The New York State Assembly’s decision to allow crucial sections of the state insurance law to expire is bad news for consumers, according to the American Insurance Association (AIA). These actions cancel the few free-market elements in New York’s command and control regulatory system. The section of the law in question allows insurers to accurately price their products and manage their particular set of policies.
The Assembly’s action takes away insurers’ ability to adjust private passenger auto rates within a so-called “flex band” of plus or minus seven percent without prior approval, and their ability to non-renew up to two percent of their policies in specific geographic areas. With this sunset, insurers will be required to underwrite auto policies for three years, and will only be allowed to non-renew for a limited number of causes. That kind of legal restriction will complicate insurer efforts to provide policies to drivers who may pose a questionable risk.
“Flex-rating and the two percent non-renewal are tools insurers need to fairly and accurately price their products and manage their risk in a competitive market. This is especially true at a time when the costs of providing auto insurance are skyrocketing in New York because of fraud and abuse,” said Michael Murphy, AIA assistant vice president, northeast region.
“The Assembly seems determined to follow the unfortunate example of New Jersey, where artificial rate suppression and mandates to insure bad risks have created market chaos and led several auto insurers to announce that they will leave the state.
“In recent years, New Yorkers have enjoyed a healthy, competitive auto insurance market because insurers have had these tools at their disposal. The Assembly’s action will make it much more difficult and expensive for auto insurers to offer their products in New York,” Murphy concluded.