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Superintendent of Insurance Howard Mills today announced that American International Group (AIG), Chubb, and General Motors Acceptance Corporation (GMAC) have joined the growing list of insurers who are cutting their auto insurance premiums for new and existing customers, bringing the total savings for New York policyholders this year to more than $360 million.

"This extraordinarily positive trend is the direct result of Governor Pataki’s successful efforts to crack down on no-fault auto insurance fraud and streamline the way in which claims are processed," Superintendent Mills said.

In a press conference at New York’s City Hall, Superintendent Mills reported that the New York State Insurance Department has secured for AIG’s nearly 75,000 auto policyholders an average rate reduction of 4 percent. The approved rate structure will go into effect July 5, 2005 for new business and Sept. 3, 2005 for renewals. The savings for New York’s AIG auto policyholders is estimated at $6.3 million.

Chubb’s 26,000-plus auto policyholders will see an average premium rate cut of 4.8 percent starting with new business on Dec. 12, 2005 and renewals after Feb. 6, 2006. Moreover, GMAC’s approximately 62,000 auto policyholders will see on average a 6 percent premium rate reduction, which will take effect no later than the third quarter of 2005. The savings for Chubb and GMAC auto policyholders are estimated at $5.1 million and $8.5 million, respectively.

The Insurance Department already approved rate cuts for 2005 that will result in the following average percentage premium reductions for the auto policyholders of these 10 insurers:

Amica Mutual 10 percent ($12 million)
GEICO 6 percent ($100 million)
MetLife 5.7 percent ($15 million)
Travelers 5.5 percent ($33 million)
Nationwide 5.2 percent ($18 million)
New York Central Mutual 5.1 percent ($15 million)
Progressive Northeastern 5.1 percent ($33 million)
State Farm 5 percent ($53 million)
Allstate 3 percent ($50 million)
Liberty Mutual 3 percent ($14 million)

The momentum for these rate reductions began in November 2004 when, in an unprecedented move, the New York State Insurance Department sent letters to the state’s largest auto insurance carriers, citing compelling industry data that showed overall loss ratio (i.e., liability and no-fault) in the private passenger market had dropped significantly since 2002, when insurers set aside 86 cents on every premium dollar collected for paying claims, to 61 cents on the dollar as of June 30, 2004.

That figure stood at 59 cents per premium dollar as of Dec. 31, 2004. The Department asked insurers to visit with the agency’s senior management team to see if these savings could be passed along to policyholders.

Drivers Realizing a Fraud Fighting Dividend

The New York State Insurance Department’s Frauds Bureau was instrumental in securing 815 arrests in 2004, establishing a new record for the agency. In fact, the Frauds Bureau’s Brooklyn office, one of eight statewide staffed by full-time law enforcement professionals, is dedicated exclusively to investigating instances of no-fault auto insurance fraud.

"Despite this great news for policyholders and these substantive Insurance Department accomplishments, even more can be done to strengthen legislation against auto insurance fraud," Superintendent Mills, a former State Assemblyman, said. "I urge my former colleagues in the State Assembly to pass two measures—one aimed at those who send individuals to unethical health care providers and attorneys, the other targeting individuals who stage automobile collisions—which would build on the dramatic auto rate premium reductions that are occurring statewide."

The New York State Senate has passed every year since 2000 a law that would make it a class E felony to act as a runner or procure the services of another to act as a runner. The term ‘runner’ refers to individuals who obtain clients, patients or customers for health care providers and attorneys that subsequently file fraudulent insurance claims.

In addition, the State Senate introduced a bill that would make it a felony to stage a motor vehicle accident. Known as Alice’s Law, the measure is named after the late Alice Ross, a 71-year-old grandmother who was killed in 2003 as the result of a staged auto accident in Queens. The State Assembly has not acted on either one of the aforementioned State Senate proposals.

Furthermore, the Insurance Department has instituted in recent years regulatory reforms which reduced to 45 days from 180 days the time in which medical providers must submit claims to insurers for payment and to 30 days from 90 days the timeframe for injured parties to file an injury claim. Both closed loopholes in Regulation 68 that had been exploited for fraud and abuse.

In another initiative that has the potential to save insurers and consumers money, the Insurance Department acted late last year to link durable medical equipment (e.g., neck braces, walkers) reimbursement costs to the fees as listed in the New York State Medicaid Management Information Provider Manual. Governed under Regulation 83, the sellers of durable medical equipment had billed auto insurers previously under rules that were open to interpretation.

Department of Financial Services


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