ALBANY - Gas prices are already out of control. Next up could be your car insurance.

New York auto insurance companies, which charge the second-highest rates in the nation, would be able to hike - or lower - premiums as much as 5% a year without the state's okay under a bill quietly introduced last week.

The chairmen of the Senate and Assembly insurance committees last week finalized a deal that returns to a flexible rating system in which insurers can do as they please with rates, up to 5% either way.

A law allowing companies to hike or cut rates by 10% lapsed years ago, and the Insurance Department has had to sign off on all rate changes since then.

Consumer advocates fear the new bill, which sponsors are pushing to pass before the legislative session ends this week, will ultimately drive up costs at a faster rate.

"We don't think things will get better if the insurance department takes a hands-off approach," said Russell Haven of the New York Public Interest Research Group.

Under the change, a 20-year-old car owner in Brooklyn who pays $7,100 a year for full coverage would fork over $355 more, Haven said.

Assembly Insurance Committee Chairman Joseph Morelle (D-Rochester) said there are safeguards to ensure that auto insurance remains affordable. For instance, the Insurance Department could require prior approval of all rate requests if one company has too much of the market in a particular area.

Morelle argues granting insurers more flexibility helps customers because it allows the companies to lower rates more quickly when their bottom lines improve.

"It's easy to say we ought to have price controls, which is effectively what prior approval is," he said. "We've had prior approval for years now, and rates still remain high."

For years, under a different insurance committee chairman, the Assembly refused the attempts by Senate Republicans to go back to a flex rating system.

But the Assembly was more open this year, not only because Morelle is more in favor of a free market, but also because the Senate agreed to include in the bill more homeowner insurance protections for those living in coastal areas like Long Island and Queens as well as distressed neighborhoods like the Bronx.

State Insurance Superintendent Eric Dinallo has indicated in the past he supports allowing insurers to raise or lower rates without permission up to a certain point.

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BY KENNETH LOVETT DAILY NEWS ALBANY BUREAU CHIEF

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