New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter V - Rates And Rating Organizations
Subchapter F - Treatment Of Excess Profits In Motor Vehicle Insurance
Part 166 - Treatment Of Excess Profits In Motor Vehicle Insurance
Subpart 166-2 - Discussion Of General Rules
Section 166-2.2 - Discussion of aggregate industry data

(a) There are serious technical problems in setting an excess profit threshold which is reasonable for each individual insurer. Premium volume, leverage, investment and underwriting strategy, and chance all contribute to the fluctuations in individual-insurer results. Professor Williams had proposed, in the first draft of his report, that companies be classified according to premium volume, with excess points varying by premium size. This method would not have addressed the other causes of individual fluctuations. These points would also, by necessity, have been quite high in order to allow for normal variation. In particular, these excess profit thresholds could have been astronomical for the small insurer, whose results could be expected to show extreme fluctuations, even when averaged over six years. The method would have been unnecessarily confusing to the public, since there would be an array of excess profit percentages (rather than a single figure), and an insured might well fail to understand why his or her company should be allowed a higher return than a larger company.

(b) Therefore, the aggregate industry data approach has been adopted, to minimize random fluctuations, to avoid unfair treatment of insurers with differing financial make-up, and to permit the selection of one relatively low and logically defensible excess profit point.

(c) The department plans, nevertheless, to examine individual insurer results and to utilize them in several ways. First, any industrywide excess profits will be distributed in part in accordance with insurers' individual rates of return. Second, the department intends to continue monitoring each insurer's experience independently of this regulation to assure that unusually high profits of individual insurers with credible statistics are returned to consumers whenever they occur.