Auto Insurers Bail Out Of N.J.

William Heine, spokesman for the New Jersey Department of Banking and Insurance in Trenton confirmed that AIG has submitted a plan to leave the state. He said the department recently turned down AIGs request for a 20 percent rate increase as not warranted. AIG has appealed the decision to the Office of Administrative Law and a decision is expected on July 19.

"Its puzzling on the timing of this," Mr. Heine said.

AIG handles 4 percent, or 220,000 of the state's policyholders, said Mr. Heine. State Farm, with 850,000 policyholders, has 11.6 percent.

Mr. Heine also said that press reports of a letter to Newark Insurance Company employees that the company would not be writing new auto business are correct. The company–ranked 15th with less than 1 percent of the market or 53,000 policyholders–will renew existing policies, he said.

Some are calling this a developing crisis in the states auto market, reminiscent of what the states drivers went through with high rates and little capacity in the 1970s and 1980s.

"New Jersey has a choice to continue on the road it has been on and repeat our own history," said John K. Tiene, chief administrative officer and vice president, public relations with the Insurance Council of New Jersey in Ewing. "New Jersey must choose whether it will be like most other states with a competitive market where they attract new companies instead of scaring them off."

The states laws are too restrictive and do not allow companies to make an adequate profit, he said.

"We are quite concerned; everybody is," said Gary Newborn, president of the Trenton-based Independent Insurance Agents of New Jersey and owner of G.S. Newborn and associates in Flemington, N.J. "What this development says to the department is that companies can really only be pushed so far."

The major problem, Mr. Newborn observed, is that the states rating system is highly politicized.

"The issue has been reduced to a sound bite and what looks good in a political brochure," Mr. Newborn said. "If the markets were freed up, yes, there would be premium increases initially, but over the long run, premiums would go down."

While the Professional Insurance Agents of New Jersey had not yet taken an official stance on the issue at presstime, the issue is of major concern to the association, according to PIANJ President Steve Reichman, who is executive vice president of NIA Group, LLC in Somerset, N.J.

As an agent, however, Mr. Reichman said he believes the loss of more carriers will mean more difficulty in doing business in the state. "Its going to be a crazy year," he said.

The American Insurance Association in Washington called on the state to reform its regulatory system, calling it a "Byzantine bureaucracy."

However, the notion that auto insurance underwriting is heading into a crisis was dismissed by Mr. Heine.

"At this point, that is overblown," he said. "We are certain the market can handle [the companies leaving]. We are concerned any time an insurer leaves the state, but the insurance market here has changed and has become a more competitive and viable market for insurers."

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 29, 2001. Copyright 2001 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.

Contact Webmaster