New Jersey’s Democratic Gov. James McGreevey received plaudits from the insurance industry following his remarks in his “State of the State” address that he would vigorously pursue reforms in the auto insurance market. He called for increased competition in the personal auto market, lower premiums for good drivers, a reduced number of uninsured motorists, continued anti-fraud efforts and a reform of the DMV.
The PIANJ posted portions of McGreevey’s remarks on its Web site, and said it would “continue to participate in the reform process and fight for members’ interests.” The Alliance of American Insurers called McGreevy’s proposals “a good first step,” but said “more work is needed to make the market attractive to insurers.”
One of the Governor’s key proposals would allow NJ’s auto insurance companies to turn away motorists seeking coverage, even those with good driving records, essentially scrapping the state’s “take all comers” law, and moving the market closer to full deregulation. According to PIANJ sources the proposal would allow companies to set their own sales standards if their business grows 5 percent or more in any of the state’s 27 geographic rating territories. That limit would shrink in the next five years until 2008, when the take-all-comers provision would be completely eliminated.
The changes would apply only to new policyholders; insurers would still be obligated to renew most of their existing policies. But the ultimate aim would be to “foster more competition, drive down prices, encourage more companies to stay in the market, and give motorists more choices.” Drivers who couldn’t obtain coverage in the newly free market would be able to buy coverage in the state’s high-risk auto insurance pool.
McGreevy’s address also promised continued vigorous investigation and prosecution of suspected auto insurance fraud. He also proposed a new “Dollar-A-Day” program to provide uninsured motorists coverage, “whereby the state would offer a $365-a-year or $1-a-day auto insurance policy for residents.” The program, similar to a “bare-bones” policy offered the past four years,” would be available to low-income residents. “The auto problem is no longer simply about rates, it is about accessibility,” McGreevy stressed.
The governor indicated that the problem of escalating premiums would be solved when the reforms insuring competition were in place, as this would attract a greater number of companies to enter the NJ market, and would encourage the companies that are already there to stay.
He warned insurers, however, that while his proposals would “make the regulatory road smoother,” it didn’t mean that insurance companies would “get a free ride.” He said that every consumer should be given at least three different rate and coverage options, alongside report cards that detail customer satisfaction so consumers can make informed decisions. He indicated that “too often consumers pay for coverage they no longer need, because they have never been given the choice to update their policies,” and also stressed that, “we must no longer allow insurance companies to cancel coverage if a payment is mailed on time but received one day late.”
McGreevy called the DMV’s computer systems “antiquated,” and also promised to “reform the DMV bureaucracy that has frustrated New Jersey drivers for decades.” He recommended hiring additional police and more investigators, improving customer service and starting Saturday hours.
Commenting on the scope of McGreevy’s proposals, Richard Stokes, government affairs representative for the Alliance’s Northeast Region, called it “a good first step on the long, difficult journey necessary to make the New Jersey auto insurance market more attractive to insurers and thus more competitive.” He added that “While we are cautiously optimistic about reform, a lot will depend on what actually is passed by the legislature. And we are not sure that the governor’s announcement goes far enough. It must include key elements, recommended by the Alliance, that will help to attract and keep companies in New Jersey.”
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