NAII, Alliance, AIA Unanimous in Opposing N.J. “Verbal Threshold” Bill

December 5, 2003

Representatives of the National Association of Independent Insurers, the Alliance of American Insurers and the American Insurance Association voiced unanimous opposition to changes in New Jersey’s “verbal threshold” policy for auto insurance coverage.

In hearings before the State Senate NAII assistant vice president and assistant general counsel Donald S. Cleasby, Alliance Northeast Regional Manager Richard Stokes and David Snyder, AIA vice president and assistant general counsel, stressed that each of their organizations oppose the proposals. They see them as a serious threat to the newly enacted N.J. auto insurance reforms.

“Significant progress is being made in reforming New Jersey’s auto insurance system,” Cleasby stated. “This bill not only reverses the cost containment provided in the reform laws, but sends a confusing message on whether lawmakers are serious about improving New Jersey’s auto insurance marketplace. The only people who support this bill are the personal injury trial lawyers who stand to gain from it.”

“We believe this legislation will open up the floodgates for litigation and increase costs,” Stokes commented. “One study points to an expected increase in costs of $98 to $163 per car per year because of this legislation. For two-car families, this could be an increase of over $300 a year for the household. Also, the verbal threshold option would be rendered meaningless because it will be too costly for consumers.”

The AIA noted that the bill, SB 2533, [its Assembly counterpart is A.B. 3531] “is legislation proposed by the American Trial Lawyers Association of New Jersey (ATLA-NJ), which would practically end the state’s verbal threshold no-fault auto insurance option for drivers.” Snyder stressed that “there is now hope for permanent improvement in the personal auto insurance market, including more choice and competitive premiums for consumers, for the first time in decades.”

The NAII explained that N.J. law “already provides drivers with a choice on whether or not to select a verbal threshold option in exchange for a premium discount. Consumers already can purchase coverage that does not have the verbal threshold, but the 92 percent who choose the threshold can save hundreds of dollars each year on their premiums. S.B. 2533 would deny consumers this choice and force them to pay a higher premium.”

It went on to accuse the trial lawyers of seeking to benefit from the bill, as the “elimination of the verbal threshold would result in more lawsuits, even in minor cases, with millions of dollars in legal fees from insurance policies.” The NAII added that the lawyers “are backing this legislation because they have failed to achieve their goal in the courts which have upheld the purpose of the 1998 law to limit the number of lawsuits filed and reduce premiums for bodily injury coverage.”

“There is no doubt that SB 2533 will increase costs and that these costs will hit low income people the hardest,” Snyder told the Senators. “Then, pressure will mount to blame insurers who will be simply passing on the increased costs. The result will be a return to anti-competitive policies and a predictable market reaction to those policies.”

All of them urged the Senate to reject the bill.

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