Insurers to New York: It’s Not Just Gas That Drives Insurance Rates

October 16, 2008

The Property Casualty Insurers Association of America (PCI) said it was disappointed by New York regulators’ decision to deny most auto insurers’ rate increases based on the assumption that higher gas prices would mean lowered risks to insurers.

Earlier this week, officials in New York said that decision meant drivers would end up paying $515 million less in premium than the amount originally sought by insurers.

In an e-mailed statement, however, PCI cautioned the New York Insurance Department “not to draw overly broad conclusions based solely on assumptions.”

“This is an assumption that is not supported by the facts,” said Paul Magaril, regional manager and counsel for PCI. “A PCI study on the issue shows that, while consumers may be temporarily driving less, repair costs continue to increase.”

PCI statistics show that while U.S. drivers are traveling fewer miles, and auto insurance claims in New York and across the country are decreasing in frequency, the cost of repairing vehicles continues to rise. Average claim costs in New York have increased by nearly 33 percent since 2000, according to PCI. The increase in the average cost per claim is substantially greater than the decrease in claim frequency, the group said, which puts upward pressure on insurance rates.

“We support insurers taking a look at data regarding miles driven,” Magaril said, but “there are many factors that determine what a consumer will pay for their auto insurance. 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. Setting fair and accurate rates are very important for consumers and they should not be based on overly simplistic assumptions that are not borne out by the facts.”

PCI’s membership comprises more than 1,000 companies, representing over $195 billion in annual premium, and nearly 52 percent of the U.S. automobile insurance market.

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