Insurers Lash Out at New York ‘Crash Tax’

January 14, 2011

The insurance industry will speak out against what it is calling a hidden “crash tax” in New York City during a hearing this morning with fire department officials.

The proposal would allow the city to charge between $365 and $490 to respond to auto accidents in New York City. The Bloomberg administration proposal contemplates charging insurance companies — but many policies do not cover these fees because they do not fit under the standard definition of either property damage or bodily injury coverage.

The Property Casualty Insurance Association of America said the fees, if insurers covered them, would drive up the cost of auto insurance premiums in the city.

“While it is understandable that with tight budgets, city officials are looking for ways to increase revenue without increasing taxes, but charging for emergency services is not the answer,” said Kristina Baldwin, PCI assistant vice president for state government affairs. “A significant problem with this program is that it is a form of double taxation. Public safety is the primary duty of local government and firefighting services are already paid for through property and other local taxes. By billing for these services, the city imposes a hidden, double tax on consumers that could ultimately increase the cost of insurance.”

“This fee will likely be difficult for many drivers to pay at a time when they are also faced with the costs and difficulties associated with being involved in an auto accident,” said Baldwin. “The fee literally and figuratively adds insult to injury. At this time of economic hardship, when many New Yorkers are being forced to stretch every dollar and do more with less, this additional fee will likely be very difficult for many drivers to bear.”

According to PCI, a number of similar programs in other parts of the country have been dropped and 10 states — Ala., Ark., Flor. Ga., Ind. La., Mo., Okla. Pa. and Tenn.) have passed laws or resolutions banning accident response fees.

The New York Insurance Association, a trade group for insurers in the state, said that the fees defy the principle that public safety services are covered by the municipal budget.

“If the fire department responds to a residential fire, no bill is ever sent to the resident,” said Ellen Melchionni, the association’s president. “If a city police officer responds to a domestic disturbance or business break-in, a bill is never sent. The fees are an unnecessary imposition of additional costs on New Yorkers who are struggling financially and plagued by taxes.”

Melchionni’s testimony points to the experience of Quincy, Massachusetts, a suburb of Boston, which last year implemented accident fees as a way to boost budget gaps. It was only able to raise about $2,700 in fees through the first half of its fiscal year.

Topics Carriers New York

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