ALBANY, N.Y. — Gov. Kathy Hochul used her Jan. 13 State of the State address to announce a series of reforms to bring down auto-insurance rates and take action against “bad actors” whose fraudulent claims drive up costs.

The new proposals include a “whole-of-government approach” to crack down on auto-insurance fraud.

New Yorkers pay some of the highest car insurance rates in the nation — totaling just over $4,000 annually on average, nearly $1,500 above the national average, Hochul’s office said. It went on to say that car-insurance rates are driven up by a combination of fraud, litigation, legal loopholes, and enforcement gaps, with staged crashes and associated insurance fraud inflating everyone’s premiums by as much as $300 per year on average, according to some estimates.

Cracking down on fraud

The governor wants to “reinvigorate” the state’s Motor Vehicle Theft and Insurance Fraud Prevention Board, empowering it to redouble its efforts toward investigating and prosecuting insurance fraud across the state.

This would include directly tasking the New York State Department of Financial Services (DFS), the New York State Department of Motor Vehicles, New York State Division of Criminal Justice, the New York State Police (NYSP) with a more “proactive and coordinated” approach to enforcement. That would include dedicated resources and staff at both DFS and NYSP focused on auto insurance, and ensuring coordination in law-enforcement response.

As the state investigates and builds cases against scammers and fraudsters, her office says the governor will ensure her agencies are partnering with prosecutors statewide to ensure crimes are not going unpunished. To equip prosecutors with the tools they need to shut down organized crime rings, Hochul will offer legislation to ensure prosecutors can seek criminal penalties against any individual responsible for organizing a staged accident, not just the particular individual behind the wheel.

Working with district attorneys across New York, the state says it will seek to help build cases that put an end to the organized fraud that’s “robbing” New Yorkers via elevated insurance rates.

The governor also plans to advance additional efforts to take on medical providers who participate in fraud by signing off on phony medical diagnoses that result in “enormous” payouts, “increasing the probability” that these white-collar crimes will lead to “temporary or permanent loss of licensure” for the providers who commit them.

State agencies will also seek to take action when New York drivers illegally register their vehicles in other states, which artificially decreases their coverage and raises costs for law-abiding New York drivers.

Strengthening insurer anti-fraud programs

Insurance companies must play a central role in tackling fraudulent behavior that targets their policyholders, Hochul’s office said. However, current law handcuffs insurers’ ability to protect their law-abiding customers against fraud and abuse by capping the time they have to identify, investigate, and report instances of fraud to just 30 days.

To ensure fraud is identified and punished, Hochul plans to increase the timeframe insurers have to report fraud and reduce barriers to alleging fraud in court, giving insurers more time to investigate claims and avoid paying fraudulent ones.

Her office went on to say that legislation will balance increased flexibility to crack down on fraud with the need to preserve crucial consumer protections, such as allowing policy-holders to collect 2 percent interest on any payment insurers hold back as an incentive to ensure insurers continue to move quickly on evaluating genuine claims.

Limiting damages for bad behavior in an accident

When drivers are involved unlawful behavior at the time of an incident, they shouldn’t be able to win sizable insurance payouts, Hochul’s office said. However, current law permits people committing crimes, including impaired driving, to receive generous payouts — including for pain and suffering and emotional distress — which are paid from the premiums contributed by law-abiding drivers.

Hochul wants to cap the payout on these types of non-economic damages for drivers engaging in criminal behavior at the time of the incident. Specific crimes that would warrant the capping of damages include uninsured motorists, who have violated state financial responsibility laws, contributing to additional cost in the insurance market.

They would also include people convicted of driving while impaired at the time of the incident; and individuals committing a felony (or fleeing one) at the time of an incident.

Limiting damages for those “mostly” at fault in causing accident

New York is in a minority of states that allow drivers that are deemed “mostly” at fault in an accident to still collect extensive damages, including non-economic damages. This means that in New York, even the driver deemed mostly at fault for an accident can walk away with a sizable payout for that accident.

Most states — including Colorado, Connecticut, Delaware, Massachusetts and New Jersey — however, have rules which only permit recovery of damages if a plaintiff is not primarily at fault for the accident. Hochul plans to seek changes to New York’s laws that will limit the non-economic damages a driver can obtain if they are mostly at fault for an accident, introducing a measure of accountability for who is compensated by insurance after an incident.

Tightening the serious injury threshold

New York’s no-fault insurance law allows for people injured in an auto accident to make claims for compensation that stretches beyond reimbursement for the medical expenses or lost wages associated with an injury.

The additional compensation is intended to offer support for the pain and suffering of victims with serious injuries. The “serious injury” threshold is intended to screen out minor injuries from personal-injury litigation in keeping with the original intent of the no-fault law to reserve litigation only for auto accidents causing serious harm.

However, New York’s legal definition of serious injury is “vague, applied inconsistently, and can include temporary injuries that only sideline an individual for a short time following an accident rather than the more significant injuries that would merit further payouts,” per Hochul’s office.

Without a “fair and firm” definition of serious injuries, individuals without significant harms may try to “game the system” to win astronomically high “jackpot” awards from courts associated with these harms — raising rates for everyone else.

Hochul wants to reform the serious-injury threshold by proposing “objective and fair” medical standards for what actually qualifies as a serious injury. This will create “clear and objective” criteria for what constitutes a serious injury; avoid unnecessary and expensive litigation; and will help stop instances where individuals are attempting to exploit a system to attempt to win payouts that are not aligned with the severity of their injuries and push everyone else’s rates up, the governor’s office said.

Insurance agents’ group response

Kelly Gonyo, chair of the board of Big I New York, on Jan. 13 issued the following statement in response to New York Gov. Kathy Hochul’s State of the State address:

“Big I New York welcomes the attention Governor Kathy Hochul is giving to the impact of high auto, home, and liability insurance costs on New York families and businesses. Affordable and accessible property and casualty insurance is foundational to enabling New Yorkers to own cars, purchase homes, secure affordable housing, and protect their livelihoods.

Safe and affordable transportation is essential for working families — to get their children to school, buy groceries, and get to work — and for commerce to flow along New York’s roadways.

It is deeply frustrating to see fraudsters exploit a system intended to help people recover after an accident through legitimate medical care and vehicle repair. Even more alarming is the reckless staging of accidents on our highways, putting innocent New Yorkers in harm’s way purely for profit.”

Big I New York says it has represented the common business interests of independent insurance agents since 1882. More than 1,450 agencies and their 13,000-plus employees currently rely on the DeWitt, New York–based not-for-profit trade association for legislative advocacy, continuing education and other means of industry support.