Contact: Colleen Roche (212) 788-2958 or Jack Deacy (212) 788 -2969
Urges State Department Of Insurance To Increase Industry Oversight
"As New York City continues its record drop in auto theft, and as insurance companies handle significantly fewer claims, these companies have not reduced comprehensive auto premiums to a level that reflects their savings, or adequately rewards New York City residents for a consistently safer environment," Mayor Giuliani said.
The Mayor's comments were made in testimony delivered today at a public hearing held by the City's Department of Consumer Affairs (DCA) in Lower Manhattan and chaired by DCA Commissioner Jose Maldonado. Last October Mayor Giuliani appointed a Task Force On Insurance Rates, also chaired by Commissioner Maldonado, to look into the disparity between the dramatic reduction in car theft in the city and the high comprehensive rates New Yorkers pay.
"Instead of passing along the savings from fewer claims to policy holders, insurance companies are retaining the profits," the Mayor said. "In 1990 insurance companies in New York State realized an 8.1 percent after-tax profit on premiums for physical damage auto insurance, making it the ninth most profitable of all lines of insurance. By 1994, the after-tax profits had grown to 12 percent, making physical damage auto insurance the fourth most profitable insurance line, after medical malpractice, inland marine and fire insurance."
The Mayor looked to New York State for greater oversight and regulation of auto insurance rates.
"This is an issue that ultimately must be settled at the state level," the Mayor declared. "Since we have a New York State excess profits law which limits the profit an insurance company can earn, the State Insurance Department should closely scrutinize the higher rates of return insurance carriers have been earning on auto insurance."
Mayor Giuliani said the State Department of Insurance should also increase oversight of the premiums policy holders pay to determine if they are fair and reflect auto theft reducionsons and closely examine auto insurance rate increases. Under the current flex-rating provisions, auto insurers are allowed to implement rate changes of up to seven percent without prior approval by the State Department of Insurance.
Charging that the insurance industry had "stonewalled" inquiries by the Task Force On Insurance Rates he had established, the Mayor said that "not one insurance carrier" responded to Task Force requests for basic information and reported that seven major insurance carriers had to be subpoenaed to appear at the hearings.
"All we have seen so far is stonewalling from the industry," the Mayor said. "When given the extremely basic nature of the information we were requesting, their across the board refusal to provide it reflects very negatively on the industry."
"The way insurance companies set premiums is such a multi-layered, complex process that hardly anyone can understand it," the Mayor pointed out. "In fact, an earlier Department of Consumer Affairs report described it as ' actuarial voodoo'. It is vital that information on this issue must be made public by the industry so that policy holders can better understand how rates are set and determine if they are fair."