Law surged New York auto insurance rates when it was supposed to lower them ...

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ALBANY - New York drivers have been taken for a costly ride by a 2008 law that was supposed to lower auto insurance rates, a new study found.

Auto insurance rates in New York have jumped 6.2% since state lawmakers enacted a so-called flexible rating system that gave insurers greater freedom to change rates without approval, according to a report from the Consumer Federation of America.

Over the same time period, the nationwide average has increased less than 1% and California - which has tight regulation of the auto insurance market - has seen a 5.5% decrease in rates, according to the federation.

"The more pricing freedom companies got, the higher the rates went over time," said Robert Hunter, director of insurance for the Consumer Federation of America.

Hunter said the system has also led to higher insurance costs for residents of New York's low and moderate-income neighborhoods because companies consider those drivers a higher risk.

New York's flexible rating system allows insurers to raise or increase rates by as much as 5% without prior approval from state regulators. New York is one of only four states to use such a system.



David Scull/Bloomberg News

Backers of the flexible rating system argued it would spur more competition and help consumers by allowing the insurance companies to lower rates more quickly when their bottom lines improved.

"It was sold as something that would drive down rates and lower costs," said Russ Haven of the New York Public Interest Research Group. "Compared to how other states are doing, New York is coming out worse."

Haven said the state should return to a system where every rate change is reviewed by regulators.

Ellen Melchionni, president of the New York Insurance Association, placed the blame for rising rates on abuse of New York's generous no-fault insurance laws - not the flex system.

"Fraud is a major problem in New York, with no-fault being particularly ripe for criminal activities," Melchionni said.

gblain@nydailynews.com

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