance Information Institute

Page 21: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Impact on New Auto Plan (Residual Market)

Page 22: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

New Residual Market PPA Applications Growth 09/30/00 – 09/30/01

Source: AIPSO; Morgan Stanley Research

12.4%

14.5%

21.7%

22.0%

34.0%

36.8%

79.8%

122.3%

-5.0%

438.9%

Michigan

Texas

California

New Jersey

Rhode Island

Virginia

Pennsylvania

Connecticut

New York

Florida

Page 23: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

New Residual Market PPA Applications

Source: AIPSO; Morgan Stanley Research

NewJersey10%

89,859

Florida6%

52,246

All Other42%

391,802

New York42%

388,066

New Jersey17%

73,849

Florida2%

9,695

New York40%

174,598

All Other41%

181,770

09/30/2000 – Total of439,912 Applications

09/30/2001 – Total of 741,973 Applications

Page 24: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

How Do We Know It’s Fraud & Abuse?

Page 25: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

How Do We Know It’s Fraud?

• NY PIP: Definitely Issue of Fraud

Not medical inflation (+4.6% in 2001)

Not “surge” in accidents (e.g., weather, road rage, etc.)

No corresponding increase in claiming in other auto coverages

PIP Fraud Reports up sharply (up 246%, 1995-2001)

PIP is leading type of fraud reported to NY Insurance Dept.

Increase in PIP fraud masking overall decline in NY fraud

– Excluding PIP, fraud reports in NY fell 32% from 1995-2001

Page 26: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Percentage Change in New York Paid Claim Severities from 1987

Source: Fastrack (ISO, NAII), American Insurance Association Analysis.

0%

50%

100%

150%

200%

250%

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Bodily Injury Liability

Personal Injury Protection

Property Damage Liability

Collision

Comprehensive

Page 27: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

New York Average Loss Costs

Source: Fastrack (ISO, NAII), American Insurance Association Analysis.

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Bodily Injury Liability Personal Injury Protection Property Damage Liability

Collision Comprehensive

Page 28: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Paid Claim Severity:Property Damage Liability Coverage

Source: Private Passenger Auto – Fast Track Data

$0

$500

$1,000

$1,500

$2,000

$2,500

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

New York

Countrywide

Page 29: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Paid Claim Severity:Collision Coverage

Source: Private Passenger Auto – Fast Track Data

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

New York

Countrywide

Page 30: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Paid Claim Severity:Comprehensive Coverage

Source: Private Passenger Auto – Fast Track Data

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

New York

Countrywide

Page 31: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Types of Fraud Committed?

• The Many Faces of PIP Fraud in NYProvider Billing Practices

Durable Medical Supplies

Transportation Services

Lost Wages

Household Help

Exotic/Dubious Treatments

Excessive Frequency

Identity Theft

Bounced Checks

Forgery

Page 32: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

New York Insurance Fraud Reports, 1995 - 2001

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1995 1996 1997 1998 1999 2000 2001

Auto Collision Damage

Auto Theft

No-Fault Auto

Source: New York Department of Insurance; Insurance Information Institute.

Page 33: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

New York Insurance Fraud Reports, 1995 - 2001

1,733

4,3935,214

7,042

9,6599,191

12,372

15,219

862798661698758851

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1995 1996 1997 1998 1999 2000 2001

Workers' Compensation

No-Fault Auto

Source: New York Department of Insurance; Insurance Information Institute.

Page 34: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

NY Insurance Fraud Bureau Investigations Opened, 1996 - 2001

1,9341,833

1,3171,238

1,004939

6288127132

295195

0

500

1,000

1,500

2,000

2,500

1996 1997 1998 1999 2000 2001

Total

No-Fault Auto

Source: New York Department of Insurance; Insurance Information Institute.

Page 35: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Total Reports = 26,028

No-Fault Auto59%

Auto Theft8%

Auto Collision

4%

Health Accident

6%

Workers' Comp

4%

All Other16%

Composition of Fraud Reports, 1995 vs. 2001

2001Total Reports = 20,205

Workers' Comp3.9%

All Other29%

Health Accident

23%

AutoTheft7.6%

Auto Collision

10%No-Fault Auto22%

1995

Source: New York Department of Insurance; Insurance Information Institute.

Page 36: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

New York Insurance Fraud Reports, 1995 - 2001

1,572

7,042

9,6599,191

12,372

15,219

2,2052,3592,637

5,4575,841

4,7125,214

4,393

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1995 1996 1997 1998 1999 2000 2001

Health/Accident

No-Fault Auto

Source: New York Department of Insurance; Insurance Information Institute.

Page 37: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

No-Fault Fraud: A Growing Problem

0

5,000

10,000

15,000

20,000

25,000

30,000

1995 1996 1997 1998 1999 2000 2001

Total All Types of Fraud

No-Fault Auto Fraud

Source: New York Department of Insurance; Insurance Information Institute.

Page 38: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Abuses of the Legal System

• Abuse of the Legal SystemSuits are Exploding

100% - 200% increase at most companies

Small number of law firms generate majority of

suits

Complaints to insurance department mostly

generated by providers and attorneys

Inequities in the Arbitration Process

Page 39: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Differences in Claiming Behavior in New York State

Page 40: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Average PIP Payments in Metro NYC versus Rest of State

$4,342

$6,898

$2,806$3,295

$4,393

$4,627

1992 1997 2000

NYC MetroOutside NYC Metro

Average Total PaymentPer PIP Claimant

Source: Insurance Research Council

Page 41: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

PIP Claim Frequencies,Selected Territories

Source: Insurance Research Council, Trends in Auto Injury Claims, 2000 Edition.

5.27

5.03

3.55

2.82

1.88

1.63

1.86

1.43

1.34

2.23

Kings County

Bronx County (1)

Queens County (3)

Buffalo

Albany

Syracuse

White Plains

Rochester

Binghamton

State (1) Remainder(3) Remainder

Page 42: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

5%

16%

25%

13%

Appearance of Fraud Appearance of Buildup

19922000

Increase in Appearance of Fraud and Buildup

Percentage of NY PIP Claims

Source: Insurance Research Council

Page 43: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

34%

17%

23%

47%

20%23%

NYC Metro Other Metro Rest of State

19972000

NY PIP Claimants Reporting Three or More Injuries

Percentage of Claimants Reporting 3+ Injuries

1997 vs. 2000

Source: Insurance Research Council

Page 44: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

9%

4%6%7% 6%

27%

NYC Metro Other Metro Rest of State

19972000

New York PIP ClaimantsVisiting More Professionals

Percentage of NY PIP Claimants Visiting 4+ Professionals

1997 vs. 2000

Source: Insurance Research Council

Page 45: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

31%

15%19%17%

13%

46%

NYC Metro Other Metro Rest of State

19972000

Use of Chiropractors Among NY PIP Claimants

1997 vs. 2000

Percentage of Claimants

Source: Insurance Research Council

Page 46: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

28%

16% 17%14%

20%

43%

NYC Metro Other Metro Rest of State

19972000

Use of Physical Therapists Among NY PIP Claimants

Percentage of Claimants

1997 vs. 2000

Source: Insurance Research Council

Page 47: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

16%

51% 53%46%

33%

4%

37%33%

4%

More than 10 visits to general

practitioner

More than 25 visits to

chiropractor

More than 25 visits to physical

therapist

NYC Metro Other Metro Rest of State

More Visits to ProvidersAmong NYC PIP Claimants

Percentage of Claimants

Source: Insurance Research Council

Page 48: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

38%

14% 16%

50%

13% 14%

NYC Metro Other Metro Rest of State

19972000

Increased Use of MRI in Metro NYC

Percentage of PIP Claimants

1997 vs. 2000

Source: Insurance Research Council

Page 49: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

32%

6% 7%

31%

3% 4%

NYC Metro Other Metro Rest of State

DME Pain Clinics

Use of Durable Medical Equip. & Pain Clinics by NY PIP Claimants

Percentage of Claimants

Source: Insurance Research Council

Page 50: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

48%

19%22%

52%

13% 14%

NYC Metro Other Metro Rest of State

19972000

Attorney Involvement Higher in NYC Metro Area

Percentage of NY PIP Claimants

1997 vs. 2000

Source: Insurance Research Council

Page 51: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

43%

66% 63%

27%

24% 24%16%

14%

NYC Metro Other Metro Rest of State

More than 30 Days

8-30 Days

2-7 Days

0-1 Days

Time to Report Injuryby Location

Number of Days from Accident to Report of Injury to Insurer

5%6%

7%6% Percentage of

NY PIP Claimants

Source: Insurance Research Council

Page 52: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

46%

73% 71%

54%

27% 29%

NYC Metro Other Metro Rest of State

Over 45 Days

0-45 Days

Time to Submit Medical Billsby Location

Number of Days from First Treatmentto First Bill Received by Insurer

Percentage ofNY PIP Claimants

Source: Insurance Research Council

Page 53: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

PIP Fraud in NY

Actual Case Studies

Page 54: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

PIP Fraud in NY

Case Study 1

Page 55: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Treatment and Testingfor Mr. H

5

5

6

2

11

11

12

2

13

14

13

4

9

11

12

0

Diagnostic

Accupuncture

Physical Therapy

Chiropractic

Jul

Aug

Sep

Oct

Jul

Aug

Sep

Oct

Jul

Aug

Sep

Oct

Jul

Aug

Sep

Oct

Total Treatments

43

41

38

8

$ 10,225

Page 56: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

5

5

6

7

6

6

7

7

8

8

9

5

4

5

4

0

Misc

Accupuncture

Physical Therapy

Chiropractic

Jul

Aug

Sep

Oct

Jul

Aug

Sep

Oct

Jul

Aug

Sep

Oct

Jul

Aug

Sep

Oct

Treatment and Testingfor Mr. B

Total Treatments

26

24

23

14

$ 8,413

Page 57: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

2

1

12

12

13

7

9

9

10

5

7

8

7

0

0

4

Misc

Accupuncture

Physical Therapy

Chiropractic

Jul

Aug

Sep

Oct

Jul

Aug

Sep

Oct

Jul

Aug

Sep

Oct

Jul

Aug

Sep

Oct

Treatment and Testingfor Mrs. P

Total Treatments

32

29

28

17

$ 9,998

Page 58: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

16

10

11

8

Physical Therapy

JulAug

Sep

Oct*

Treatment and Testingfor Mrs. D

Total Treatments

45

48

44

19

15

10

11

8

Accupuncture Jul

Aug

Sep

Oct*

16

11

12

9

Chiropractic

Jul

Aug

Sep

Oct*

$ 13,266

1

1

10

7

Misc

JulAugSepOct*

Page 59: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

30

43

32 44

Chiropractic

Jul

Aug

Sep

Oct*

26

39

42

32

Physical Therapy

JulAug

Sep

Oct*

Total Treatmentsand Testing, 482

Total Treatments

149

139

133

61

25

39

41

28

Accupuncture

Jul

Aug

Sep

Oct* $ 41,902

5

6

27

23

Misc

JulAugSepOct*

Page 60: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Where Do You Findthe Time Mrs. D?

August 2000Monday Tuesday Wednesday Thursday Friday

TMJ-Dental, Acupuncture, Physical Therapy, Chiropractic 1

MRI, Acupuncture, Physical Therapy, Chiropractic 2

3

Acupuncture, Physical Therapy, Chiropractic 4

Chiropractic-Off, Acupuncture, Physical Therapy, Chiropractic 7

8

Chiropractic, MRI Transportation, Neuro-Consult, Physical Therapy, Neuro-Tests, Acupuncture 9

10

Whirlpool, Supplies, Acupuncture, Physical Therapy, Chiropractic 11

14

15

Acupuncture, Physical Therapy, Chiropractic 16

Acupuncture, Physical Therapy, Chiropractic 17

18

21

Acupuncture, Physical Therapy, Chiropractic 22

Transportation, MRI, 23

24

Acupuncture, Physical Therapy, Chiropractic 25

28

Acupuncture, PT, Diag – ROM, Chiropractic 29

30 31

Page 61: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

PIP Fraud in NY

Case Study 2

Page 62: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Low Impact, High Cost Claim

Damage to Vehicle $0

Amount Billed for Claimant

$17,188

Page 63: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

The Anatomy of a Minimal Impact Claim: The Red Flags

Date of Loss 03/21/00; Reported by Claimant Attorney 06/13/00

• Claimant Atty refused vehicle inspection

• Pictures provided by SIU showed No Physical Damage

• Independent medical exam came back negative

• Claimant “No-Showed” for scheduled vehicle inspection and examination under oath

• Investigative/legal costs to date: $3,626 (could go much higher)

Page 64: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

PIP Fraud in NY

Case Study 3

Page 65: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Where’s the Impact?

Service CategoryTotal Amount Billed = $21,862

$4,462

$2,254

$4,755

$998

$9,394

Physical Therapy MRI's

Manipulation ME/Supplies

Office Visits

• Date of Loss 03/20/00

• 3 claimants involved; 2 claimants accounted for $20,122 of amount billed.

• 2 claimants accounted for nearly 240 treatments (PT, Chiro, Acup, H/C, ES, and MT).

• Expensive diagnostics were provided within 2 weeks from DOL (totaling $4,462).

• Medical equipment/Supplies accounted for $4,755 of amount billed.

Page 66: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

PIP Fraud in NY

Case Study 4

Page 67: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Big Car, Small Thump,Big Bucks

• Single claimant

• Billed $16,666

• 112 separate treatments

• 180 days from DOL to last treatment

• Services included sensory and motor nerve testing, a breathing capacity test, manual traction therapy, muscle tests, and various other therapies

Major Service Categories

3,112

$3,027

$1,807$1,198

$804

$3,135

$3,583

MRIs Electrodiagnostics

CT Scans Physical Therapy

Radiology Hospital Services

Other

Page 68: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Where Does it All Go?

• Medical Services includes

Acupuncture, electrical stimulation, hot and cold packs, manual traction, chiropractic, and physical therapy

• Diagnostics includes MRIs, CAT scans, X rays, nerve testing, and

muscle testing

• Other includes ER/Ambulance, hospital services, office

visits, lab work, manipulation, and supplies

• Supplies includes ER/Ambulance, hospital services, office

visits, lab work, manipulation, and supplies

Total Billed Services = $16, 666

$9,439

$714

$4,228$2,285

Medical Services Diagnostics

ME/Supplies Other

Page 69: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Here’s the Diagnosis• Treatments were rendered for 14 different Diagnoses

Codes.

• There was a change of body region being treated subsequent to DOL

• Diagnoses includedUnspecified site of sprain and strainIntervertebral disc disorderLumbagoHeadachePost concussion syndromeUnspecified chest pain

Page 70: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Cumulative Cost CalendarMay 1999

Monday Tuesday Wednesday Thursday Friday

3

4

5

6

7

10

11

12

**Date of Loss**Lutheran Med Ctr

$3,135 13

Manipulation,Other, Off Visit

$3,497 14

Supplies,Other,Physical Therapy

$4096 17 18

Physical Therapy

$4162 19 20

Physical Therapy

$4229 21

Lutheran Med Ctr

$7363 24 25

26

27

28

31

June

$7,88

4 July

$12,4

80Augu

st

$15,7

73

Page 71: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

PIP Fraud in NY

Solutions

Page 72: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Solutions to NY’s PIP Problem• What Is Being Done

Legislative & Administrative Action Required Key elements of solution

– Reduce 180 day provider claiming window & 90 reporting window (Regulation 68)

– Remove inequities in arbitration process (mandatory arbitration)– Enhanced ability to challenge questionable medical treatments– Cost containment initiatives (e.g., treatment guidelines)– Strengthen criminal penalties for insurance fraud (e.g., runners)

• Bogged DownNY Appellate Court stayed implementation of shorter reporting

deadlines on Feb. 20 (2nd stay in 5 months) 30 days for reporting claim (down from 90) 45 days for submission of med bill (down from 180) Need legislature to act on non-administrative reforms

Page 73: Who Wants to be a Millionaire? No-Fault Auto Insurance Fraud in New York March 2002 Robert P. Hartwig, Ph.D., Senior Vice President & Chief Economist

Who Wants to be a Millionaire?

No-Fault Auto Insurance Fraudin New York

March 2002

Robert P. Hartwig, Ph.D., Senior Vice President & Chief EconomistInsurance Information Institute 110 William Street New York, NY 10038

Tel: (212) 346-5520 Fax: (212) 732-1916 [email protected] www.iii.org