BUFFALO, N.Y. – According to an April report by the New York Civil Justice Institute, New York has some of the highest insurance costs in the country, and that could spell trouble ahead. Scott Hobson from Big I New York, an insurance industry advocacy group, says while high premiums are concerning, there’s an even bigger problem on the horizon.
“We’re seeing signs that suggest we might be heading into a crisis of insurance availability,” Hobson said.
He explained that insurance companies, especially those offering auto insurance, are losing money despite increasing premiums. They’re paying out more in claims, court verdicts, and settlements than they’re collecting from customers.
“For every dollar an insurance company earns, they’re spending $1.12 on claims,” Hobson noted. “I’m no business expert, but that doesn’t seem like a sustainable model.”
As insurance companies pull out of the market, more people are finding it hard to get coverage from private insurers. This has led to a surge in applications to the Assigned Risk Plan, a state-coordinated program meant for high-risk or otherwise uninsurable individuals.
Hobson highlighted that similar situations in California and Florida, where surges in applications for state-backed homeowner insurance led to chaos and skyrocketing premiums, are a warning for New York.
“The assigned risk plans can’t handle this kind of load, and they’re breaking down under the pressure, which is causing rates to soar. It’s a disaster, and we definitely don’t want that happening here in New York,” he said.
David Weprin, a Democrat from Queens and chair of the State Assembly Insurance Committee, acknowledged the problem and said lawmakers are taking it seriously.
“We’re doing everything we can to keep insurance companies in New York and maintain reasonable premiums,” Weprin said.
He said the committee is in discussions with the superintendent of the state Department of Financial Services and insurance industry leaders about possible solutions.
“I’m hopeful that this new report will push us to address this problem before the end of the session. We need to find ways to fix this,” Weprin added.
Hobson believes one of the key issues is New York’s complex liability laws, which create opportunities for fraud and abuse. He pointed out that predatory lawsuit loans exacerbate the problem, hurting both consumers and insurance companies.
Additionally, the state’s scaffold law, which makes property owners and contractors absolutely liable for construction site falls, is contributing to higher costs for homeowners insurance and housing in general. Weprin is sponsoring legislation to combat this problem. The proposed bill would make staging a construction site accident a felony, similar to the legislation passed five years ago targeting fraudulent auto accident claims.
