Auto insurance losses have fallen sharply across the board since 2002, and state insurance regulators want to see that start showing up in lower premiums for consumers.
State Insurance Superintendent Gregory V. Serio has launched an immediate and broad review of auto insurance rates for private cars in the state. The department earlier this month sent letters to 13 major insurance carriers representing 60 percent of the auto insurance market in New York state directing them to appear before regulators to review their prices.
"When I became superintendent three years ago, Governor Pataki gave me a mandate and the support to attack the high cost of auto insurance in New York," Serio said in a statement. "It is time for the companies to re-evaluate their rate structures and loss experience and return to the people of New York the anti-fraud dividend that is the yield of this hard work."
Auto insurers had been suffering hundreds of millions of dollars in losses every year in New York because of fraud rings that take advantage of the state's no-fault personal injury law. Organized groups of doctors, lawyers, and dozens of willing victims and coordinators, known as "runners," stage accidents, direct people to participating medical clinics, run up charges for unnecessary treatment, and bury insurers in paperwork.
Losses in 2003 totaled $432 million, or $1.2 million a day, and losses had been mounting, according to the National Insurance Crime Bureau. (In insurance industry terms, "losses" are claims payouts, not net losses.) As a result, the Insurance Information Institute says, New Yorkers now pay $60 a year more for their car insurance, and may pay $75 next year.
But insurance losses have been dropping recently because of aggressive anti-fraud efforts by government agencies at various levels, together with the insurance companies, who have their own special investigative units. In particular, Serio cited cooperation of the insurance department's Frauds Bureau with local police and district attorneys and Attorney General Eliot Spitzer's role as special prosecutor for auto insurance fraud.
In addition, the state tightened regulations governing the way no-fault auto insurance claims are processed in a bid to help insurers.
As of June 2004, 61 cents of every dollar in premiums had to be set aside to pay claims. That's down from 86 cents for 2002. Also, the average personal injury protection losses per claim fell to $6,229 in June from $8,489 at the end of 2002, the department said.
"Continued improvement in loss experience and related costs appear to indicate that downward rate adjustments might now be appropriate," Serio wrote in the letters, which were sent Nov. 15.
Serio's review will include both insurance for the "voluntary" market as well as those policies written in the New York Automobile Insurance Plan, which is the assigned risk plan for those who otherwise don't qualify for traditional insurance coverage. The number of customers insured through NYAIP was approaching a four-year low as of Sept. 30, and policyholders in the program saw their rates fall 2 percent as of August.
A spokesman said Serio wants to see lower rates, but will listen if the companies can defend the need to keep premiums at current levels.
The Insurance Department plans to meet over the next 30 days with representatives from Allstate Corp., CNA Financial Corp., Geico Corp., The Hartford Financial Services Group, Liberty Mutual Group, MetLife Home and Auto, Nationwide Mutual Insurance Co., New York Central Mutual, One Beacon Insurance Group, Progressive Corp., State Farm Mutual Automobile Insurance Co., St. Paul Travelers Cos. and USAA.
Progressive and State Farm already cut rates this year. State Farm's rates are now 14 percent lower than a year ago after three rate changes in 2004.
State Farm spokesman Dick Luedke said the company was trying to determine how the letter would apply to them. Allstate spokeswoman Krista DeMaria said the company had just received Serio's letter and "it's currently under review."