There was recently a raging debate on the No-Fault Paradise blog about the high-cost of NF “fraud” — that is the allegedly high cost of fraudulent NF claims. One writer, citing loss statistics for carriers from eight years before, suggested that the insurance industry was suffering horribly because of fraudulent claims. But this response from D. Barshay was dynamite:
How can you, with a straight face, quote fraud statistics from eight years ago? Your [claim that insurance carriers are being] “driven out of business” comment is laughable. In 2005, the year of Hurricane Katrina, insurers that also provide auto insurance made a record $48.8-billion profit, 18.7% increase over 2004. The industry raised its surplus by more than 7% to nearly $427 billion. The ratio of claims and expenses to premiums was among the lowest in 30 years. In 2006, the profits were $59.9-billion and the surplus was $600 billion. Certainly, New York is much harder for insurers because of all the fraud, right? Wrong. 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. Meanwhile, during the same period, incurred losses plummeted by more than 20 percent, from $6.4 billion to $5.1 billion. From 2000 to 2005, the loss ratio (the amount of each insurance premium dollar that goes to pay claims) in New York fell from 78.3 percent to 48.4 percent of premiums, according to the National Association of Insurance Commissioners (NAIC). This means that in 2005 only 48.4 cents of each premium dollar was paid to policyholders, a nearly 30 percentage point drop from 2000. The 2005 New York loss ratio was the lowest in the nation and was 11.8 percentage points below the nationwide loss ratio of 60.2 percent.
“For too long, auto insurance companies have been price-gouging New Yorkers,” Thompson said. “Rising premiums are becoming cost prohibitive and squeezing New Yorkers even more as they struggle to pay their rent, food, gas and other necessities. A reduction in premiums is the right direction so that drivers can afford to stay on the road.” William C. Thompson, Jr. New York City Comptroller.
I don’t know D. Barshay but I tip my hat to him for citing the cold, hard fact that NY auto insurance carriers are making billions of dollars annually in profits while paying their industry lobbyists and marketing firms millions of dollars to continue the media campaign that they are in “crisis”. Man, could I use a crisis like that!!
Thanks for reading, Jim Reed