NYC Comptroller Calls City Auto Rates 'Robbery'

His report called the current increases "excessive" relative to national averages and in relation to other states and said they led to "unprecedented auto insurer profitability within New York State."

The comptroller, in a letter to New York Attorney General Spitzer, who leaves office to become governor in January, urged him to address what he called unjustifiably high and "onerous" rate impacts on city residents.

Auto insurers reported $10.5 billion in earned premiums in New York in 2005, a jump of nearly 29 percent from $8.2 billion in 2000, reported Mr. Thompson, who noted that during the same period, incurred losses plummeted by more than 20 percent, from $6.4 billion to $5.1 billion.

The comptroller, who said his source for premium information came from the National Association of Insurance Commissioners, said premiums increased 33.8 percent nationally, moderately faster than New York, yet losses increased 12.9 percent nationally.

The loss ratio, (the amount of each insurance premium dollar that goes to pay claims) from 2000 to 2005 in New York, fell from 78.3 percent to 48.4 percent of premiums, according to the NAIC, Mr. Thompson said

This means that in 2005 only 48.4 cents of each premium dollar was paid to policyholders, a nearly 30 percentage point drop from 2000. The 2005 New York loss ratio was the lowest in the nation and was 11.8 percentage points below the nationwide loss ratio of 60.2 percent, Mr. Thompson reported.

In 2004, he said, industry net worth was 18.6 percent in New York, the highest return in New York since at least 1990. Comparatively, in 2004, the national return on net worth was 13.2 percent, which was also well above its historical range.

In 2006, Mr. Thompson noted insurance department figures showing the average of premiums for the State's four largest insurers to provide minimal, required coverage for a 35-year old male exceeded $1,500 in the borough of the Bronx's most urban portion and Brooklyn borough, the comptroller reported.

Since 2001, in the urban Bronx insurance rating territory, this amount increased 51.2 percent and in Brooklyn it went up 24.5 percent, according to the comptroller.

Mr. Thompson made the following recommendations in addition to insurers lowering their premiums:

? Municipalities should be allowed to petition the Insurance Department for rate reductions.

? An Insurance Department comparative price list and insurer publication of loss ratios according to a uniform rating territory, so drivers would have a means to track comparative costs.

? Creation of a state Office of the Insurance Consumer Advocate within the Department of Insurance.

Bernard Bourdeau, president of the New York Insurance Association, said if Mr. Thompson "thinks auto insurance rates are higher than they should be, I tend to agree."

"But, the reason is regulation is strangling price competition. As a result, companies have to stand in line to talk to a bureaucrat to get lower rate approval. I've heard of companies taking a year or longer to get rate reduction approval.

The comptroller proposes greater regulation, which is the exact opposite of what we need, which is for companies to compete–then we'll have something."

Dave Snyder, American Insurance Association vice president, said the prior approval system for setting rates means insurers "can't respond to market conditions and lower rates quickly to be competitive."

The report was flawed, he said in a statement, because it "tries to isolate a single year and draw conclusions that do not hold up over time."