PIANJ Offers Suggestions to Help Counter State’s Auto Insurance Availability Crisis

Following the recent hearings on reforming New Jersey’s auto insurance coverage regulations, the Professional Insurance Agents of New Jersey Inc. suggested that the problem with auto insurance availability stems from the fact that insurance companies don’t want to do business in New Jersey.

In testimony submitted to the Assembly Banking and Insurance Committee on Monday. Leon J. Zimmerman, the PIANJ’s legislative representative, expressed support for the current bill, S.63 – A.2625, indicating that it would help restore competition and choice in New Jersey’s auto insurance industry.

However, the PIANJ noted a few areas of concern: “S.63/A.2625 would make several important changes to the current system that would restore competition to the marketplace by attracting new companies into the state and by keeping existing ones from leaving,” Zimmerman stated. “For instance, the bill would provide certain exemptions to companies, and eventually phase out altogether, the take-all-comers law, which requires insurers to accept virtually every applicant, regardless of the risk.”

The proposal amends the current rules for approving rate increases to ensure requests for increases are acted upon promptly. It also amends the excess profits law and extends the look-back period for calculating these profits to take into account market fluctuations to more fairly calculate the profits insurers must return. “These changes will give insurers the underwriting flexibility to choose the risks they want to insure, the ability to charge an adequate rate for the coverage and to keep a reasonable profit,” Zimmerman noted. “They are changes that will attract insurers to New Jersey and make the remaining ones want to stay.”

While acknowledging that the bill would solve the current availability problem, the PIANJ is concerned with the requirement that insurers provide each new applicant for auto insurance with three premium scenarios to demonstrate the effect of different coverage choices. Zimmerman explained that many agents represent several companies, and for the agents to provide three quotes for each company would be overkill. “While PIANJ understands and appreciates the rationale behind this three-scenario proposal, it must be narrowly tailored to provide real benefit to the consumer and to avoid undue hardship on agents,” said Zimmerman.

The PIANJ suggested that the bill could require that three quotes be given, but limit the number of companies an agent is required to represent to each applicant.

The announcement also indicated that S.63/A.2625 “proposes a special auto policy for low-income drivers. While this policy provides emergency medical coverage and a $10,000 death benefit, it does not cover liability, collision, comprehensive, uninsured or underinsured motorist coverage.” According to Zimmerman, the special policy is susceptible to fraud. Although the policy is designed to help low-income drivers, an eligible driver could obtain a special auto policy and easily let other drivers who don’t qualify use the vehicle.