High Costs of Auto Injuries, Accident Rate - Not Profits Are Key Factors Behind Price of New York Auto Insurance

Insurance Payout for Injuries, Number of Damage Claims Far Higher than

National Average

May 18, 2000, 01:00 ET from New York Insurance Association

    NEW YORK, May 18 /PRNewswire/ -- The high costs of injury claims and large
 number of damage claims from auto accidents in New York are far above the
 national average, keeping the price of auto insurance in the state high.
     The costs drivers associated with medical care, auto repair, litigation
 and fraud are behind New York's high auto insurance rates, not the profits of
 auto insurance companies, Bernard L. Bourdeau, president of the New York
 Insurance Association, told the Assembly Standing Committee on Insurance.
     Appearing at a public hearing examining the costs of auto insurance,
 Bourdeau explained that auto insurance companies have paid out more in claims
 than they received in premiums from individual drivers in seven of the past
 ten years.  For commercial auto insurance, the coverage sold to businesses,
 auto insurers have had underwriting losses for ten consecutive years
     "Auto insurers in New York do not make their profits from underwriting
 insurance, but by investing premium dollars," he said.  "When auto
 underwriting is combined with investment income, auto insurers on average earn
 about five percent on the premium dollar -- about the same as the national
     Bourdeau observed that it is the 95 cents of the premium dollar paid out
 in claims and other expenses that must be examined to identify cost drivers
 and ways to reduce premiums.
     Citing insurance industry studies on injuries in auto accidents, he noted
 that in New York State, the average cost of a bodily injury claim in New York
 is $21,471 per claim, a staggering 124 percent higher than the national
     The cost of claims under the Personal Injury Protection (PIP) portion of
 New York's no-fault auto insurance policy is $5,763.  That amount is
 44 percent higher than the national average, according to Bourdeau.
     The frequency of claims for property damage in New York State is
 15 percent higher than the national average, while the cost of those claims is
 slightly below the national average, he added.
     To help reduce costs, Bourdeau urged approval of amendments to the state's
 no-fault insurance law that could eliminate as much as $100 million in
 fraudulent insurance claims.  In addition, he said the adoption of a voluntary
 no-fault managed care program would further reduce premiums.
     He also recommended the continued use of lower costs, competitively-priced
 cosmetic parts for auto repairs.  Bourdeau said that measures that prohibit
 the use of these competitive parts would only drive up the cost of insurance
     In closing, Bourdeau cautioned that state mandated rate roll backs or
 government price fixing would only serve to reduce competition in the market
 place, inevitably leading to higher prices.
     "These days most companies are not making any profits in the New York auto
 market," he said.  "Any measures to restrict their prices would only drive
 those companies out of New York."
     The New York Insurance Association is a trade association of
 property/casualty insurance companies that provide insurance coverage for
 autos, homes and businesses throughout New York State.

SOURCE New York Insurance Association