AIA: N.J. Auto Crisis Will Persist Despite DOBI Efforts

September 17, 2002

The New Jersey Department of Banking and Insurance (DOBI) has devised a program to assist the state’s auto policyholders find new coverage in light of State Farm Indemnity’s pending non-renewal of 4,000 polices per month.

According to American Insurance Association assistant vice president, mid-Atlantic region Jack Andryszak, however, the program will provide little assistance: “The program is not a solution to the auto insurance crisis inthe state. That DOBI even has to create such a program is yet more evidence of the crisis in New Jersey. Significant regulatory reform is the only real and viable long-term solution to the availability crisis in the state. Governor McGreevey and the Legislature-on a bipartisan basis-must address the need for substantial regulatory reform to the New Jersey system.”

To implement the State Farm Market Stabilization Order (Order A02-123), the DOBI has created the Market Assistance Program (MAP) to help those policyholders who are non-renewed by the insurer find coverage with another insurer. State Farm submitted an application to the DOBI last year to stop selling auto insurance altogether in New Jersey, citing oppressive over-regulation as its primary reason for wanting to leave the state.

Since then, it has reached an agreement with the DOBI, which allows the insurer to non-renew 96,000 policyholders over the course of two years as long as it continues doing business in New Jersey until 2005 when it can re-evaluate its decision. State Farm will begin randomly non-renewing policyholders later in the month. More than 20 auto insurers have left New Jersey in the last 10 years due to the adverse regulatory environment.

“The MAP will not increase the capacity of insurers in New Jersey to write more business, nor will it bring new insurers into the marketplace. It is a temporary fix that helps place these State Farm policyholders with other companies,” said Andryszak.

“There has to be further action to enhance competition to provide incentive for more insurers to enter the New Jersey market and for existing insurers to commit more capital. This will not happen without the sort of meaningful reform outlined in the Automobile Insurance Competition and Choice Act (A-2526).

“AIA and its members will continue working with the DOBI to implement the MAP, but DOBI needs to take all administrative steps possible to assist companies in underwriting these policyholders and any other policyholders seeking coverage,” added Andryszak.

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