New York motorists' cutback in miles driven as a result of soaring gasoline prices has led one large auto insurer to agree to withdraw a rate hike request for most of its companies, a state official said today.

Insurance Superintendent Eric Dinallo announced that action by GEICO, New York State's largest writer of automobile insurance.

A spokesperson for the department said actual numbers could not be mentioned. "It's confidential until we approve it [a rate request], and since they withdrew it, it's confidential," said Andy Mais.

The request was "not insubstantial" and applied to 75 percent of GEICO's state business. A third, smaller GEICO company, he said, will be resubmitting a lower request.

GEICO declined to provide any figures.

Mr. Dinallo, in a statement, said that after discussions with his department on the impact of higher gas prices on the number of miles New Yorkers drive, GEICO had informed it was withdrawing a rate increase request previously filed that applied to its primary companies, GEICO and GEICO General.

Those two companies write more than 75 percent of the company's auto insurance policies in the state. The insurer's remaining company, GEICO Indemnity, "will substantially reduce its rate increase request," explained Mr. Dinallo.

The superintendent said also that other automobile insurers with rate filings before the department are now required to assess the impact of reduced driving on their rates and rate requests under a bulletin the department issued today.

"Paying more to gas up your car may mean paying less to insure it," Mr. Dinallo said. "Higher gas prices lead to less driving, and as New Yorkers drive less, the number of accidents should go down."

Mr. Dinallo mentioned that New York Gov. David Paterson recently observed "less crowding of the New York State Thruway," and he said the governor's view is backed up by data from the federal government.

Fewer accidents should mean lower auto claims costs for the insurance companies, and he said his job is to make sure that these savings are passed on in the form of lower rates for New York drivers.

GEICO, Mr. Dinallo said, "is to be commended for its decision to withdraw its rate increase request based on how changes in driver habits in New York affected its recent loss experience. We hope other insurers will also carefully evaluate the effects of reduced driving in New York."

The regulator said he has had a concern about an upward trend in some of the recent rate filings his department received that may not fully take into account the impact of high gas prices on New York drivers.

While he is pushing for rate decreases, Mr. Dinallo said he understands there may be other factors involved and the department recognizes that auto insurance losses have been increasing recently.

"We are not making a prejudgment, but we do expect insurance companies to explain the rate impact of higher gas prices and the resulting dramatic reduction in driving we are seeing in the latest federal statistics. We will take that into account as we evaluate rate increase requests," he said.

The department said the bulletin issued today, known as a Circular Letter, instructs companies with pending rate requests to submit a supplement with their assessment of the impact on rates and rate requests of reduced driving before the department approves any rate filings. Any new rate filings must contain this information when submitted.

The announcement noted U.S. Department of Transportation data showing that New Yorkers drove 4 percent less in May 2008 than May 2007, a reduction of 500 million vehicle-miles, which would be associated with between $120 million and $420 million in annual costs.

Special Reports /

As N.Y. Drivers Cut Mileage, GEICO Drops 2 Rate Requests

Related Stories

Recommended For You