Live Insurance News: Trouble in the No-Fault System? Allstate and GEICO Hit New York Fraud Schemes
By: Tate Ellison
If you think insurance fraud is just a “one-off” scam here and there, think again. Two recently filed lawsuits by powerhouse insurers Allstate and GEICO suggest something much bigger is at play. Patterns of deception. Exploitation. Maybe even cracks in the system itself. The no-fault insurance system, to be precise.
Here’s the lowdown.
Allstate’s $1.48 Million Headache
Allstate isn’t holding back. On August 13, they slapped a network of New York pharmacies and wholesalers with a lawsuit. The charge? A $1.48 million scam.
Here’s what they’re saying happened. The pharmacies allegedly submitted bogus claims under New York’s no-fault auto insurance laws. Drugs got billed that shouldn’t have been. Payments rolled out for medications that violated state regulations. Prices were inflated. And, to top it off, Allstate alleges these pharmacies worked a little too closely with prescribers to write up unnecessary scripts.
What’s Allstate doing about it? Fighting back, hard. They’re not just asking for their money. Nope. They want a court ruling that these pharmacies can’t file any more no-fault claims and an injunction to stop this fraud from continuing.
GEICO’s Battles with Brooklyn and Beyond
GEICO, your move.
This July, GEICO took on a Brooklyn pharmacy in court, claiming $3.5 million in fraudulent no-fault claims. But that’s not all. A separate lawsuit involves six New York medical suppliers facing accusations of orchestrating $2 million in fake claims.
The stories sound eerily familiar. GEICO alleges the pharmacies abused New York’s no-fault system, with fraudulent billing and prescriptions handed out like candy.
Different names. Same game.
Do These Cases Show a Pattern?
Two major insurers. Similar lawsuits. Both in New York. It’s hard not to connect the dots. These cases paint an unsettling picture of how New York’s no-fault insurance system may be falling victim to organized schemes.
Why does this keep happening? Well, the no-fault system was designed to speed up claims. Accidents happen. Victims need medical care. Insurers pay. Everyone moves on, no drawn-out court drama required. But here’s the catch. Fraudsters might see this as an easy payday. No-fault relies heavily on trust and documentation—an open door for abuse if someone’s willing to fudge the facts.
The Similarities Are Hard to Ignore
Both lawsuits highlight the same tactics. Inflated bills. Questionable prescriptions. Cooperation between pharmacies, suppliers, and prescribers.
Both insurers also face high-dollar payouts they now believe shouldn’t have happened. For GEICO, it’s millions across multiple cases. For Allstate, $1.48 million and counting.
Same issues. Same region. A system under siege?
How No-Fault Insurance Works and Where It Falls Short
No-fault insurance is meant to make life easier after a car accident. Instead of fighting about who caused the crash, each driver’s own insurance pays medical bills and other costs. That means faster payouts and fewer long, expensive lawsuits.
But this convenience comes with a catch. The system relies on honest paperwork and accurate details from doctors and anyone filing a claim.
If someone inflates bills, submits claims for treatments that never happened, or tweaks documents, the insurer may not catch it. When trust is broken, the whole system takes a hit. In the end, everyone pays more.
Should the No-Fault System Get a Reboot?
Here’s the question we’re all asking by now. Is the no-fault system the problem?
Some argue it’s the perfect storm for fraud. A system that moves fast can lead to oversight gaps. Paired with the complexity of medical billing, it becomes fertile ground for bad actors.
But can you throw out the system entirely? Not so fast. No-fault exists to protect accident victims and keep claims moving smoothly. Scrapping it would be a massive shift.
What Happens Next?
For Allstate and GEICO, these lawsuits are just the beginning. It could take years to fully unravel the fraud they’re alleging. Meanwhile, other insurers will be watching closely. Why? Because if these fraud patterns go unchecked, everyone loses.
Will these lawsuits spark a crackdown on similar schemes? Or is the no-fault system doomed to repeat itself?
Stay tuned. One thing’s for sure—this isn’t the last we’ll hear about no-fault fraud. Not by a long shot.