Sad, but true. When claim costs rise due to fraud, policyholders are forced to pay for it through higher premiums.
A good example is New York StateÃ¢â‚¬â„¢s no-fault auto insurance fraud crisis. New data shows that the problem of excessive billings by medical mills in the Empire State is growing.
During the first six months of 2010, questionable liability insurance claims involving excessive medical treatment in New York surged 42 percent to 431, up from 304 in the first half of 2009, according to the New York Alliance Against Insurance Fraud (NYAAIF).
Many of these questionable liability claims referred by insurance companies to the National Insurance Crime Bureau (NICB) for investigation involved no-fault auto insurance claims submitted by medical mills, NYAAIF reports.
These fraudulent claims submitted to auto insurers are for treatment that was either excessive or not necessary, and in some instances the treatments are never even performed.
Fraud and abuse pushes up the total cost of claims and in turn the cost of insurance. Insurance Information Institute (I.I.I.) analysis shows that fraud in the New York no-fault system accounts for roughly 20 percent of every no-fault claim paid Ã¢â‚¬“ or about $1,561 per claim.
As a result, in 2009 policyholders paid the equivalent of a $229 million tax on their auto insurance policies due to these unethical and often fraudulent activities, I.I.I. estimates.
For more information, check out an I.I.I. backgrounderÃ‚ on no-fault auto insuranceÃ‚ and an I.I.I. presentation on the issue of no-fault insurance fraud.