New York Insurance Fraud: A Comprehensive Guide

Insurance fraud is a serious issue in New York that costs residents millions of dollars each year in the form of increased premiums and higher prices for goods and services. While there are many complex laws and regulations around insurance fraud, this guide aims to provide New Yorkers with a basic understanding of what constitutes insurance fraud, how to avoid becoming a victim, and what to do if you suspect fraud has occurred.

What is Insurance Fraud?

Insurance fraud occurs when someone intentionally lies to or misleads an insurance company in order to collect money they are not entitled to. Common examples include:

• Filing claims for injuries or damage that did not actually occur
• Exaggerating the severity of an injury or damage to receive a larger payout
• Staging accidents to file fraudulent claims
• Billing for medical services that were not provided
• Working while collecting disability or workers’ compensation benefits

No matter the specifics, the key factor is that the policyholder deliberately deceives the insurance company in order to wrongly obtain money or benefits.

Major Types of Insurance Fraud

While insurance fraud can occur in any type of policy, some of the most common schemes involve:

Auto Insurance Fraud

This often takes the form of staged accidents or exaggerating injuries and damage from a real accident. For example, an insured driver may purposefully cause an accident and then file an injury claim even though they were not actually hurt.

Health Insurance Fraud

Doctors or medical clinics bill for services that were never performed, or pad bills with extra diagnostic tests that weren’t medically necessary. Patients also commit fraud by allowing false billing on their behalf or faking illnesses to receive benefits.

Workers Compensation Fraud

Employees who have filed workers comp claims continue working another job while collecting disability benefits. Or, individuals fake workplace injuries to collect benefits they don’t deserve.

Life Insurance Fraud

A beneficiary lies about the cause of death in order to collect life insurance funds they wouldn’t otherwise receive. For example, if the policyholder commits suicide but the death is reported as an accident.

Cost of Insurance Fraud

Insurance fraud costs New Yorkers big. While the exact figures are hard to pin down, estimates indicate auto insurance fraud alone costs New Yorkers $230-$240 million per year[1]. Nationwide, the Coalition Against Insurance Fraud estimates fraud costs families $950 to $1,300 per year in the form of increased premiums[2].

Much of this cost arises because insurance companies have to raise rates for honest policyholders to help recoup losses from fraud. When claims payouts are inflated by fraudulent activities, companies need to bring in higher premium revenues to remain profitable.

Avoiding Insurance Fraud as a Consumer

The best way to avoid enabling insurance fraud is to provide accurate information on all applications and claims. Beyond that, here are some tips:

• Review all documents carefully before signing and ask questions if anything seems incorrect or suspicious. Don’t sign blank forms.
• Avoid agents or brokers who discourage you from reading documents thoroughly or rush you to sign.
• Beware of unsolicited contacts after an accident from medical clinics, attorneys, or other vendors recommending their services.
• Don’t accept payment from an attorney or medical provider for referring accident victims to them.
• Be truthful and transparent when reporting injuries and damages. Exaggerating a claim could constitute fraud.
• Notify your insurer and medical providers if you have any other insurance policies that may cover your treatment.
• If you suspect fraud, report it. See the next section for information on reporting.

Reporting Suspected Insurance Fraud

If you believe an insurance company, agent, policyholder, or any other party has committed fraud, report it. Here’s how:

• Contact the New York Department of Financial Services (DFS) – Call the DFS Insurance Fraud Hotline at 1-888-FRAUDNY (888-372-8369) or file a report online at www.dfs.ny.gov[3]. You can report anonymously.
• Notify your insurer – If you suspect a fraudulent claim has been filed on your policy, inform your insurer’s special investigations unit.
• Contact law enforcement – For severe or criminal fraud, get your local police or sheriff involved. The DFS may also forward your report to prosecutors.

When reporting, provide as much documentation and evidence as possible. The more details you can provide, the more effectively authorities can investigate.

Penalties for Insurance Fraud

Insurance fraud in New York may be charged as either a misdemeanor or felony depending on severity, with penalties ranging from fines and probation to jail time:

• Insurance Fraud in the 5th Degree (Class A Misdemeanor) – up to 1 year in jail
• Insurance Fraud in the 4th Degree (Class E Felony) – up to 4 years in prison
• Insurance Fraud in the 3rd Degree (Class D Felony) – up to 7 years in prison
• Insurance Fraud in the 2nd Degree (Class C Felony) – up to 15 years in prison
• Insurance Fraud in the 1st Degree (Class B Felony) – up to 25 years in prison

Those convicted may also face civil lawsuits, fines, and restitution orders. Providers or brokers can lose their professional licenses.

Protecting Yourself from Fraudulent Claims

On the flip side, policyholders also need to beware of fraudulent claims made against them. Here are some precautions:

• Only share insurance information with other parties involved in an accident. Don’t let strangers photograph your cards.
• If you’re not at fault for an accident, don’t pay anything to the other party directly. Let your insurer handle it.
• Document the scene with photos and video, noting license plate numbers. Obtain a police report.
• Review any claims made against your policy for red flags like excessive treatment or billing for pre-existing injuries.
• Don’t settle or pay out claims that seem fraudulent or inflated. Report it to your insurer.

Working with a Lawyer

If you’ve been accused of insurance fraud or believe a fraudulent claim has been made against you, consult an attorney. A lawyer can help protect your rights in the investigation process and build a defense against criminal or civil charges if necessary.

The Bottom Line

Insurance fraud imposes a tremendous cost on New Yorkers through increased premiums, healthcare costs, and other expenses. By learning to recognize common schemes, reporting suspicious activity, and working with qualified legal counsel, New Yorkers can help curb insurance fraud and its effects. But combating this problem requires vigilance and action from insurance consumers as much as from institutions.