New York’s no-fault insurance fraud problem: A warning for Alberta’s Care-First system

Alberta's Care-First regulated auto insurance system is still set to be introduced — and those towards the South, in New York (NY) state are already experiencing a similar system — ripe with fraud. The fraud in NY's no-fault auto insurance system comes from its strict regulations surrounding claims, which have caused a rise in auto insurance prices for drivers in the state.In fact, on average, New Yorkers pay $4,000 (USD) annually for car insurance, which is $1,500 (USD) more than the US national average. What's going on here and how is it related to regulated car insurance?.According to Live Insurance News, in 2023, NY recorded 38,270 suspected fraud cases with 1,729 staged crashes recorded — making the state the second-highest state in the US for this type of scam.NY's no-fault system is obviously regulated — and in a car crash, even an at-fault crash, the person's own insurance pays out coverage regulated by the state.The state regulates how an individual's insurance company compensates car accident victims, providing only up to $50,000 for medical expenses and lost wages, and not covering expenses over that amount, nor property damage, pain and suffering, or motorcyclists..Another regulated rule in the state: the timeline for insurers to pay or deny an accident claim, a short period of 30 days, which invites a large amount of fraud.Fraudsters found a legal loophole: where insurers have this 30-day deadline — and if it is missed — so is the ability to challenge the claim if it's fraudulent.Now it becomes clear: this system is a fraudster's heaven.What would this look like in Alberta under Care-First come January 2027?.Under Alberta's Care-First system, an individual's own insurance will compensate them after a car crash, regulating the almost— non-negotiable set compensation amounts for injuries, disregarding their specific circumstances.According to the government, the only way to litigate under the care-first system is if the at-fault driver is convicted of causing serious injury.Other than that, a "meat chart" for Care-First insurance puts a price tag on injuries when someone is harmed by an at-fault driver in a car crash.Although this may have its downside for those actually injured in a car crash, it's guaranteed money for fraud. .It is still unclear whether Alberta will have the same regulations regarding timelines for insurers to deny or pay a claim once it has been submitted to them — because the details of the regulation have yet to be announced.Under the current publicly released legislation, the Alberta government states claims must be submitted within a "prescribed timeline," but has yet to announce when the timeline is for claimants or insurers.However, if Alberta decides to release a short timeline, it could make the system vulnerable to fraud, with a similar set compensation package promised.To get a better idea of the fraud cases going on in NY, let's look at the case of GEICO, a car insurance provider in the US..GEICO discovered a $3.4 million no-fault fraud scheme on claims between August 2019 and April 2023, involving a Queens medical practice.Accident victims were sent to the clinic in exchange for kickbacks, patients were then given unnecessary or fake treatments, and claims were fraudulently boosted with forged signatures and unlicensed providers. GEICO then fought back — filing a racketeering lawsuit against the clinic.The fraudsters then flooded state courts with 605 collection suits, in an attempt to overwhelm the system..The federal court then stepped in blocking the flood of suits and letting GEICO prove the fraud. Although this gave GEICO the opportunity it needed — under the state's system, the fraud had been able to last a few years — a very costly and messy fraud indeed. Could less fraud lower the costs of NY car insurance prices?You guessed it, yes.Less fraud would equal lower payouts and lower costs..And with lower costs come more competition, allowing new insurers to enter the market. With this, established insurers could lower premiums to attract customers.In Alberta, once regulations surrounding insurers approving claims are released, it could predict Care-First vulnerability to fraud.Not to mention, it could predict whether insurance prices for Alberta drivers will increase.

New York’s no-fault insurance fraud problem: A warning for Alberta’s Care-First system

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