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 com
pany 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 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,” a
uthored 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 b
ack 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 Ho
chul’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.
Watch More Image Part 2 >>>
Said Farney at the S&P conference: “We will probably be in the stature of let’s see how this plays out rather than being too proactive. [We] just have had losses for a long time.”
Earlier in the session, Farney referenced the activity in New York in response to a question from Moderator Taoufik Gharib, director and lead analyst for S&P Gl
obal Ratings, about State Farm strategies for addressing the impact of inflation while maintaining customers. Farney said the first step is to identify the factors driving
the costs of doing auto and property business on a state-by-state basis and to determine which
ones are controllable. After discussing drivers such as catastrophe perils and materials cost inflation, he focused on liability exposure, which he said is “really driving the cost of insurance for people. That’s where we work a lot on tort reform…”
