N.J. Auto Insurance Reform Gains Momentum

By Michael Ha

NU Online News Service, March 18, 3:38 p.m.EST?Two months after Gov. James E. McGreevey firstoutlined his proposals, the New Jersey Senate Commerce Committeeunanimously approved his auto insurance reform package aimed atmaking it easier for auto insurers to do business in the GardenState.

The bill, (S 63/S 1999), now goes to the state Senate floor,where the measure could be voted on as early as Thursday beforelawmakers go on a six-week recess.

The approval came after more than 150 insurance companies'employees and agents as well as consumers staged a rally on theState House steps in Trenton, N.J., before the Senate hearing tookplace.

The new reform bill is intended to boost competition by bringingmore insurance companies to the New Jersey market.

Despite recent premium price hikes for New Jersey drivers, thebill stayed away from any rate rollbacks.

New Jersey Banking and Insurance Commissioner Holly Bakke notedthat nearly half of the companies writing auto insurance in NewJersey did not make a profit last year and many are in weakfinancial condition.

The measure would also revise some regulations insurers saidmake New Jersey unattractive for their industry.

The Newark, N.J.-based Coalition for Auto Insurance Competition,which organized the demonstration, said it supports legislationthat stimulates competition and choice in the auto insurancemarket. Excessive state regulation of auto insurance, the groupsaid, is one of the main causes of insufficient choice andcompetition.

In New Jersey, the group said, tens of thousands of driverscurrently cannot find auto insurance coverage, as more insurershave closed their business in the state. More than 26 auto insurershave left the state in the last ten years, six in the last 11months. Additionally, five of the six largest auto insurancecompanies in the United States no longer write auto business in NewJersey.

"This is a tremendous step forward on the long path we musttravel to restore stability to the New Jersey auto insurancemarket," said Richard Stokes, a representative for the DownersGrove, Ill.-based Alliance of American Insurers.

"The problem with the New Jersey market is that, for the pastthree decades, it has not projected the climate of stability andcertainty that is necessary to entice insurers to commit capitaland other resources to the state," said Mr. Stokes, who alsoattended the Senate Commerce Committee hearing and submittedwritten testimony.

If new companies are to be attracted to New Jersey, and if thosealready doing business there are to be encouraged to write morebusiness, the state must enact a prompt, objective and fairrate-review system, Mr. Stokes said.

"Under current conditions, it can take up to two years forinsurers to obtain sorely needed rate approvals. This is not theproper signal to send when the objective is to expand autoinsurance availability by encouraging new companies to enter thestate," he said.

In approving the McGreevey administration bill, the lawmakersalso made it easier for insurers to leave the state if they are notmaking a profit.

Mr. Stokes noted that the bill does not have as much bureaucracyin the withdrawal requirements for insurers compared to currentrequirements in the state.

The bill also requires non-renewals to be performed on anequitable geographic and demographic basis. Additionally, if twoinsurers with 25 percent or more of the market seek withdrawalwithin a one-year period, the phase-out withdrawal period can beextended from a three-year timeframe to five years. The bill wouldalso allow the insurance commissioner to determine whethercertificates for other lines of business must be surrendered aswell.