Insurance companies in New York are not only gouging consumers, but also underpaying collision shops, says the New York State Auto Collision Technicians Association (NYSACTA). The group has sent results of their own industry studies to New York City Comptroller William Thompson in response to a report issued by his office last year that criticized insurers in the state for charging higher premiums despite a drop in claims payments.

“Insurers are beating us silly between steering, capping and suppressing labor rates,” says Mike Orso, NYSACTA president.

According to NYSACTA's study, originally released last year, auto insurance rates have increased more than 145 percent in the past 19 years, while autobody repair labor rates have risen only 45 percent, or $12 per hour.

“We think insurers are unfairly profiting, it appears, at both ends of the spectrum: high premiums and lower pay out on claims,” says executive director Ed Kizenberger.

According to Kizenberger, the group has had discussions with the New York State Insurance Department about steering concerns as well.

Thompson's study, called “Highway Robbery: The High Cost of Automobile Insurance in New York,” said auto insurers reported $10.5 billion in earned premiums in New York in 2005, a jump of nearly 29 percent from $8.2 billion in 2000. During the same period, incurred losses dropped by more than 20 percent, from $6.4 billion to $5.1 billion. The report also says that premium increases in the state since 2001 have been substantially greater than the inflation rate, and exceeded 40 percent in some areas for some major insurers.

Thompson called for insurers to lower overall premiums in the state by 15 percent (or $1.5 billion per year).

Insurance industry groups criticized the study's conclusions, and claimed that the delay in premium reductions was in part due to New York's prior approval system of setting insurance rates.

Record insurance company profits have come under attack from several quarters in the past six months. In January, the Consumer Federation of America released a report chastising the insurance industry for reporting record profits while charging higher premiums and paying lower claims.

“Insurance company profits are essential to providing insurance coverage relied upon daily by American families and businesses," says Marc Racicot, president of the American Insurance Association (AIA) and former governor of Montana. "Last year was a fortunate anomaly, given that in virtually every year over the past two decades, insurers lost money on their core business operations. In fact, the U.S. property-casualty industry as a whole has had only two underwriting gains at year’s end during the past 27 years. After record losses in 2004 and 2005, the respite provided by 2006 has meant that insurers could replenish the capital that they must have on hand in order to stand behind the policies they sell. Healthy balance sheets better prepare insurers to face future catastrophes, and greatly benefit consumers.”

The NYSACTA study (conducted by Frederick Jennings of EconoLogistics) concluded that autobody labor rates in New York should be in the neighborhood of $80 to $95 per hour.

According to Kizenberger, rates have been suppressed through a combination of steering, price fixing and certain direct repair program (DRP) practices. In the meantime, fuel and energy costs have increased substantially, putting the squeeze on many smaller shops.

“We also feel other violations are being committed, creating an unfair claims practice environment," says Kizenberger. "For instance, by using direct repair shops as a back-up source, [insurers] may indeed be in collusion, creating an unfair trade and claims practice by coercing other non-DRP shops to accept low rates.”

The group has asked that insurers increase their labor allowances by $20 per hour, raising it to $64. The group has also asked that insurers adjust for annual increases of 3 to 5 percent, to keep in line with the CPI or state index.

NYSACTA is also supporting legislation (A00392) introduced by Assemblyman William Magnarelli that would prohibit insurers from placing price caps on labor, parts and materials, and that is intended to curb illegal steering.

Incoming Governor Elliot Spitzer recently named Eric Dinallo as the new superintendent of the Insurance Department, replacing Republican Howard Mills. Dinallo was a key figure in Spitzer's well-publicized Wall Street investigations when Spitzer was attorney general.

For more information, visit www.nysact.org.