AIA: N.J. Auto Market ?Desperate'

By Michael Ha

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

As a result, the New Jersey Manufacturers Insurance Company--the largest domestic insurer in the state--recently made an unsuccessful attempt to have regulators give them a two-month reprieve from issuing quotes.

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

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

Responding to the company's request, New Jersey Banking and Insurance Commissioner Holly Bakke acknowledged that "current market conditions have made it difficult for auto insurers trying to follow both the letter and the spirit of the law to properly process the flood of requests for coverage." However, the department decided not to grant a reprieve.

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

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

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

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

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

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

"There are a very few companies in New Jersey that write private passenger auto insurance--there are only about 50. The administration and the legislature need to enact regulatory reform to stabilize the market to bring in new companies," Ms. Velasquez said.

According to Mr. Snyder, compared to neighboring states and those with similar demographics--such as Pennsylvania, Connecticut and Illinois--New Jersey has relatively few companies writing private passenger auto insurance.

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

More than 26 auto insurers have left the state in the last ten years, six in the last 11 months. Five of the six largest auto insurance companies in the United States no longer write business in New Jersey, according to the Insurance Council of New Jersey.

Special Reports /

AIA: N.J. Auto Market ?Desperate'

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