New York Insurance Association President Ellen Melchionni issued strong statements against New York’s No-Fault Auto Insurance, describing it to be broken and needed major reforms.

Melchionni has been panning over the NY no-fault auto insurance as it has been an easy target for fraud. No-fault auto insurance fraud exists on a wide variety of schemes. There are those fraudsters who stage accidents, or recruit injured drivers and passengers to take advantage of no-fault benefits. In some cases, medical doctors even connive with fraudsters or do the fraud by themselves.

NY no-fault auto insurance is quite beneficial to those who have it. If an insured will have an accident, his auto insurer will automatically pay to cover medical costs and lost wages up $50,000 per injured person. Lawsuits will only be allowed under the state’s no-fault law if the damages would exceed the no-fault benefits.

With the no-fault system being an easy target for fraud, Melchionni argues that it is the state’s auto insurance consumers who are being hit hard. As to cover for fraud losses, everyone is paying the fraud tax.

To resolve such problem, NY Governor Andrew Cuomo had already launched efforts to go after the no-fault fraud, with the state’s Department of Financial Services (DFS) taking the frontline. Benjamin Lawsky, DFS Superintendent explained that one way in battling the no-fault fraud, the state will target doctors who participate in illegal activities to defraud the auto insurance industry. These doctors provide unnecessary treatment to auto accident victims. They submit fake medical bills to insurers and in some cases, participate too in other moneymaking schemes. The DFS had already announced that it will be implementing a 2005 law that will ban doctors who will participate in auto insurance fraud.

The anti-fraud efforts in New York are set to bring down the burgeoning auto insurance premiums in the state.

However, Property Casualty Insurers Association of America Assistant Vice President Kristina Baldwin believes that to effectively combat fraud, reforms shall be instituted to the state’s no-fault auto insurance system.