“It's ridiculous," said Rafael Valentin, a Brooklyn driver who says he’s.”been with Allstate for five years and it just keeps going up and up and up." Valentin, who has no tickets or accidents on his driving record, pays $3,400 in annual premiums to cover his 2003 minivan.
The New York State Insurance Department has approved six rate hike requests this year, the largest a 7.4% increase from Farmers New Century Insurance Co. More rate hikes could be on the way: 48 other insurers have pending requests for rate hikes averaging 7%, far more than the average 2.6% increase sought by auto insurers nationally.
"This is a heavy hit for drivers," said Russell Haven of the New York Public Interest Research Group. "The Insurance Department should be extremely skeptical of rate increase requests in the face of substantial reductions in driving mileage."
Geico, the state’s largest insurer, recently withdrew a rate request at the behest of Insurance Superintendent Eric Dinallo, who pointed out the fact that people are driving less. Dinallo is asking other insurers to follow Geico’s lead.
Currently, the department still has the last word on all rate increases, but not for long. Under a new law that take effect in 2009, auto insurers will be able to increase or decrease rates by as much as 5% without department approval.
Department and industry officials say that although the overall number of accidents and number of miles driven has declined, insurers are paying more in claims due to higher repair and medical costs. When operating expenses are factored in, most insurers are seeing scant profits from premiums, they say.
After expenses, Geico, State Farm and Progressive actually paid out more in claims than they collected in premiums, according to state figures.
Last year, insurers paid an average of 61 cents in claims for every $1 collected in premiums, a 10% jump over the year prior, according to department data.
"It's a cyclical market but one where profit margins are not unreasonable by any standard," said Robert Hartwig, president of the Insurance Information Institute, an industry trade group.
"There's times when the industry sustains tremendous losses and needs to earn profits to tide it over for the bad years."