AIA: N.J. Auto Market ?Desperate'

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By Michael Ha

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NU Online News Service, Feb. 28, 10:24 a.m.EST?As the number of carriers writing auto insurance inNew Jersey continues to decline, remaining insurers in the stateare so inundated with new applicants they are running afoul ofstate time requirements for giving quotes and processingapplications.

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As a result, the New Jersey Manufacturers Insurance Company--thelargest domestic insurer in the state--recently made anunsuccessful attempt to have regulators give them a two-monthreprieve from issuing quotes.

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Under New Jersey's "take-all-comers" law, insurers must issue apolicy to any eligible driver willing to pay the quoted price. Thecompany said it has a backlog of 8,100 unprocessedapplications.

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The situation was noted by the American Insurance Association,which said the request demonstrated that the auto insurance crisisin the Garden State is growing and the need for regulatoryreform..

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Responding to the company's request, New Jersey Banking andInsurance Commissioner Holly Bakke acknowledged that "currentmarket conditions have made it difficult for auto insurers tryingto follow both the letter and the spirit of the law to properlyprocess the flood of requests for coverage." However, thedepartment decided not to grant a reprieve.

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Instead, the department said it will monitor the situation atNew Jersey Re-Insurance Company, the New Jersey Manufacturer's autoinsurance branch, as well as that at other companies.

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David Snyder, general counsel at the AIA in Washington, D.C.,said, "The fact that one of the largest insurers in the state is sooverwhelmed that they need to turn away good customers clearlydemonstrates how dysfunctional the auto insurance marketplace is inNew Jersey and how desperate this system is for reform."

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The AIA said the only viable long-term solution to theavailability crisis is for the administration and the legislatureto work together and enact substantial regulatory reform.

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The problem with the New Jersey market, AIA said, is that, forthe last 30 years, it has not projected the climate of stabilityand certainty necessary to entice insurers to commit capital andother resources to the state.

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AIA estimated that under current conditions, it can take up totwo years for insurers to obtain rate approvals.

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"The request by New Jersey Manufacturers Insurance is anotherexample that illustrates the state's crisis," said Tammy Velasquez,assistant vice president at the AIA.

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"There are a very few companies in New Jersey that write privatepassenger auto insurance--there are only about 50. Theadministration and the legislature need to enact regulatory reformto stabilize the market to bring in new companies," Ms. Velasquezsaid.

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According to Mr. Snyder, compared to neighboring states andthose with similar demographics--such as Pennsylvania, Connecticutand Illinois--New Jersey has relatively few companies writingprivate passenger auto insurance.

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"New Jersey lacks competition in personal auto insurance.Consumers need choices in the marketplace, and competition in theauto insurance market will ensure the lowest feasible rate levelsfor New Jersey motorists," said Mr. Snyder.

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More than 26 auto insurers have left the state in the last tenyears, six in the last 11 months. Five of the six largest autoinsurance companies in the United States no longer write businessin New Jersey, according to the Insurance Council of NewJersey.

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