While State Farm publicly supported auto insurance reform measures in New York this year, now that a package of changes has been written into the state’s statutes, the insurance giant is taking a measured business approach.
“We want some proof before we move too hard [or] too fast there,” State Farm Chief Executive Officer Jon Farney told an analyst who asked whether the company would change its business plans in New York a few weeks after New York lawmakers agreed to some reforms proposed by Governor Kathy Hochul as part of the state’s budget approval process.
The exchange between Farney and Assured Research President William Wilt took place during an Executive Perspectives panel at the S&P Global Ratings 42nd Annual Insurance conference in early June in midtown Manhattan, with Farney reporting that State Farm is excited about New York’s “first step” toward improving a difficult situation for insurers.
“The New York market is a very tough market in auto insurance,” he said. Over multiple years the Empire State has actually been “our toughest market,” Farney reported, referring to a high level of losses incurred in the state.
That reality may be part of the reason for a State Farm blog post earlier this year titled “New Yorkers Deserve a Path to Lower Auto Insurance Premiums,” authored by State Farm Senior Vice President Lisa Stewart. Stewart’s post, which put the insurer’s support behind several reform initiatives in play at that time, also contrasted the experiences of State Farm policyholders in New York with those in other states. Specifically, the post noted that New York drivers’ share of a $5 billion cash back policyholder dividend declared by the insurer earlier this year represented just 4% of premiums for New York drivers vs. 10% outside of New York.
“The amount varies because claims experience varies by state, and premiums reflect the cost of risk in each state. Across the country, we have also reduced auto rates in more than 40 states, collectively saving those customers over $4.6 billion a year. New York was not one of them,” the post said, throwing support behind Hochul’s fraud-fighting plan that proposed to crack down on staged accidents and organized fraud, give insurers more time to investigate suspected fraud, and reform the serious injury threshold under New York’s no-fault system.
The reform measures ultimately approved by state lawmakers included a clarification of what constitutes a “serious injury” for the recovery of non-economic damages under New York’s no-fault law, a cap on non-economic damages for drivers engaging in criminal behavior, changes to the comparative negligence law, and a crackdown on individuals responsible for organizing staged accidents. (Editor’s Note: Based on CM’s reading of the final approved reform package, a proposal supported by State Farm that would have extended insurers’ time to investigate suspected no-fault fraud from 30 days to 60 days was not enacted. The existing 30-day framework remains in place.)
