Fraudulent Out-of-State Vehicle Registration Crackdown

By Betty Flood and Katlin Nash

A LBA NY, N.Y.—The New York Stand Against Insurance Fraud endorsed a measure for the crackdown on rate evasion insurance fraud. New York State Senator Lee Zeldin (R, C, I- Shirley) has called for a crackdown on rampant auto insurance fraud being committed by New Yorkers who intentionally and illegally register their vehicles out of state to take advantage of lower auto insurance rates. The sponsors of the bill include Independent Demo cratic C onference Leader Jeffrey Klein (D, WF, I-Bronx), Senator Davi d Carlucci (D, WFRockland), Senator Ted O’ Brien (DMonroe), Senator Diane Savino (D, WF, I-Kings), Senator Daniel Squadron (D, WF-Kings), Senator Toby Ann Stavisky (D, WF, I-Queens), and Senator David Va l e s ky (D, WF, I-Madison).

The purpose of the bill is to reduce the incidence of auto insurance fraud including fraud committed by those who misrepresent were they live, operate their automobile, and garage their vehicle for insurance coverage purposes. “By misrepresenting where their automobile operators truly live and operate their motor vehicle, these people obtain inappropriate reductions in their auto insurance premium rates and these costs are shifted to other law abiding automobile owners,” said Senator Zeldin.

The practice of rate evasion creates a double deficit by stealing legitimate revenues from registration fees and sales and use taxes due to the state where the vehicle actually resides and denies the insurance carrier its legitimate premium to cover the greater risk in that location. According to the State Commission on Investigation, millions of dollars are lost in the state and municipal revenue every year.

The comprehensive legislation would grant the Super intendent of Insurance the authority to investigate fraudulent activity, provide rewards of up to $5,000 to anyone who provides information leading to the conviction of a rate evader and bumps up the severity of the violations connected to this practice.

“Rate evasion is an illegal and costly scam that drives up insurance premiums for honest car owners and causes the state to lose out on precious revenues,” said Senator Zeldin. “This is a particular problem in areas like Long Island and New York City where we pay some of the highest insurances rates already.”

“New Yorkers Stand Against Insurance Fraud is pleased to have Senator Zeldin’s strong support on this issue,” said NYSAIF spokesman David Schwartz.

Estimates show that rate evasion jumped by as much as 50% in 2009. Zeldin also notes the difficulty of tracking down parking ticket scofflaws without of state plates. In 2010, New York City alone racked up almost $7 million in unpaid traffic tickets on out of state vehicles.

“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 lower incidents of motor vehicle theft, car accidents or judgments relegated to motor vehicle accident,” said Zeldin. This issue was a topic of a report released in 2006 by the State Commission on Investigations. Since 2006, the commission has sunsetted.

Senator Klein is revising and updating this report. This 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.