N.J. Governor Pushed On Auto Reform

The coalition expressed concern that an update issued by the New Jersey Department of Insurance and Banking on its auto insurance working group did not focus on the "dire conditions in the auto insurance marketplace that lead to a lack of choice and competition."

"While the auto insurance working group's discussions reflected serious concern about the need for a more competitive market," yesterday's update "failed to highlight these deliberations," the coalition said.

The working group effort was also criticized by the Insurance Council of New Jersey, which said insurers are troubled by the lack of attention and concern reflected in the update.

"The group never agreed to repeal no-fault, only to study the possibility," said John K. Tiene, president of the Insurance Council of New Jersey and a member of the Auto Insurance Working Group.

"We were surprised to learn," Mr. Tiene said, that the Department of Banking & Insurance was "even taking actions based on the working group discussions. The issues focused on by the [McGreevy] administration are not the issues of greatest concern to consumers."

The Insurance Council said it feels that the actions outlined by the department begin to dismantle cost saving measures in the state's Automobile Insurance Cost Reduction Act of 1998 that justified a 15 percent rate cut consumers received in March 1999.

"With New Jersey's auto insurance market in trouble, we shouldn't be talking about increasing costs but how to create competition," Mr. Tiene continued. "Over twenty insurance companies have left New Jersey since 1990, it's time to get serious about addressing this looming crisis."

"Four out of the six largest insurers in America already do not do business in New Jersey, and when the state's largest auto insurer completes withdrawal, that number will increase to five out of six," said Mr. Friedman of the coalition.

"Now is the time to put forth sensible solutions that will empower New Jersey consumers with a greater choice of auto insurance companies and a marketplace where auto insurers actively compete against each other to sell auto insurance. We welcome the opportunity to work with the administration to develop such a plan," Mr. Friedman added.

The Coalition for Auto Insurance Competition, open to businesses, associations and consumers, cites excessive state regulation of auto insurance as the culprit behind limited competition by discouraging insurance companies from doing business in New Jersey.

It said the latest figures show that New Jersey has 47 percent fewer companies selling auto insurance than Illinois and more than a third fewer than neighboring New York and Pennsylvania. More than 20 auto insurance companies have left New Jersey in the past 10 years, the group added.

"With comparatively few auto insurers remaining in New Jersey, the loss of the state's largest will create significant pressure on companies' capital reserves, straining their capacity to take on more policyholders," said Mr. Friedman.

"Having to operate under the state's restrictive and difficult regulatory regime, where insurers are told what products to sell, to whom they must sell to, and how much to charge, companies will lack an incentive to remain and invest in New Jersey, " Mr. Friedman added.

The group is calling for reforms that it contends will attract more auto insurers to New Jersey, spurring competition and increasing consumer choice. These reforms include:

? Permitting companies to use industry-accepted standard underwriting methods already used in nearly every state.

? Lifting the exit barriers for ailing companies.

? Adjusting the low ceiling on company profits to permit a reasonable rate of return.

"It's only natural to expect that consumers will shop around for the best deal if they have more choices. Competition and choice benefit consumers, and when companies compete, consumers win," said Mr. Friedman.

The coalition said it welcomes the participation of businesses, associations and consumers who seek to work together to bring about "meaningful and responsible" auto insurance reform.

Coalition Members include the American Insurance Association, Independent Insurance Agents of New Jersey, Citizens for a Sound Economy, the National Association of Independent Insurers, the National Association of Mutual Insurance Companies, the New Jersey Association of Realtors, the Professional Insurance Agents of New Jersey, New Jersey Food Council, New Jersey Retail Merchants Association, NJ SEED (Society for Environmental, Economic Development), Somerset County Chamber of Commerce, and the Commerce and Industry Association of New Jersey.