NY Cracks Down on Insurance Fraud

Posted & filed under Car Insurance News.

If you’ve registered your vehicle in another state in order to pay lower insurance premiums, you had better make sure that you have a legitimate address in that state, or you could be facing stiff penalties.   SiLive.com reports that a new bill adds harsh penalties, and greater legislative powers, for police and investigators looking to crack down on these types of minor insurance fraud.

The problem, Sen. Diane J. Savino says, is that those who dodge paying insurance in their home state raise the average premium for all drivers who are not trying to get out of paying their state’s insurance premiums. “The bill adds teeth to make folks think twice about committing fraud and stealing money from the pockets of their fellow Staten Island drivers,” he says, adding that, “honest drivers are forced to pay for those who don’t pay what they truly owe.”

Incentive to Report Non-State Plates

In a move reminiscent of dystopian films like Nineteen Eighty Four, the department has instigated a cash reward system for anyone reporting out-of-state plates belonging to a Staten Island resident. Any information that leads to the arrest and conviction of a fraudster will entitle the provider to a reward of 15% of the original penalty or settlement, up to a maximum of $25,000.

The state aims to encourage this behavior by increasing awareness of the fraud report hotline, 888-FRAUD-NY, and by strengthening the capacity of the call center that handles calls to this number. A further initiative is in progress to offer rewards of between $1,000 and $5,000 to anyone providing information that leads to a conviction.

Out-of-State Plates Not Always Fraud

There are many instances where it is perfectly legitimate to own a car that is not registered within your home state.   However, you have to prove that you own or rent a property in the state in which your vehicle is registered, and you have to prove that you spend a certain portion of each 12 month period in that state.

Relaxed controls and weak penalties have encouraged abuse of this system, however. In one case, “There were 161 vehicles used in New York registered to one Pennsylvania address,” Sen. Savino said. “One family in Brooklyn provided an address to Pennsylvania to obtain auto insurance for 14 vehicles.”

The latest changes to the law will make it much easier for insurance companies and the police to crack down on fraud offenders. The penalty for insurance premium evasion, by any unlawful means, is up to four years in prison. Forging an insurance certificate carries a penalty of up to seven years in premium, and forging documents on a larger scale (ten or more) can land you with a prison sentence of up to fifteen years.

Statistics of insurance abuse in the state of New York, and Staten Island in particular, have worsened since the financial crisis.   In 2010 over 10,000 New York residents claimed to have a residential address other than their primary residence, resulting in a loss of $23.8 billion in insurance premiums.   This loss, which amounts to roughly $238 per incidence of fraud, had to be carried by those registered to pay insurance in New York – the state with the fourth highest average premiums in the country.