NYC Mayor and Insurers Fight about Auto Insurance Premiums

09/10/96

The National Underwriter Property & Casualty has reported that New York City's mayor, police commissioner, Department of Consumer Affairs commissioner and a state senator held a press conference to ask why auto insurance premiums in New York are rising, while auto thefts are decreasing. The group also questioned insurers' ability to assess risk and the state insurance department's effectiveness in overseeing insurance rates.

Mayor Rudolph Giuliani said, "dramatic decreases in auto theft . . . should be reflected in insurance premiums." Giuliani indicated that thefts in each of the city's five boroughs had declined 51 percent between 1990 and 1995, on average.

"Insurance companies have said there has to be a trend and that they can't reduce rates very quickly. Well, this is what you call a trend," the Mayor said.

Jose Maldonado, commissioner of the City's Consumer Affairs Department, referred to his department's study of recent trends in theft rates and auto premiums, combining frequency and severity results. Maldonado said pure premiums declined 15.4 percent, from $108.25 for the year ending in the fourth quarter of 1990 to $91.56 for the year ending in the third quarter of 1995. In contrast, he indicated that the average comprehensive insurance premium rose 22 percent from $153.52 in 1990 to $187.56 in 1994.

Industry representatives tried to explain divergent theft and premium trends, noting that comprehensive insurance covers not only auto thefts, but break-ins, and that liability and no-fault coverage costs have increased.

Mayor Giuliani, countered insurer arguments, by noting that police statistics show a 37 percent drop in auto accessory thefts, and that the Department of Consumer Affairs report only measures changes in comprehensive premiums, not liability or no-fault.

John Calagna, a representative of New York insurance department said, the "big thing they're overlooking" is that 62 percent of the city's insured drivers have no comprehensive insurance on their cars, "so no matter what the theft rate is, most people don't even have the coverage that the mayor's talking about."

Christopher Guidette, a representative of the New York-based Insurance Services Office, said comprehensive insurance accounts for 20 percent of the total auto premium and theft premium is roughly 80 percent of the city's comprehensive premium. The remainder of comprehensive coverage relates to fire damage, glass and other things.

Dave Tideman, a representative of State Farm, applauded the city's police department for lowering theft rates, and noted that State Farm's raw claims numbers from 1991 to 1995 "reflect the same percentage drop" police found.

He said that while the number of claims went down 50 percent, the average paid theft claim rose 60 percent. He speculated that rising vehicle values and a drop in vehicle recoveries (as more stolen vehicles are exported) might explain the rise.

Tideman said, "In fact, our rates did reflect decreased frequency," noting that State Farm has decreased comprehensive rates 17 percent since 1991.

Paul Dever -- The Auto Channel