New York State
Eric R. Dinallo Superintendent of Insurance 25 Beaver Street New York, N.Y. 10004
|ISSUED 08/06/2008||FOR IMMEDIATE RELEASE|
GEICO WITHDRAWS RATE INCREASE REQUEST AS DEPARTMENT ASKS INSURERS TO ASSESS IMPACT OF HIGHER GAS PRICES ON AUTO RATES
Will higher gas prices help hold the line on auto insurance rates? For GEICO, New York State’s largest writer of automobile insurance, the answer is yes, Insurance Superintendent Eric Dinallo announced today. After discussions with the New York State Insurance Department on how higher gas prices are reducing the number of miles New York motorists drive, GEICO informed the Department it was withdrawing a rate increase request previously filed for its primary companies, GEICO and GEICO General, which together write more than 75% of the company’s auto insurance policies in the state. GEICO will also substantially reduce its rate increase request for its remaining company, GEICO Indemnity.
Other automobile insurers with rate filings before the Department are now required to assess the impact of reduced driving on their rates and rate requests under a bulletin the Department issued today.
“Paying more to gas up your car may mean paying less to insure it,” Dinallo said. “Higher gas prices lead to less driving, and as New Yorkers drive less, the number of accidents should go down. Governor David Paterson recently observed ‘less crowding of the New York State Thruway’ and the Governor’s view is backed up by data from the federal government. Fewer accidents should mean lower auto claims costs for the insurance companies, and my job is to make sure that these savings are passed on in the form of lower rates for New York drivers.
“GEICO is to be commended for its decision to withdraw its rate increase request based on how changes in driver habits in New York affected its recent loss experience. We hope other insurers will also carefully evaluate the effects of reduced driving in New York.
“We have been concerned about an upward trend in some of the recent rate filings we have received that may not fully take into account the impact of high gas prices on New York drivers. As Governor Paterson said, these are difficult economic times for New Yorkers and the Insurance Department is committed to doing all it can to ensure New York drivers receive the benefit of any reductions in auto insurance claims. Let me be clear, there may be other factors involved and we recognize that auto insurance losses have been increasing recently. We are not making a prejudgment, but we do expect insurance companies to explain the rate impact of higher gas prices and the resulting dramatic reduction in driving we are seeing in the latest federal statistics. We will take that into account as we evaluate rate increase requests.”
Currently, automobile insurance rate increases require prior approval from the Insurance Department. The bulletin issued today, known as a Circular Letter, instructs companies with pending rate requests to submit a supplement with their assessment of the impact on rates and rate requests of reduced driving before the Department approves any rate filings. Any new rate filings must contain this information when submitted.
The U.S. Department of Transportation recently announced that the number of miles Americans drove dropped in May for the seventh straight month. New Yorkers drove 4% less in May 2008 than May 2007, a reduction of 500 million vehicle-miles (vehicle-miles is the standard measurement of traffic volume, with one vehicle-mile representing one vehicle driven one mile). United States Transportation Secretary Mary Peters said she expected this drop-off will continue.
Economists estimate the average external cost of an accident in the United States at 2 to 7 cents per vehicle-mile. External costs include property damage and medical costs normally assumed by insurance companies. Assuming a straight-line relationship, 500,000,000 vehicle-miles per month would be associated with between $120 million and $420 million in annual costs. The Circular Letter is intended to help develop a real world estimate of the savings associated with such a reduction in driving.
New York residents now pay approximately $10 billion annually in auto insurance premiums.
Return to 2008 News Index