N.J. Rejects Allstate Agents' Complaint

By Michael Ha

July 3–Holly Bakke, banking and insurance commissioner for New Jersey, said she has decided that Allstate New Jersey's marketing and agent compensation practices do not violate her state's “take-all-comers” rule, which requires the state's auto insurers to cover all but the worst drivers.

Allstate New Jersey's practices were the subject of a complaint filed by 16 Allstate agents in late 2001. They claimed that the company tried to avoid urban businesses through its marketing and compensation practices.

The issue before Commissioner Bakke was whether Allstate New Jersey had violated the state's Fair Automobile Insurance Act.

In their complaint, agents charged, among other things, that Allstate linked bonuses to loss ratios, which sometimes hurt agents with urban policies. The agents also said Allstate marketing strategies targeted certain suburban areas and not urban ones, which, they argued, violates the Fair Automobile Insurance Act.

Commissioner Bakke disagreed, stating instead that the “take-all-comers” provision does not prevent companies from developing a statewide business plan.

“We know from our ample experience that a failure to balance urban auto risks with suburban risks results in carriers being unable to write any auto policies at all,” said Mary Caffrey, spokesperson for the New Jersey Department of Banking and Insurance.

Besides, New Jersey has what it calls the “Urban Enterprise Zone” assignment system, an urban quota that auto insurers must meet, and Allstate New Jersey has been meeting its goal, she said. “Every carrier in New Jersey has the quota in urban assignments. Let's say you have five percent of the market in New Jersey, then you also have to have five percent in the urban market as well,” she said.

She pointed out that Allstate New Jersey has been meeting its urban assignment and that its share in the urban market is, in fact, increasing.

“Allstate New Jersey actually was doing a pretty good job,” she said.

Reproduced from National Underwriter Edition, July 14, 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. Rejects Allstate Agents' Complaint

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