N.J. Auto Profits’ IIANJ Disputes Findings

January 19, 2004

Statistics released by the National Association of Insurance Commissioners last week, have received widespread coverage in New Jersey. They seem to show that, contrary to industry statements, the state’s auto insurers made the second highest profit in the nation in 2002, an average of 8 percent.

The Independent lnsurance Agents of New Jersey issued a statement Friday challenging those conclusions, indicating they were based on an inaccurate reading of the NAIC’s national statistics.

The dispute raises questions about the state’s recently enacted auto reforms, which were introduced after a well supported campaign convinced state legislators and Governor James McGreevey that only a radical restructuring of New Jersey’s auto insurance regulations would convince more carriers to enter the market and ultimately reduce rates, which are still the highest in the country.

A typical report appeared in The Record of Hackensack. It quoted the NAIC findings as supporting conclusions that all 60 N.J. based auto insurers netted a combined 8 percent profit from 2002 premiums. The rate is the second highest in the country after Connecticut, where carriers averaged an 8.7 percent profit on premiums.

The article did point out, however, that five of the 60 – Prudential, Allstate, State Farm, N.J. Manufacturers and USAA made 98 percent of the profit, while other insurers made considerably less, or lost money. It tempered that with a statement from John Dyke, whom it identified as the Chairman of the New Jersey Auto Agents Alliance, as indicating that he believed the insurance industry had created a misleading impression about its profitability in order to convince regulators and the public that there was a crisis.

The IIANJ, which represents over 10,000 independent agency owners and their employees in the state, said it questioned the validity of such statements as the report “clearly states that the information is an estimate drawn on data from the National Association of Insurance Commissioners. Within the report, it is noted that the NAIC does not endorse any analysis or calculations based on the use of its data.”

Jeanne M. Heisler, IIANJ Government Affairs Representative and an independent agent, commented, “The problems for the automobile insurance industry in New Jersey are much greater than statistics within a report. Companies have left New Jersey over the past decade creating an enormous challenge for the remaining companies in the state, the agent community and most importantly, the consumer. As companies left, other companies were facing financial concerns as they wrote business under the state’s difficult regulatory environment, by early 2003, there were less than 18 companies writing business under the NJ Take All Comers Law and consumers were unable to secure the coverage that they needed”.

The IIANJ said it “believes that the auto reform legislation signed by Governor McGreevey was absolutely necessary to create an environment where companies would seek to do business in New Jersey. Already, there is interest by companies to enter the marketplace which will result in more choices for consumers to secure the policy that they need at a competitive price.”

“Good drivers will benefit by this legislation and will begin to see positive change as the law is implemented” Heisler concluded.

Topics Agencies Legislation Profit Loss Auto New Jersey

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