New York PIP
Insurance Update:
Is New York’s No-Fault
Crisis Returning?
Insurance Information Institute
January 7, 2010
Download at http://www.iii.org/Presentations
Robert P. Hartwig, Ph.D., CPCU, President & Economist
Insurance Information Institute  110 William Street  New York, NY 10038
Tel: (212) 346-5520  Fax: (212) 732-1916  [email protected]  www.iii.org
Summary of New York State’s Resurgent
No-Fault Auto Insurance Problem
No-Fault (PIP) Costs Are Surging
• New York’s no-fault (PIP) average claims costs—at
$8,690 per claim—are the third highest in the US (as of
the 3rd quarter of 2009), behind Michigan and NJ
• The average cost per no-fault claim in New York is
more than double (104%) that of the US median
($4,268)
• The average cost of a no-fault claim has soared $3,075
or 55% from $5,615 at the end of 2004 to $8,690 in the
third quarter of 2009
• No-Fault claim costs as of Q3 of 2009 are near the
highest in NY’s history, just 5.9% short of their alltime high of $9,235 in the 1st quarter of 2002
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DÉJÀ VU,
ANYONE?
Previous Effort to Get Message
Out and Drive Down Costs Was
a Big Success
No-Fault Fraud Was Front
Page News in 2001-2002
4
Sparking Interest in Action
5
Urging Albany to Action
6
NY PIP UPDATE
Is New York’s No-Fault
System Out of Control—
Again?
Average PIP (No-Fault) Claim Cost
as of 2009:Q3*
$25,000
$1,797
$2,087
$2,445
$2,851
$2,862
$3,951
HI
$2,924
$3,954
$4,125
PA OR WA
$4,268
$4,999
$5,578
$5,000
$6,298
$10,000
$6,343
$8,690
$15,000
$6,678
$20,000
$7,566
$16,637
Avg. PIP Claim Severity
$30,000
$30,856
$35,000
Average No-Fault (PIP) claim
costs in NY are the third highest
in the US and are 64% higher
than the median cost of $5,289
$0
MI
NJ NY FL MN DC DE KY ND
TX MD KS SC UT MA
Sources: Insurance Information Institute based on ISO/PCI Fast Track data.
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$6,705
03:4
$6,971
$6,838
$6,729
$7,060
04:4 $5,867
$6,599
03:3
04:3 $6,001
$6,593
03:2
$6,229
$6,548
03:1
04:2
$6,509
02:4
$6,510
$6,526
02:3
$6,377
02:2
04:1
$7,600
$8,033
$8,489
$8,308
$8,097
$6,299
02:1
$6,009
01:3
01:4
$5,990
01:2
5,000
01:1 $5,929
5,500
00:4 $5,782
6,000
$6,132
6,500
$6,811
7,000
NY PIP claim severity, once the 2nd highest in
the US, fell well below the US average by yearend 2004 after a crackdown on fraud, abuse.
$7,188
7,500
NY
$7,883
8,000
$7,712
$8,076
8,500
$8,360
9,000
$8,271
US excl. NY
$8,597
Last Campaign Was a Success:
PIP Average Claim Severity Plunged
*ISO Fast Track PIP data as of 2004:Q4 include the following states: FL, HI, KY, KS, MA, MI, MN, NY, ND, SC and UT.
Source: Insurance Information Institute calculations based on ISO/PCI Fast Track Data.
NY PIP Claim Frequency &
Severity, (1997 – 2009:03)
$6,500
$6,000
$5,500
Claim severity
rose 63% in the 5
years after the
1997 Presbyterian
decision
$8,443
$8,177
$8,507
$8,025
$8,562
$8,748
$8,690
$6,156
$6,052
$5,820
$5,991
$5,615
$6,094
$5,914
$6,250
$6,269
$6,530
$6,606
$7,063
$7,323
$7,378
$7,297
$7,670
$7,740
$7,000
$7,311
$6,958
$6,870
$6,699
$7,500
$7,773
$8,000
$5,675
$6,063
Avg. Claim Cost
$8,500
2.4%
Third highest
level in history:
$8,690 per claim
Avg. Claim Severity
2.3%
2.2%
2.1%
2.0%
1.9%
1.8%
1.7%
Frequency
1.5%
1.4%
1997
1998
1999
2000
1:01
1:02
1:03
1:04
2:01
2:02
2:03
2:04
3:01
3:02
3:03
3:04
4:01
4:02
4:03
4:04
5:01
5:02
5:03
5:04
6:01
6:02
6:03
6:04
7:01
7:02
7:03
7:04
8:01
8:02
8:03
8:04
9:01
9:02
9:03
$5,000
1.6%
Sources: Insurance Information Institute based on ISO/PCI Fast Track data.
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Claim Frequency
$8,347
$8,327
$7,888
$7,507
$8,234
$9,000
$9,235
$8,727
$8,577
$9,500
NY PIP Fraud is Back
Average cost per PIP claim
(severity) fell 39% between
02:Q1 and 04:Q4 but has since
soared by 55% through 09:Q3
Freq. down 33% since 2000
NY PIP Claim Frequency &
Severity, (2000:04 – 2009:03)
$7,000
$5,500
$8,443
$8,177
$8,507
$8,025
$8,562
$8,748
$8,690
PIP severity is now
at its third highest
level in history:
$8,690 per claim
$6,500
$6,000
$6,156
$6,052
$5,820
$5,991
$5,615
$6,094
$5,914
$6,250
$6,269
$6,530
$6,606
$7,063
$7,323
$7,378
$7,297
$7,670
$7,740
$7,500
$7,773
$7,311
$6,958
$6,870
$8,000
2.4%
2.3%
2.2%
2.1%
2.0%
1.9%
1.8%
1.7%
Avg. Claim Severity
1.6%
Frequency
1.5%
1.4%
0:04
1:01
1:02
1:03
1:04
2:01
2:02
2:03
2:04
3:01
3:02
3:03
3:04
4:01
4:02
4:03
4:04
5:01
5:02
5:03
5:04
6:01
6:02
6:03
6:04
7:01
7:02
7:03
7:04
8:01
8:02
8:03
8:04
9:01
9:02
9:03
$5,000
Sources: Insurance Information Institute based on ISO/PCI Fast Track data.
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Claim Frequency
Avg. Claim Cost
$8,500
$8,271
$8,327
$7,888
$7,507
$8,234
$9,000
$9,235
$8,727
$8,577
$9,500
NY PIP Fraud is Back
Average cost per PIP claim
(severity) fell 39% between
02:Q1 and 04:Q4 but has since
soared by 55% through 09:Q3
Freq. down 33% since 2000:04
New York Insurance Fraud
Reports, 1995 – 2008
20,000
18,000
16,000
Auto Collision
Damage
Auto Theft
14,000
12,000
No-fault fraud
reports fell 35%
between 2003 and
2006, but are now
rising (up 22% in
2008 over 2006)
No-Fault Auto
10,000
8,000
6,000
4,000
Number of No-Fault related
fraud reports remains high
and is beginning to rise again
2,000
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*
Source: New York Department of Insurance, Insurance Frauds Bureau Annual Report; Insurance Info.12
Institute.
No-Fault Auto Unit Investigations
by NY Insurance Fraud Bureau
600
500
No-fault fraud investigations
have more than doubled since
2004—up 140% through 2007
400
300
479
349
278
268
250
200
200
100
0
2002
2003
2004
2005
2006
2007
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Source: New York Insurance Department http://www.ins.state.ny.us/acrobat/fd07ar2g.pdf; Ins. Info. Institute.
No-Fault Auto Unit Cases Opened
by NY Insurance Fraud Bureau
180
160
160
142
140
120
122
113
88
100
73
80
60
40
20
No-fault cases
opened have more
than doubled since
2004—up 119%
through 2007
0
2002
2003
2004
2005
2006
2007
15
Source: New York Insurance Department http://www.ins.state.ny.us/acrobat/fd07ar2g.pdf; Ins. Info. Institute.
NY’s Private
Passenger Auto
Insurance Market
Improvements at Risk
$600
US
$1,047
$1,083
$795
$1,122
$829
$840
$1,172
$1,168
NY
$816
$726
$718
$686
$700
$703
$800
$705
$900
$824
$939
$930
$960
$1,000
$959
$1,100
$781
$1,200
$1,015
NY ranked as the 2nd most
expensive state during the
crisis, falling to 4th by 2007
$1,300
$1,100
Average Expenditure on Auto Insurance,
NY State vs. US: 1997-2007*
In the wake of NY’s first no-fault crisis, the
average expenditure on auto insurance in NY
state fell by $125 or 10.7% between 2004 and
2007, twice the 5.4% drop in the US overall.
$500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
*Latest available as of December 2009.
Source: NAIC; Insurance Information Institute.
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New York State Direct Pvt. Passenger
Auto Premiums Written: 1999-2008
$11.0
$10.710
$10.558
$10.5
$10.262
$9.914
$10.0
$9.994
$9.794 $9.789
$9.5
$9.018
$9.0
$8.5
$8.0
$7.5
$8.166 $8.175
Auto insurance premiums paid by NY
drivers dropped by almost $1 billion or
nearly 9% since the end of last no-fault
crisis in 2004, but the system is once again
under siege from fraud and abuse.*
$7.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
*Exact decline between 2004 and 2008 was $921 million.
Source: Highline Data; Insurance Information Institute.
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Insurance Information
Institute On-Line
Download at:
http://www.iii.org/presentations
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