Smart Auto Insurance Blog

According to the article “New York No-Fault Auto Insurance Leads to Inflated Claims” by Ryan Fields on e-wisdom.com, New York auto insurance could be experiencing higher rates because of their insurance model.  New York is one of many states in the US using the no-fault auto insurance system.  The purpose of this type in insurance model is to reduce costly legal costs from deciding who is at-fault for an accident.

Since no-fault auto insurance has auto insurance companies paying out claims directly to their customers regardless of fault, fraud can be an issue.  According to the Insurance Information Institute, about 20% of each no-fault auto insurance claims made are fraudulent.  That adds up to approximately $1561 per claim and cost insurers and their customers over $600 million since 2005.

Chief economist, Dr. Steven Weisbard, ties the increase to medical providers who submit claims that are much higher than they should be.  He says the amount of fraud in New York’s auto insurance system is so severe that payouts for claims are currently the 2nd highest they have been since the late 1990’s.  This excess translates to higher auto insurance rates for drivers in New York obtaining auto insurance.  Costs rise for everyone as fraud claims rise.

Currently only 12 states have no-fault laws in place according to the article “How Florida No-Fault Auto Insurance Laws Work” by Robert Fredricks on youronlineinsurance.com.  A no-fault law means that there is a limit on what a driver can sue another driver’s auto insurance company for.

Florida has a qualitative threshold with its no-fault law which means that for particular injuries or death the driver can sue the insurance company for up to a certain dollar amount.  These types of laws can keep auto insurance rates in check because the auto insurance companies are not getting sued for as much as in other states where just about any type of lawsuit is allowed.

Because of this type of regulation, Florida auto insurance tends to be lower which is great news for residents.  There are other states that have much stricter no-fault laws which only allow drivers to sue for the exact amount of injury or damages not already covered by the auto insurance company.  One downside to these types of no-fault laws is that when real permanent damage has been done the victim can be left short of what they truly deserve.  It can be hard for these victims to fight for what they believe is right.