The hearing was called by the Committee's chairman, State Senator Guy Velella of the Bronx, to determine if New York City drivers are receiving the reductions they are entitled to on their automobile insurance. This hearing was prompted by a Department of Consumer Affairs report that we released a little more than a month ago.
The report revealed a startling and troubling discrepancy -- during the same period of time that auto theft declined by historic margins, by over 50%, insurance rates for auto theft have actually increased, by almost 20%.
At the time the report was released, Senator Velella came to City Hall where he joined Commissioner Safir, Commissioner Maldonado, and me, and we vowed to pursue the issue of auto theft insurance premiums and to ensure that New Yorkers receive fair value for their insurance dollars.
Senator Velella's cooperation is vital, because City government does not have direct authority to set insurance rates. All the City can do is identify the problem, bring it to the State's attention, and press them to enact a remedy. Last Thursday's hearing was the first step in a formal investigation by the State Insurance Committee.
At the hearing, I testified that from 1990 to 1995 auto theft has declined in the city by 51 percent. The number of paid claims has decreased by nearly 28 percent. The amount of premium that insurance companies use to pay claims has decreased by more than 15 percent. And yet, over the same period, comprehensive automobile insurance rates have increased by 22 percent.
Insurance companies give a host of reasons as to why premiums haven't reflected the decrease in risk, but one doesn't have to go too far to see where the additional dollars have actually been going.
In 1990, insurance companies realized an 8.1 percent profit on physical damage auto insurance. In 1994, these companies realized a 12 percent profit.
And to add insult to injury, Senator Velella learned the insurance companies were planning to request another 4% increase.
They quickly backed off.
One reason that insurance companies believed they could continue to overcharge New York City drivers is what I call the "Cost of Living Myth," in which some people tend to think they can get away with charging a higher price for goods and services and insurance in New York City, just because in New York City, we're used to paying more.
Well, they're wrong.
I have created a Mayoral task force -- which is headed by Commissioner Maldonado, and includes Police Commissioner Safir, Corporation Counsel Paul Crotty, and the president of the "Better Business Bureau," Barbara Opotowsky.
Going forward, the goals of the task force are simple.
We want to see New Yorkers benefit from the greatly reduced risk of auto theft by getting a reduction in the amount of money they pay.
And if possible, we want to obtain refunds for policy holders -- to repay them for the overcharging to which they have already been subjected. If we can't come to an agreement with the carriers on this issue, we are considering a law suit to get policy holders back what they are due.
The fact is, New York City has spent a great deal of time, effort and resources battling auto theft. Now the time has come for insurance carriers to recognize our success, and reward New Yorkers in the form of lower rates.
From Gracie Mansion, this is Rudy Giuliani.