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Premiums to Fall 7% for Riskiest Drivers

Jul 16, 2007

By Jonathan D. Epstein, The Buffalo News, N.Y.

Jul. 17--The state's highest-risk drivers will see their auto insurance premiums fall by an average of 7 percent under the state's assigned-risk plan, state insurance regulators said Monday.

The state Insurance Department said the rate cut for the Automobile Insurance Plan -- which is the insurer of last resort for those who can't get insurance otherwise -- will save nearly $20 million statewide for new drivers and others in the plan.

The new premiums will go into effect on Aug. 15 for new policies and Oct. 1 for renewals. In all, the change will affect about 130,000 policies. The last rate cut was in January 2006.

Superintendent of Insurance Eric R. Dinallo said the rate cuts are the result of combined efforts by state insurance regulators and local prosecutors to fight insurance fraud. The success of those efforts previously led former insurance superintendents to pressure more than 20 private carriers to reduce their regular insurance rates statewide, saving consumers more than $360 million.

The assigned-risk pool is generally for drivers with little or no experience or who have poor driving records that disqualify them from getting traditional insurance at reasonable rates from private companies. The policies provide auto liability and physical damages coverage.

Under state law, all companies writing auto insurance in New York must participate in the assigned- risk pool by providing the higher-risk coverage to those "assigned" to them by the plan. The premiums, which are determined based on a set of rates approved by the Insurance Department, are the same from company to company, depending on the characteristics of the driver. But they are usually significantly higher than regular coverage.

For example, in the Buffalo suburbs, the typical annual premium in the assigned-risk pool for a 20- year-old unmarried male is $1,083, nearly twice the rate of Allstate Corp. and Geico Corp. For a 20- year-old unmarried woman, it's $723, compared with $536 at Allstate and $477 at Geico.

A 35-year-old male would pay $689 in the assigned risk pool, versus $336 at Allstate and $346 at Geico. And a 69-year-old retired man or woman would pay $603 in assigned-risk, compared with $287 at Geico.

The number of drivers in the assigned- risk pool peaked more than 10 years ago at 1.7 million, but most drivers have since been able to drop out and save money by getting coverage in the regular market because of increased competition for business.

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