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
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 average." 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 average. 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 further. 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
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