Recession fails to drive down insurance costs

Premiums in New York have risen 2 or 3 percent so far this year, but there are further increases to come, one expert said.

"Auto insurance premiums over the past decade have experienced a bit of a seesaw and now they're on the way back up again," said Robert Hartwig, president of the Manhattan-based industry group the Insurance Information Institute.

The main reason given: a resurgence of fraud, especially phony or exaggerated medical claims.

Hartwig estimated the increase is to an average of $1,100 per car. The other potential increases have been applied for by insurance companies but have not yet been approved by the state.

Nationally, rates were 5.3 percent higher in the 12 months that ended in March than they were a year earlier, the federal government's Bureau of Labor Statistics said.

"The reason the average driver in New York isn't attuned to this yet is that the average driver hasn't been hit yet with the rate increases," said Hartwig, "but that's just around the corner."

Here's why, he says: Between 2004 and last year, the average no-fault medical claim rose to $8,862 from $5,615, reversing the results of a two-year crackdown on fraud by insurers and law enforcement. "What happened," said Hartwig, "was that those who would perpetrate fraud and abuse have returned, using slightly different methods."

Often, industry experts say, when insurers delay payment of what they suspect are phony or exaggerated medical claims, they are sued by health care providers. Ultimately, those costs get built into the premium rate structures. Steven Weisbart, the institute's chief economist, told an insurance fraud conference earlier this month that fraud and abuse in the New York no-fault system totaled an estimated $230 million last year.

The Property Casualty Insurers Association, based in Des Plaines, Ill., says drivers in New York State pay the third highest auto liability premium in the nation, after Florida and New Jersey.

Still, as evidenced by TV's omnipresent Geico gecko, competition remains fierce among insurers for New York motorists with good driving records. "Everybody is fighting for market share," said Massapequa-based Allstate Insurance agent Robert Zabbia. "But there's more targeted marketing."

For drivers with poor records, premium increases might be higher. Experts say insurers are being choosier than ever about who they accept as customers, even refusing coverage to drivers with bad credit ratings. Insurers aren't just worried that they won't pay their premiums. Industry research has found that consumers with lower credit scores are more likely to file claims - honest, exaggerated or completely phony.

Deteriorating credit scores are, of course, an outgrowth of the recession, as millions of Americans who are unemployed or underemployed or forced to take pay cuts have fallen behind on mortgage payments and other bills.

Increases in insurance premiums aren't likely to help. But the industry is hoping to regain control of the medical fraud problem with a no-fault reform package that would give them more time to look into suspected phony claims, expose crooked medical care providers and only allow patients, not medical providers, to sue auto insurance companies.

"Criminals are making a lot of money on this," said Ellen Melchionni, president of the New York State Insurance Association, a trade group based in Albany. "And the victims are the honest policy holders."