An insurance trade group said New York's insurance regulator is wrong to assume that reduced mileage by auto policyholders translates into lower claim costs.

The Property Casualty Insurers Association of America (PCI) statement came after New York Insurance Superintendent Eric Dinallo convinced GEICO last Wednesday to withdraw a rate increase request for most of its auto insurance companies in the state.

Mr. Dinallo cited the impact of higher gas prices on the number of miles New Yorkers drive. But PCI said there is not necessarily an impact on claims because repairs cost more and frequency was trending downward before gasoline costs spiked upward.

"We are encouraging the superintendent to not draw overly broad conclusions based solely on assumptions being drawn by consumer groups regarding the number of miles driven," said Paul Magaril, regional manager and counsel for PCI

The organization said in its statement that it has done a study showing public policymakers should be cautious in isolating one factor such as the number of miles driven, and then concluding auto insurance premiums should be reduced.

"While there is solid evidence that the high price of gas has reduced the number of miles driven, it would be a mistake to assume that this means there will be lower insurance claims reporting and as a result, lower insurance premiums for consumers," said Mr. Magaril.

PCI noted that Mr. Dinallo has told insurers they must supplement rate filings with a written analysis of how the effects of the rising price of gas in New York are reflected in their rate level indications and rate requests.

Mr. Magaril said while PCI supports insurers taking a look at data regarding miles driven, "there are many factors that determine what a consumer will pay for their auto insurance. As a result, it is necessary to explore in detail the trends of all of the various factors that have an impact on auto insurance premiums that consumers pay."

He added that PCI's "analysis of auto insurance claims in New York and across the country shows that while the number of claims reflecting vehicle damages has been reduced, it is more costly to repair vehicles today."

According to PCI, average claim costs in New York have increased by nearly one-third since 2000. "Unless claim costs are reduced, it would be unreasonable to expect insurance premiums to drop," said Mr. Magaril.

While Mr. Dinallo was able to convince the state's largest insurer to withdraw most of an increase request that was said to be sizeable, GEICO did not cut its rates. One company, GEICO Indemnity, did not drop its rate hike request, but will reduce it "substantially," it was announced.

PCI said a paper it researched highlights statistics indicating that U.S. drivers are traveling fewer miles.

According to data gathered by the Federal Highway Administration from state highway agencies, the total number of vehicle miles driven during the 12-month period ending March 2008 (2.99 trillion) fell 0.8 percent compared to the previous 12-month period.

But Diana Lee, PCI assistant vice president of research, said that "while this results in fewer miles driven, we found that this is only part of a larger trend toward fewer accidents. Our study showed that the recent surge in gasoline prices does not appear to be the cause of generally declining claim frequencies."

PCI research determined, she added, that "the rate of claims was dropping even during the early 2000s, when gasoline prices were less than half of today's cost. Based on the data, it cannot be said that the recent surge in gasoline prices is the cause of generally declining claim frequencies in New York, especially when frequencies have shown a slight increase over the last five quarters."

According to the PCI paper, from the first quarter of 2000 to the first quarter of this year, claim frequency has fallen by 11.6 percent, but severity has jumped up by 31.6 percent and lost costs have risen 16.4 percent.

PCI said its more than 1,000 member companies write 51.4 percent of the U.S. automobile insurance market.

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PCI: Dinallo Wrong To Tie Auto Rates To Mileage

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