New York PIP Insurance Update: Is New York’s No-Fault Crisis Returning? Insurance Information Institute January 7, 2010 Download at Robert P. Hartwig, Ph.D., CPCU, President & Economist Insurance Information Institute  110 William Street  New York, NY Tel: (212)  Fax: (212)  

2 Summary of New York State’s Resurgent No-Fault Auto Insurance Problem No-Fault (PIP) Costs Are Surging New York’s no-fault (PIP) average claims costs—at $8,690 per claim—are the third highest in the US (as of the 3 rd quarter of 2009), behind Michigan and NJ The average cost per no-fault claim in New York is more than double (104%) that of the US median ($4,268) The average cost of a no-fault claim has soared $3,075 or 55% from $5,615 at the end of 2004 to $8,690 in the third quarter of 2009 No-Fault claim costs as of Q3 of 2009 are near the highest in NY’s history, just 5.9% short of their all- time high of $9,235 in the 1 st quarter of 2002

DÉJÀ VU, ANYONE? Previous Effort to Get Message Out and Drive Down Costs Was a Big Success

4 No-Fault Fraud Was Front Page News in

5 Sparking Interest in Action

6 Urging Albany to Action

NY PIP UPDATE Is New York’s No-Fault System Out of Control— Again?

8 Average PIP (No-Fault) Claim Cost as of 2009:Q3* Average No-Fault (PIP) claim costs in NY are the third highest in the US and are 64% higher than the median cost of $5,289 Sources: Insurance Information Institute based on ISO/PCI Fast Track data.

Last Campaign Was a Success: PIP Average Claim Severity Plunged *ISO Fast Track PIP data as of 2004:Q4 include the following states: FL, HI, KY, KS, MA, MI, MN, NY, ND, SC and UT. Source: Insurance Information Institute calculations based on ISO/PCI Fast Track Data. NY PIP claim severity, once the 2 nd highest in the US, fell well below the US average by year- end 2004 after a crackdown on fraud, abuse.

10 NY PIP Claim Frequency & Severity, ( 1997 – 2009:03) Sources: Insurance Information Institute based on ISO/PCI Fast Track data. Claim severity rose 63% in the 5 years after the 1997 Presbyterian decision NY PIP Fraud is Back Average cost per PIP claim (severity) fell 39% between 02:Q1 and 04:Q4 but has since soared by 55% through 09:Q3 Freq. down 33% since 2000 Third highest level in history: $8,690 per claim

11 NY PIP Claim Frequency & Severity, ( 2000:04 – 2009:03) Sources: Insurance Information Institute based on ISO/PCI Fast Track data. NY PIP Fraud is Back Average cost per PIP claim (severity) fell 39% between 02:Q1 and 04:Q4 but has since soared by 55% through 09:Q3 Freq. down 33% since 2000:04 PIP severity is now at its third highest level in history: $8,690 per claim

12 New York Insurance Fraud Reports, 1995 – 2008 Source: New York Department of Insurance, Insurance Frauds Bureau Annual Report; Insurance Info. Institute. Number of No-Fault related fraud reports remains high and is beginning to rise again No-fault fraud reports fell 35% between 2003 and 2006, but are now rising (up 22% in 2008 over 2006)

13 No-Fault/Auto Unit Arrests by NY Insurance Fraud Bureau *In August 2003 the no-fault unit was merged with auto unit Data beginning in 2003 include no-fault auto unit arrests. Source: New York Department of Insurance, Insurance Frauds Bureau Annual Report; Insurance Info. Institute. No fault/auto unit arrests fell 30.3% from 2004 to 2006 but are beginning to rise (up 5.4% in 2007)

14 Source: New York Insurance Department Ins. Info. Institute. No-fault fraud investigations have more than doubled since 2004—up 140% through 2007 No-Fault Auto Unit Investigations by NY Insurance Fraud Bureau

15 Source: New York Insurance Department Ins. Info. Institute. No-fault cases opened have more than doubled since 2004—up 119% through 2007 No-Fault Auto Unit Cases Opened by NY Insurance Fraud Bureau

NY’s Private Passenger Auto Insurance Market Improvements at Risk

17 In the wake of NY’s first no-fault crisis, the average expenditure on auto insurance in NY state fell by $125 or 10.7% between 2004 and 2007, twice the 5.4% drop in the US overall. Average Expenditure on Auto Insurance, NY State vs. US : * *Latest available as of December Source: NAIC; Insurance Information Institute. NY ranked as the 2 nd most expensive state during the crisis, falling to 4 th by 2007

18 Auto insurance premiums paid by NY drivers dropped by almost $1 billion or nearly 9% since the end of last no-fault crisis in 2004, but the system is once again under siege from fraud and abuse.* New York State Direct Pvt. Passenger Auto Premiums Written: *Exact decline between 2004 and 2008 was $921 million. Source: Highline Data; Insurance Information Institute.

19 Private Passenger Auto Insurers in New York State, 2008 (1-25) Source: Highline Data; Insurance Information Institute. RankCompanyGroupDirect Premiums WrittenMkt. Share (%) 1. GeicoBERKSHIRE HATHAWAY GRP2,250,603, Allstate Insurance Co GroupALLSTATE INSURANCE GROUP1,844,794, State Farm Mutual GroupSTATE FARM GRP1,060,333, Progressive Casualty GroupPROGRESSIVE GRP641,957, Liberty Mutual GroupLIBERTY MUTUAL INSURANCE GROUP559,129, Travelers Cos & AffilTRAVELERS GRP538,882, Nationwide GroupNATIONWIDE CORP GRP286,052, New York Central Mut Fire Ins CoCENTRAL SERV GRP269,489, Metropolitan P&C Ins Co & AffiliatesMETROPOLITAN GROUP253,168, Hartford Fire GroupHARTFORD FIRE & CASUALTY GROUP222,681, American International GroupAMERICAN INTL GRP208,727, United Services Automobile ASN GroupUNITED SERV AUTOMOBILE ASSN GRP191,513, Unitrin Prop & Cas Ins GrpUNITRIN GRP134,559, Motors Insurance Corp GroupGMAC INS HOLDING GRP104,591, Adirondack Ins ExchN/A98,818, Onebeacon Ins GrpWHITE MOUNTAIN GROUP91,412, Amica Mutual GroupAMICA MUTUAL GRP86,573, Combined Federal Ins Co & AffiliatesCHUBB & SON INC GRP81,495, Hanover Insurance Co GroupTHE HANOVER INS GRP81,413, Countrywide Insurance CoN/A77,264, Erie Insurance Exchange GroupERIE INS GRP61,404, Esurance Ins Co and AffiliateWHITE MOUNTAIN GROUP60,874, Ngm Ins CoMAIN STREET AMER GRP56,858, Farmers Insurance GroupZURICH INS GRP55,162, Preferred Mutual Insurance CoN/A50,892,5030.5

20 Top Private Passenger Auto Insurers in New York State, 2008 (26-50) Source: Highline Data; Insurance Information Institute. Rank CompanyGroupDirect Written PremiumsMkt. Share (%) 26. Preferred Mutual Insurance CoN/A50,892, Lincoln General Insurance CoKINGSWAY GRP48,762, Response Ins GrpRESPONSE INSURANCE GROUP39,068, Commerce Group IncCOMMERCE INC GRP33,329, Utica National Insurance GroupUTICA GRP29,739, Mercury Casualty GroupMERCURY GENERAL GRP28,114, QBE The AmericasQBE INS GRP26,518, Amer Natl Prop & Cas Co & AffiliatesAMERICAN NATL FIN GRP24,434, IDS Property Casualty GroupAMERIPRISE FIN GRP22,034, Firemans Fund Insurance GroupALLIANZ INSURANCE GROUP17,792, Tri-State Consumer Insurance CoN/A17,755, Electric Insurance CompanyELECTRIC INS GRP12,395, American Modern Home Group INCMUNICH RE GRP12,310, Balboa Casualty GrpBANKAMERICA CORP GRP12,275, Eveready Insurance CoN/A12,002, Merchants Mutual GroupMERCHANTS MUT GRP11,354, Long Island Ins CoN/A8,412, Interboro Mutual Indemnity Ins CoN/A7,793, California State Automobile AssocCALIFORNIA STATE AUTO GRP5,796, Harleysville Mutual Insurance Co GrpHARLEYSVILLE GRP5,655, Assurant GroupASSURANT INC GRP5,588, Ocean Harbor Casualty Insurance CoOCEAN HARBOR GRP4,943, Infinity Prop & Cas CosINFINITY PROP & CAS INS GRP4,553, Central Mutual of OH GroupCENTRAL MUT INS CO GRP4,516, United Farm Family Mut Ins Co & AffiINDIANA FARM BUREAU GRP4,061, Sentry Insurance A Mutual Co GroupSENTRY INSURANCE GROUP3,950,5140

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