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 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
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.
Comparative Statistics: PIP Claims Costs
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
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
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
Comparative Statistics: Profitability
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
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
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
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
PIP Fraud and Abuse in New York State
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.
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.
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
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
$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
Impact on Cost of Auto Insurance in New York State
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
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
Impact on New Auto Plan (Residual Market)
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
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
How Do We Know It’s Fraud & Abuse?
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
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
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
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
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
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
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
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.
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.
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.
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.
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.
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.
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
Differences in Claiming Behavior in New York State
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
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
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
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
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
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
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
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
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
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
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
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
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
PIP Fraud in NY
Actual Case Studies
PIP Fraud in NY
Case Study 1
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
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
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
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*
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*
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
PIP Fraud in NY
Case Study 2
Low Impact, High Cost Claim
Damage to Vehicle $0
Amount Billed for Claimant
$17,188
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)
PIP Fraud in NY
Case Study 3
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.
PIP Fraud in NY
Case Study 4
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
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
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
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
PIP Fraud in NY
Solutions
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
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