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NY Daily News: Special Report: Insurance Can Take Drivers for a Ride

Thanks to the New York Daily News For This Special Insurance Story; Buyer Beware

By WILLIAM SHERMAN

In the helter-skelter of the New York City auto insurance market, consumers are paying up to 64% more for the identical coverage depending on which company sells the premium.

Even with the same car, driving record, age, gender and address, the vast differences in rates hold in every borough in every category listed by the state Department of Insurance.

For example, a 20-year-old man in the Bronx can pay $1,426 more for the same coverage if he buys his insurance from Travelers Indemnity as opposed to the Progressive Corp.

The smallest variation between the most expensive and least expensive premium was 34.9% in Queens for retired men and women aged 69.

The differences in rates emerged in a study by the Daily News of premiums for mandatory minimum coverage charged by the 10 biggest insurance underwriters in the city and state.

They are Allstate, State Farm, Geico, Progressive, Travelers, Nationwide, Liberty, New York Central, Metropolitan and the Automobile Insurance Company of Hartford.

Mandatory minimum coverage includes no-fault, personal liability and property damage and does not include theft, collision and other optional coverages.

But the differences in rates carry over to optional coverage as well, according to insurers.

The Department of Insurance said the wide disparity in rates is due to companies' underwriting philosophies and the different claims losses those companies experience over a period of time.

"Some companies don't want to write insurance for youthful drivers, other companies want only affluent customers and different companies target different segments of the marketplace," said John Cashin, a deputy superintendent of the Insurance Department.

"Geico and Progressive are aggressively pursuing drivers throughout the city, trying to get a bigger market share. Other companies aren't," he said.

The other major factor is claims losses, payouts for car repairs and health care for those injured or killed in accidents.

"Ten different companies will have 10 different claims costs with people in the same age group in the same borough with the same kind of driving record," said Greg Serio, also a deputy superintendent of the Insurance Department.

"Believe me, it pays to shop around, and we encourage everyone to do that."

Serio said his agency has found no evidence that insurance companies are artificially boosting rates to discriminate against drivers in particular areas of the city.

"There's no evidence of any redlining going on," he said, referring to that discriminatory practice.

"We have a competitive market in New York City, and I don't find the differences in rates surprising considering the number of companies doing business here."

In fact, the big, but little known disparities in rates hold true not just for New York City, but for the country as a whole, according to Leslie Kolleda, spokeswoman for the Progressive Corp., a nationwide insurer that has conducted extensive studies on the phenomenon.

"The average difference between the high and low, same car and driver, in all the states is $550," she said. "And in Connecticut, which has the highest difference, it's $983."

Remarkably, in some cases in New York City, high-risk drivers turned down by insurance companies and placed in the assigned pool are paying lower premiums than drivers with good records.

For example, 20-year-old males who insure their cars in Manhattan and are in the assigned risk pool paid $1,988 a year for coverage as of last July, while drivers with good records in that category would have paid more if they got their policies through Travelers or State Farm.

In The News' study, the biggest difference in rates was 64.7% for 69-year-old retirees on Staten Island.

Generally, Travelers charged the most for coverage in every age category and borough, and New York Central, Progressive and Geico offered the least expensive policies.

Travelers Insurance spokesman Keith Anderson said his company owns two other underwriting companies in New York City that charge less for the same coverage than Travelers itself.

"Most of our business in New York City is under the Phoenix Insurance Co. and the Automobile Insurance Company of Hartford," he said.

Bruce Earwaker, a Travelers vice president, said that last year, in the five boroughs, Travelers wrote $68.3 million in premiums while Phoenix wrote $157.4 million and Hartford wrote $99 million.

Asked to explain why Travelers was so much more expensive than the other insurers, Anderson said, "Everybody has a different loss experience. Company A right next to company B could have very different loss experience. That's the reason."

He added, "When you go to a Travelers agent, they will place you with the appropriate company."

Geico's regional Vice President Mike LaRocco agreed with Anderson's explanation.

"Each company bases their rates on losses and expenses. Our goal is to get the rates as low as possible, but they have to be high enough to cover losses," he said. "One way we keep premiums down is we don't pay agents' commissions. We deal directly with customers, and that gives us a competitive advantage."

LaRocco and officers of other insurance companies said many other factors determine rates.

"You are looking at male versus female; we know men drive more than women and have more accidents," said Paul Gabe, senior vice president for the Hartford Financial Services Group, a company not included in The News study.

"When you're looking at a territory, or in your case, a borough or part of a borough, you look the severity or amount of the losses as well as the frequency of losses in a particular age group. You are looking at married versus single as well."

In fact, The News study showed that 20-year-old females in all the boroughs paid 39% less for coverage than 20-year-old males.

That was the one constant in the study.

Otherwise, those age 20 of either sex pay 46.8% more than 35-year-olds on average and 59.9% more than those age 69. With Jonathan Lemire