IIANJ Comments on Out of State Trust Accounts; ID Cards; Consumer Notices

October 10, 2003

The Independent Insurance Agents of New Jersey has issued three separate bulletins addressing the problems of out of state trust accounts, multiple ID card forms and consumer notices on automobile insurance.

The IIANJ strongly supports proposed regulations (PRN 318) issued by the state’s Department of Banking and Insurance to remove the prior requirement that banks maintain local physical branches. The organization had called on the DOBI early last year to review the issue of New Jersey producers maintaining trust accounts in out of state financial institutions.

“In today’s electronic environment such a necessity no longer exists,” stated IIANJ Chairman Scott Stanford. “IIANJ believes the proposal will not only be a tremendous benefit to New Jersey producers but it will allow licensed producers headquartered elsewhere to retain existing banking relationships when expanding into New Jersey.”

The IIANJ sees problems with PRN 310, however, which would allow every insurance company to use a different format for insurance ID cards. The organization said that while it “understands and supports the DOBI’s efforts to combat fraud,” it doesn’t “believe the measures proposed would decrease the instances of counterfeit ID cards and may ultimately make it more difficult for law enforcement to detect fraudulent cards.”

The IIANJ explained that if every company uses a different card format, law enforcement would have to maintain a catalog of every ID card, an onerous project. In addition, because independent agents represent more than one company, even small to mid sized agencies may be required to issue 40-50 ID cards per week to new and existing applicants. Under the new regulation, agencies would be required to hand type ID cards, disrupting normal work flow and causing delays to consumers.

“More importantly,” said the bulletin, “since information would need to be entered manually it could result in an increase in errors made on the cards which could cause great inconvenience to consumers stopped by law enforcement.” It added that the various sizes of ID cards outlined by the DOBI “may be cumbersome for mailing purposes.”

The IIANJ told the DOBI that the ACORD standard ID card should continue to be used by all companies, and agents should continue to have the ability to issue an ACORD ID card or the company ID card. “Moreover, IIANJ believes there should be no temporary ID card. When coverage is bound, agents should be able to issue a standard ACORD permanent ID card to the consumer which can be replaced by the company card when the new policy is issued.”

“IIANJ understands and shares the concerns of the DOBI, that the instances of fraud must be reduced,” Stanford indicated. “However, we believe the proposed regulation will inconvenience valid policyholders who cannot quickly obtain an ID card, will substantially increase costs for independent agents and will make it more difficult for law enforcement to detect counterfeit cards.”

Commenting on PRN 329, the IIANJ urged the DOBI to reconsider the elimination of the Buyer’s Guide. It told the department that “the Coverage Selection Form provides a brief synopsis of the coverage provided and indicates all of the options available to the consumer from the insurance company. It also provides general premium comparisons. The Coverage Selection Form is mandatory for all new business and the insured reads and signs the Coverage Selection Form.”

The Buyer’s Guide on the other hand “is costly to produce and mail, and the information is redundant to the Coverage Selection Form,” said the IIANJ. Stanford, explained that the “IIANJ does not believe that consumers utilize the Buyer’s guide at any time in the insurance buying process, nor throughout the lifetime of the policy; therefore, we have urged the DOBI to consider eliminating the guide all together.”

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