exclusive remedy - new york’s experience
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Anne Kelly Chief Casualty Actuary New York Insurance Dept. Exclusive Remedy - New York’s Experience. The views expressed are my own and not necessarily those of the New York Insurance Department. 1972. - PowerPoint PPT PresentationTRANSCRIPT
Anne Kelly
Chief Casualty Actuary
New York Insurance Dept
The views expressed are my own and not necessarily those of the New York Insurance Department
Exclusive Remedy - New York’s Experience
1972
• Email Invented Ray Tomlinson of BBN develops a program to send messages across ARPANET. His program uses the "@" sign to separate email users'
names from their machines.
• First Electronic Calculator Hewlett-Packard introduces the world's first electronic calculator. The calculator is a phenomenal success, and Hewlett-Packard proves adept at adjusting the company to new technological trends.
CAS Presidential Address - 1970
“Some reform of the legal system as it applies to automobile insurance is inevitable for it is only through such reform that the insurance business can provide the service the public deserves at a cost it is willing to pay”
Daniel J. McNamara
No Fault in New York
• Part of a broad plan of legislative reforms– competitive rating, – reducing the AIP subsidy, – expanding the Guaranty Fund
• “Automobile Insurance - For Whose Benefit?” NYSID Blueprint for change
Auto Insurance in New York 1970
• Slow payment
• Unpaid victims
• Overpayment of small claims
• Underpayment of large claims
• Waste
• Duplication
• Dishonesty
Why Tort Doesn’t Work
“When you are ill you want your health insurance to pay your medical bills without requiring you to prove that your illness was caused by someone who carelessly sneezed on you on the bus. Nor would you tolerate a health insurer which sought to duck payment by claiming you would not have gotten sick if, right after the sneeze, you had run home and gone right to bed. Yet that kind of proof and that kind of defense are the mainstays of automobile insurance today.”
Supt. Richard Stewart, April 1970
Change is Inevitable!
“We should all remember that tottering institutions — defensive and fearful, out of touch with their roots, out of touch with reality, out of touch with the needs of the people they profess to serve — such institutions, however formidable and entrenched, eventually fall. The institution known as the fault insurance system was not first criticized by the Insurance Department. The fault insurance system has been exposed again and again as slow, wasteful, unfair and inhumane, living only on myth and momentum and on the dexterity of its operators at confusing the issues and obstructing change. But change will come. Eventually change always comes. Here at least we have all had ample warning and a chance to influence what is bound to happen.”
Richard E. Stewart
No Fault Law #1
• Compromise: $500 serious injury threshold instead of pure no-fault
• 75% reduction in BI claims anticipated
• $50,000 First Party package (mainly medical)
• 16% rate reduction
What Went Wrong?
• Medical Providers easily overcame threshold
• Reduction in BI claims was closer to 50% than 75%
• Industrywide losses
No Fault Law #2
• Crisis created by rate increases• Public Outcry• Legislative reform :
– Verbal threshold– NYSID arbitration– Fee schedule
• Judiciary maintains strict interpretation of new threshold
No Fault - Not for the Faint of Heart
• Auto insurance In New York is expensive and gets a lot of attention
• Underlying conditions: accident frequency, litigiousness, provider abundance
• No Fault requires significant oversight– Claims Regulations– Market conduct examinations– Anti-fraud measures
After 20 years of stability...
• Some erosion of tort threshold over time
• Steady increase in PIP costs
• Fraud, abuse, overuse targeted to claim reg loopholes and breadth of benefits
• Minimum Limits increased in 1996
RBI & PIP Pure Premiums 1975-2002
20
40
60
80
100
120
140
160
180
200
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
RBIPIP
No Fault Law #2.5
• Reg. 68 revised to shorten time allowed for claim reporting and submission of medical bills
• Anti-fraud units mandatory
• Better preparation of fraud cases and more success in getting law enforcement to pursue them
• Relentless publicity and arrests
Private Passenger Auto Rate Changes 1990-2002
100
110
120
130
140
150
160
170
7.7 9 3.9 4.7 3.5 3 0.4 -1.5 -0.4 2.9 8.1 8.4
Line 2 108 117 122 128 132 136 138 136 136 140 151 164
1990 1991 1992 1993 1994 1995 1997 1998 1999 2000 2001 2002
Private Passenger Auto Cumulative Rate Changes 1990-2002
8.4
8.1
2.9
-0.4-1.50.41.23.03.5
4.7
3.99.0
7.7
100
110
120
130
140
150
160
170
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Annual rate changes
(Average annual change: 3.9%)
RBI & PIP Pure PremiumYear Ending Quarterly 1998-2002
120
130
140
150
160
170
180
190
Mar
-98
Jun-
98Se
p-98
Dec
-98
Mar
-99
Jun-
99Se
p-99
Dec
-99
Mar
-00
Jun-
00Se
p-00
Dec
-00
Mar
-01
Jun-
01Se
p-01
Dec
-01
Mar
-02
Jun-
02Se
p-02
Dec
-02
RBIPIP
RBI & PIP Claim Frequency Year Ending Quarterly 1998-2002
2.00
2.05
2.10
2.15
2.20
2.25
2.30
Mar
-98
Jun-
98
Sep-
98
Dec
-98
Mar
-99
Jun-
99
Sep-
99
Dec
-99
Mar
-00
Jun-
00
Sep-
00
Dec
-00
Mar
-01
Jun-
01
Sep-
01
Dec
-01
Mar
-02
Jun-
02
Sep-
02
Dec
-02
PIP
0.750
0.775
0.800
0.825
0.850
0.875
0.900
Mar
-98
Jun-
98
Sep-
98
Dec
-98
Mar
-99
Jun-
99
Sep-
99
Dec
-99
Mar
-00
Jun-
00
Sep-
00
Dec
-00
Mar
-01
Jun-
01
Sep-
01
Dec
-01
Mar
-02
Jun-
02
Sep-
02
Dec
-02
RBI
RBI & PIP Claim SeverityYear Ending Quarterly 1998-2002
20000
20250
20500
20750
21000
21250
21500
21750
22000
Mar
-98
Jun-
98
Sep-
98
Dec
-98
Mar
-99
Jun-
99
Sep-
99
Dec
-99
Mar
-00
Jun-
00
Sep-
00
Dec
-00
Mar
-01
Jun-
01
Sep-
01
Dec
-01
Mar
-02
Jun-
02
Sep-
02
Dec
-02
RBI
5500
6000
6500
7000
7500
8000
8500
Mar
-98
Jun-
98
Sep-
98
Dec
-98
Mar
-99
Jun-
99
Sep-
99
Dec
-99
Mar
-00
Jun-
00
Sep-
00
Dec
-00
Mar
-01
Jun-
01
Sep-
01
Dec
-01
Mar
-02
Jun-
02
Sep-
02
Dec
-02
PIP
PDL, Comp & Coll Pure PremiumYear Ending Quarterly 1998-2002
65758595
105115125135145155165175185195
Mar
-98
Jun-
98Se
p-98
Dec
-98
Mar
-99
Jun-
99Se
p-99
Dec
-99
Mar
-00
Jun-
00Se
p-00
Dec
-00
Mar
-01
Jun-
01Se
p-01
Dec
-01
Mar
-02
Jun-
02Se
p-02
Dec
-02
PDLCompColl
AIP – A Quick History
• Subsidized AIP rates = No non-standard market
• 1996: Flex-rating; Multi-tier rating; rates allowed higher than AIP; Credit scoring for tier placement
• Depopulation credit programs
• Growing pains in new non-standard market
Percent of PPA Cars in AIP
0
2
4
6
8
10
12
14
16
18
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Is AIP Repopulating? No!
• Take out credits increased
• Significant AIP rate increases
• Increased anti-fraud activities
• Numerous depopulation initiatives
• New Applications appear to have stabilized
Update on New York’s No-Fault Fraud & Abuse Problem
Robert P. Hartwig, Ph.D., CPCU, 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
New York Alliance Against Insurance Fraud Insurance Fraud Briefing
Albany, NYMarch 25, 2003
Insurance Fraud in the U.S. Costs Billions!
Health$61.4 billion
64%
Life$11.8 billion
12%
Disability$0.5 billion
1%
Prop./Casualty$22.4 billion
23%
Total Fraud Costs are $96.2 Billion
Source: Conning & Co.
0%25%
50%75%
100%
125%150%
175%200%225%
250%275%
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.
50%
75%
100%
125%
150%
175%
200%
225%
250%
U.S.New York
*Through 4 quarters ending 2002: 3rd.Source: American Insurance Association/ISO FastTrack; Insurance Information Institute
Change in PIP Loss Costs:New York vs. US 1993-2002*
In 2002:III, cumulative growth in New York PIP loss costs were nearly twice (+89% above) the national average.
New York Insurance Fraud Reports 1995 - 2002
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1995 1996 1997 1998 1999 2000 2001 2002
Auto Collision Damage
Auto Theft
No-Fault Auto
Source: New York Department of Insurance; Insurance Information Institute.
New York Insurance Fraud Reports 1995 - 2002
4,3935,214
7,042
9,6599,191
12,372
15,219 14,852
1,0861,733
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 2002
Workers' Compensation
No-Fault Auto
Source: New York Department of Insurance; Insurance Information Institute.
New York Insurance Fraud Reports 1995 - 2002
1,572 1,518
7,042
9,6599,191
12,372
15,219 14,852
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 2002
Health/Accident
No-Fault Auto
Source: New York Department of Insurance; Insurance Information Institute.
Health Accident
6% Auto Theft8%
Auto Collision
4%
No-Fault Auto59%
Workers' Comp
4%
All Other16%
Composition of Fraud Reports 1995 vs. 2001
Workers' Comp3.9%
All Other29%
No-Fault Auto22%
AutoTheft7.6%
Auto Collision
10%
Health Accident
23%
Source: New York Department of Insurance; Insurance Information Institute.
2001Total Reports = 26,028
1995Total Reports = 20,205
Health Accident
6%
Auto Theft8%
Auto Collision
4%
No-Fault Auto59%
Workers' Comp
4%
All Other16%
Composition of Fraud Reports 2001 vs. 2002
Source: New York Department of Insurance; Insurance Information Institute.
All Other19%
Workers' Comp
4%
No-Fault Auto61%
Auto Collision
3%Auto Theft
7%Health Accident
6%
2001Total Reports = 26,028
2002Total Reports = 24,578
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 2002
Total All Types of Fraud
No-Fault Auto Fraud
Source: New York Department of Insurance; Insurance Information Institute.
PIP fraud reports accounted for 61% of all fraud reports in 2002
compared with 22% in 1995
NYSID Fraud Report -2003
Superintendent of Insurance Gregory V. Serio today announced that the Department’s year-end fraud fighting statistics show that arrests reached an all time high, increasing by 27% from 2001 and over 400% since 1996.
"The Department’s hard-hitting approach to eliminating insurance fraud is clearly evident with the record breaking statistics for 2002. The Department’s efforts to prompt changes to laws regulating insurance fraud, promote increased law enforcement collaborations resulting in more expansive sweeps, increase consumer education programs and utilize forfeiture laws have resulted in our best, most aggressive year fighting fraud," said Serio.
NYSID Annual Fraud Report - 2003