The Office of General Counsel issued the following informal opinion on May 14, 2001, representing the position of the New York State Insurance Department.
Re: Automobile Insurance Rates
May automobile insurers agree on identical rates to charge insureds resulting in identical premiums for all insureds?
No. This would be a violation of N.Y. Insurance Law § 2303 (McKinney 2000).
No specific facts relating to this inquiry were given.
N.Y. Insurance Law § 2303 (McKinney 2000) prohibits price-fixing, as referred to in your inquiry, and states in pertinent part:
Rates shall not be excessive, inadequate, unfairly discriminatory, destructive of competition or detrimental to the solvency of insurers. . . . (emphasis added).
It is the Departments view that if automobile insurers were to agree on identical rates to charge all insureds, this would result in the destruction of competition, and therefore be violative of N.Y. Insurance Law § 2303 (McKinney 2000) and the regulations promulgated thereunder.
Additionally, N.Y. Insurance Law § 2313(a) (McKinney 2000) states in part:
In this article, "rate service organization" means a person or any other entity which makes or files rates as permitted by this article, or which assists insurers in rate making or filing by collecting, compiling and furnishing loss or expense statistics, or by recommending rates or rate information, or which inspects risks, tests appliances, formulates rules or establishes standards, as such activities relate to rate making or to the administration of rates. It shall include a person or entity which prepares and files policy forms and endorsements on behalf of insurers. . . .
An example of a rate service organization, as stated above, is Insurance Services Office, Inc. ("ISO"). A rate is composed of both a loss portion and expense portion. ISO files the loss portion rate for automobile insurers on behalf of its automobile insurer members. This portion of the rate is referred to as the "loss cost." It is the individual insurers responsibility to determine its own individual expenses, which when combined with the loss cost, make up the rates. Therefore, rates should be different for each insurer, since they would most likely have different expenses.
For further information regarding automobile insurance rates, you may view Article 23 of the Insurance Law on this Departments website at www.ins.state.ny.us.
For further information, you may contact Senior Attorney Meredith S. Kaufer at the New York City Office.