Enacts provisions to reduce the incidence of motor vehicle insurance fraud

Summary of provisions

Section 1: Adds a new Insurance Law section 401(d) to explicitly expand the authority of the superintendent of Insurance, under the Insurance Fraud prevention Article, to investigate fraudulent activities with regard to motor vehicle operators who have not secured automobile insurance coverage or who misrepresent the principle place where such automobiles are garaged and operated.

Section 2: A new Vehicle & Traffic Law section 201-a is added to give law enforcement personnel access to any individual's street address provided to the Department of Motor Vehicles to register a motor vehicle in this state or to obtain a driver's license in this State. This information can be used to ensure that those who submit information to the Department submit accurate information of their residence and where they operate and garage their motor vehicle for auto insurance premium rating purposes.

Section 3: Amends Vehicle & Traffic Law section 401(1) to require that all those who file an application to register an automobile in New York must provide their street address where they reside if such person uses a Post Office box for their location of residence. The purpose of this provision is to curtail those that submit fraudulent information on where such applicants truly reside.

Section 4: Amends Vehicle & Traffic Law section 502(1) to require that all those who file an application for a driver's license must provide their street address where they reside if such person uses a Post Office box for their location of residence.

Justification

The purpose of this bill is to address the ever increasing incidence of auto insurance fraud in this state. More particularly, this bill seeks to address insurance fraud that is perpetrated against those law abiding operators of motor vehicles that accurately and truthfully disclose where they reside and operate and garage their vehicles, regardless of where they live. Some who live in high auto insurance rate areas, such as the New York City metropolitan area, misrepresent where they live, garage and operate their automobiles

and fraudulently maintain that they live in low insurance premium rate areas that are either up-state or out of state.

There is a prevalence of in-state residents misrepresenting their true place of residence so that they can obtain much lower auto insurance rates. Instead of disclosing their true address in high insurance premium places such as, for example, Bronx or Kings Counties, they state that they live in lower insurance premium rated territories such as North Carolina, Pennsylvania, or upstate counties that have much lower incidents of motor vehicle theft, car accidents and judgments relegated to motor vehicle accidents. This issue was a topic of a report released in 2006 by the State Commission on Investigations. Since 2006, the commission has sunsetted, however, Senator Klein has revised and updated this report. The new Report "Auto Insurance Rate Evasion" was released in February 2011. This bill implements many of the suggested changes contained in that Report.

This situation or rate evasion, while artificially lowering the insurance rates of those who fraudulently do not disclose their true residential address, substantially increases the insurance premiums paid by those who truthfully disclose their actual place of residence and where they operated and garaged their cars. This bill should bring more equity to those who purchase auto insurance coverages in this state and ensure that everyone pays their fair share for auto insurance coverages that matches their actuarial risk of potential physical damage or theft of their automobiles, risk of personal injury or liability exposure due to judgments obtain in local courts.

Legislative history

Similar to S. 4847 which passed the Senate in 2011

Fiscal implications

None.

Effective date

The same date as the merger of the Insurance and Banking Departments.