Consumer Groups Flay High N.Y. Auto Insurance Rates

"New York was once the acknowledged leader in this country in protecting insurance consumers, but it has failed in recent years to properly oversee automobile insurers to keep rates at more equitable levels," said Travis B. Plunkett, CFA's legislative director. "New York now ranks in the bottom tier of all the states in stopping unfair rate increases."

The State Insurance Department and former Governor George E. Pataki also came under criticism by the consumer groups. They said that under Gov. Pataki, department "reduced oversight of automobile insurance rates without obtaining legislative authorization, even though state law requires insurers to seek prior approval of rates."

They also said that current Superintendent Eric Dinallo "has been working with the New York State Commission to Modernize the Regulation of Financial Services, which he co-chairs, to consider proposals that would eliminate prior approval of automobile rates entirely or otherwise diminish protections for consumers who buy automobile insurance."

The groups called on the department to evaluate its rate review procedures for home and auto insurance rates, and convene a hearing and demand that insurers demonstrate why rates should not be lowered immediately. They also called on the governor and the Legislature to implement legislation that would mirror auto insurance laws passed in California.

Responding to the consumer groups' suggestions via e-mail, Michael Moriarty, deputy superintendent for property-casualty markets at the department, said, "We currently have a number of automobile insurance rate filings being reviewed, and we will consider the issues raised by the Consumer Federation, NYPIRG, and Consumers Union when discussing these applications with the companies involved."

Paul Tetrault, northeast state affairs manager for the National Association of Mutual Insurance Companies (NAMIC), said that the consumer groups' arguments are "a little bit like d?j? vu all over again," referring to similar consumer group complaints regarding the New York auto market in March. He added that NAMIC's feeling is that "what they prescribe is exactly the wrong thing."

Mr. Tetrault said that New York has a competitive auto market, and rather than increasing legislative and regulatory oversight, he recommended liberalizing the state's rating scheme by allowing insurers to adjust rates according to market conditions rather than seeking prior approval.

He said that insurers would be more willing to lower rates under such a regulatory scheme because they would not be concerned about seeking prior approval to raise rates again should market conditions warrant that.

Also pointing to the benefits of less regulation rather than more, Gary Henning, northeast region assistant vice president for the American Insurance Association (AIA), said, "Rigid rate regulation undermines competition and the marketplace's ability to respond to consumer preferences. In New York, when flex rating for automobile insurance was in effect from 1995 to 2001, premiums were relatively stable–more so than either before or right after flex rating–and more carriers were writing automobile insurance. While flex rating may not have been the only factor in bringing about this stability, there is absolutely no basis for arguing that this flexibility for carriers in determining rates hurt consumers."