N.J. Auto Reform Needs Consumer Focus: Commissioner

New Jerseys latest effort to reform its auto insurance laws must be “acceptable for all policyholders” and retain protections for consumers that include rate controls, the states top insurance regulator said.

New Jerseys Banking and Insurance Commissioner Holly C. Bakke, in an interview with National Underwriter, also expressed the view that what will be good for consumers, in the long run, will benefit insurance agents and the industry. Her department is looking to strike a balance between consumer protections and attracting insurers to the state.

Earlier this month, Ms. Bakkes boss, Gov. James E. McGreevey, in his State of the State message, outlined a plan to revamp New Jerseys auto insurance system, with an emphasis on consumer protection, while attempting to address a serious problem on the business side.

Among the governors proposals are a measure aimed at cutting insurer costs by eliminating assessments charged for the states Unsatisfied Claims and Judgment Fund, as well as anti-fraud measures. Consumer-friendly measures include the introduction of a dollar-a-day medical coverage policy aimed at reducing the ranks of uninsured drivers, and a provision that would require insurers to notify their customers when theyre seeking rate increases.

Ms. Bakke said there are not enough companies in the state to underwrite and until the deficit of carriers is corrected, the states policyholders will continue to have difficulty getting the insurance they need. She said there is currently a “very strong industry bill” receiving bipartisan support in the state legislature to address this problem, but it lacks consumer protections.

The governor, she said, has made it clear he will work with companies on this reform legislation, but there needs to be consumer protection within the bill.

One thing that must remain, said Ms. Bakke, is that the department continues its role determining appropriate and adequate auto premium rates for companies and the insured. Notification by carriers to consumers when a rate adjustment is being sought, and making sure consumers play an active role in their choice of coverage are also some of the hallmarks of the administrations proposal, she noted.

Agents, she said, would play a critical role in increasing that discussion. They will present the policy review to consumers.

Among some of “the tools” included among department proposals to protect auto insurance purchasers are:

A requirement that insurers offer three coverage scenarios so consumers can compare options

A requirement that independent agents post an Auto Insurance Bill of Rights

The creation of a state Auto Insurance Report Card rating of insurers.

The administration is working with an industry group representing a cross section of interests, including agents, to develop manageable solutions for these proposals, Ms. Bakke explained.

While the reform work proceeds, the department will continue to enforce current laws, she said. Recently, the department did an undercover investigation, which uncovered carrier non-compliance with the Basic Policy program. The program sets a low cost auto policy for consumers, which investigators found was not being honored by some agents and carriers.

“We will use all the regulatory tools available to the department through this transition period to protect policyholders,” Ms. Bakke promised.

Looking to the future, Ms. Bakke said she hoped by next year existing companies in the state would introduce more capital and, in turn, devote more agents to the market, especially in urban areas. She would also like to see rating agencies develop a favorable view of New Jersey that would encourage more insurance capital and attract more carriers.

“With those two things in place, it would help us achieve our most important goal–that auto insurance in New Jersey is affordable and acceptable for all policyholders,” Ms. Bakke said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 27, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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N.J. Auto Reform Needs Consumer Focus: Commissioner

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