PIANY CEO/Agency Conference Nearly 80 people attended PIANY’s CEO/Agency Conference, sponsored by the New York Insurance Association and held this year in conjunction with the Hudson Valley RAP event in Suffern Oct. 2, 2003. The conference featured a panel discussion bringing Hudson Valley agents and company executives together over the tough problem of securing needed legislative changes in areas that affect the health of the state’s insurance markets.
PIANY past president Robert Franzese, CEO of Capital Bauer Insurance Agency, Albany, moderated the discussion of “Unfinished Business: How to Move Forward On Outstanding Legislative Issues.” PIANY agency owners Robert J. Ryan Jr., CIC of Ulster Savings Bank and Virginia Wall of PELL & Associates shared their detailed knowledge of the Hudson Valley insurance marketplace from their respective headquarters in Kingston and West Nyack. Joining the agent panelists were company representatives from AIG, Selective Insurance and Lancer Insurance Company, parent of D.C. White Agency. Workers’ compensation. Speaking for AIG, Cecilia Norat forecast that workers’ compensation will become a major issue in the 2004 session. She emphasized that the industry needs to unite behind some needed cost-saving measures to offset the probable effort by Labor to increase workers’ comp benefit levels. Market conditions are currently “good,” especially since the major reforms obtained in 1996, she said. The last big rate increase was in 1990, which also was the last time benefit levels were raised. “It’s outrageous to keep benefits the same for twelve years,” Norat said. “But to avoid negative economic impact for New York’s employers in raising benefits, there will need to be offsetting cost containments.” Norat is AIG’s director of state relations. She identified some promising areas for reform. The first is New York’s high proportion of “permanent partial” disability cases, which she said is the highest in the nation -- almost double the next-highest jurisdiction. In addition to light-duty job incentives, she said New York needs to adopt standards that will treat neck and back injuries according to a schedule of benefits, similar to that used for other injuries. She said that medical guidelines for evaluating these cases have been developed and could be used here. Norat minimized claimant fraud as a cost-driver in New York’s workers’ comp market. “Provider fraud and employer [rate] fraud—that’s where the real money is,” she said. “It hurts honest employers by inflating their costs.” Other areas that Norat discussed include worker rehabilitation and the need to prevent drop-outs from the program; systemic provisions that encourage a high degree of attorney involvement and drag out the settlement process; and New York’s still-inadequate “managed care” provisions. Labor law. Selective Insurance representative Greg Massey addressed the seemingly intractable dilemma of New York’s Labor Law and the impact of its absolute liability provisions on insurance carriers. He said initial optimism that case law might establish a viable “recalcitrant employee” defense has come to naught, leaving us back with the same old problem. “This is a real economic issue for contractors,” Massey said. “Premium dollars and jobs are leaving the state over this one.” He said that the insurance industry needs to partner with affected businesses and property owners and redouble our efforts. “Affected parties need to show more tenacity” to overcome powerful resistance to change, he said. Massey encouraged agents to become involved by urging their large accounts to get face-time with legislators and explain the law’s effects on them as employers. He also pointed to PIANY’s upcoming legislative breakfast/luncheon series as a good chance to bring affected clients in touch with lawmakers. “The common policy exclusions [excluding Labor Law claims] are an E&O problem for agents,” Massey noted. His company has run two sets of programs for Selective’s New York agents to educate them on the issue. Massey manages the company’s northeast region. Auto insurance fraud. Lancer Insurance Company startled attendees by the figures presented by its director of claims, John Riddell, and the head of its Special Investigative Unit, Angelo Baio. “The cost of fraud is huge,” Riddell said. “Recent estimates from the Insurance Department say that it adds $177 to $200 to the annual premium of each policy.” He noted that the exposure from physical damage scams is minor compared to medical fraud. The majority of Lancer’s SIU time is spent on Personal Injury Protection claims. Baio took conference participants inside the mindset of people who are intent on committing fraud. “First, you have to be a crook, to be willing to do whatever is necessary to benefit from insurance fraud. Second, you need to form relationships with other people who are willing to take part—and there are many willing individuals.” He said people even allow themselves to be used as “crash dummies”—passengers in staged accidents—and literally risk death for the chance at getting money. Ironically, these same people are often gypped by those higher up in the fraudulent scheme, he said. Next, the audience got a peek inside some of Lancer’s claim files, showing how a minor fender-bender can rack up thousands in PIP claims for dubious treatments. Lancer also related how one customer was victimized by being named in multiple phony accident reports, each of which led to a set of bogus claims. Lancer believes that the aggressive actions of SIUs, law enforcement and the Insurance Department’s Fraud Bureau have put a dent in staged accidents. “But the problem of out-of-control lawsuits remains,” Riddell explained. He said that mandatory, binding arbitration for provider reimbursement disputes would wring a great deal of cost out of the system, while keeping all such proceedings under the control of arbitrators who really know New York's no-fault system. Participants agreed that both insurance professionals and their affected clients will need to pull out the stops in 2004 in order to achieve change. This will take greater outreach and an education process to bring customers into active, organized involvement, the panelists concluded. |
