N.J. Auto Insurance Reform A Step Closer

By Daniel Hays

NU Online News Service, April 5, 3:35 p.m. EDT?A New Jersey Assembly panel voted today to release an omnibus pieceof legislation aimed at repairing the state's declining autoinsurance injury.

By a unanimous vote, the Assembly Banking & InsuranceCommittee approved A-2625, the New Jersey Automobile InsuranceCompetition and Choice Act, a move that was greeted warmly byinsurers, who at the same time expressed concern about anothermeasure acted on by the committee.

The 96-page bill that has opposition from trial lawyers,includes provisions to phase out the "take-all-comers" rule thatcurrently requires insurers to insure all applicants.

It would also revise the application of the 6 percent excessprofits limit so that the look-back period is increased to averageout seven years, rather than the present three years.

The bill also provides that an expedited procedure to secureapproval of rate increases would apply to requests up to sevenpercent rather than the current three percent.

The measure now goes to the full Assembly for final vote. Ifapproved, Democratic Gov. Jim McGreevey has indicated he would signit.

Industry representatives who have pushed long and hard for thebill, which drew opposition from the Association of Trial Lawyersin New Jersey, said they were happy to see the bill move.

However they expressed concern about the committee's release ofA 3531. That bill, which would need Senate as well as Assemblyapproval, would ease language restrictions on lawsuits fornoneconomic injury, which currently require injuries to have aserious and significant impact. "This would negate thatrequirement," said Richard Stokes, who represents the Alliance ofAmerican Insurers, based in Downers Grove, Ill.

Among the other organizations pushing for the omnibus A2625legislation has been the umbrella group, Coalition for AutoInsurance Competition, Newark, N.J.

John Friedman, the group's chairman, recently called it a firststep toward reform and "a foundation upon which a competitivemarket can be built."

In the past 10 years, more than 20 auto insurers have left NewJersey by the Coalition's count.

The Insurance Council of New Jersey, after the vote, said it waspleased that committee members, Assembly leadership and thegovernor have worked together to forge a comprehensive bi-partisansolution to address New Jersey's automobile insurance availabilitycrisis.

"New Jersey is one step closer to meaningful auto insurancereform that will begin to untangle decades of complicated andburdensome regulations, give consumers more choice, and encouragecompetition," declared John K. Tiene, president of the InsuranceCouncil of New Jersey. "Enactment of this law is the foundationupon which a competitive market can be built."

He said he was not very concerned by the release of the A 3531verbal threshold bill because, in his view, legislators will notsupport a measure that would result in lawsuit recoveries "thatwould increase rates 20 to 30 percent."

The Association of Trial Lawyers of America-New Jersey, however,predicted that the auto insurance reform bill would make it harderand more expensive to gain coverage.

Richard H. Wildstein, chairman of ATLA-NJ automobile insurancereparations committee, said in a statement that the measure wouldresult in "higher premiums for everyone."

He said the state's no-fault insurance system is so complex andexpensive to manage that newcomers would not be able to effectivelycompete with established firms.

Mr. Wildstein also predicted that the bill would allow insurancecarriers to reject tens of thousands of drivers in city areas whohave good driving records or force them to pay premiums double ortriple the current rate.

The Council noted that five of the nation's top six autoinsurance companies are not writing auto insurance policies in NewJersey. According to the Council, when insolvencies are factoredin, the state has lost more than 26 auto insurance companies in thelast ten years.

Mr. Tiene told the committee the bill was a "constructiveframework for building a reasoned, rational and meaningfulregulatory system, and moves New Jersey toward a competitivemarket."

State Farm Indemnity, the state's largest auto insurer, has beenapproved to withdraw and since September, 2002 has beennon-renewing 4,000 insured vehicles a month, which will continuefor 24 months or 96,000 insured vehicles.

According to the New Jersey Department of Banking &Insurance, 19 auto insurance companies writing 28 percent of allauto insurance policies in the state have finances that are soshaky they are being monitored by state regulators.

Other provisions in the auto insurance bill would create a crimeof insurance fraud and allow authorities to impound vehicles beingdriven without insurance. It would also provide for a $365 policyfor low income drivers.