N.J. Senate OKs Electronic Proof of Insurance, Reverse Rate Evasion Bills

By | March 19, 2015

New Jersey’s state Senate on March 16 passed a bill (A-3905) that would allow motorists to display proof of auto insurance in either physical or electronic format. The bill was previously approved by the state Assembly and now heads to Gov. Chris Christie for his consideration.

The bill also states that when the insurance identification card is displayed or provided in the electronic form using a smartphone, tablet, computer, or any other electronic devices, it does not constitute consent for a police officer or judge to access any other contents on the device. Any police officer or judge presented with an electronic device for the proof of insurance would be immune from any liability resulting from damage to the device.

According to the Property Casualty Insurers Association of America, there are currently 37 states that have adopted e-card laws and/or regulations that allow drivers to present electronic proof of insurance.

Reverse Rate Evasion

The New Jersey Senate on March 16 also passed a bill (A-2281) that aims to crack down on so-called reverse rate evasion. The measure targets residents who fraudulently obtain auto insurance in another state with lower rates, even though New Jersey is their principal residence or they principally keep the insured vehicle in New Jersey.

Under the bill, reverse rate evasion would be considered a form of insurance fraud that violates the New Jersey Insurance Fraud Prevention Act, making it a crime of the fourth degree. The bill also specifies that reverse rate evasion constitutes a violation of the New Jersey Insurance Fraud Prevention Act, with various civil penalties and remedies provided for in that act applying to violations.

The bill previously passed the Assembly and now goes to Gov. Christie’s desk.

“Insurance fraud is not only wrong, but it costs honest drivers money through higher premiums,” said Assemblyman Wayne DeAngelo, a co-sponsor of the bill. “We’ve made a lot of progress in controlling auto insurance rates, but we still have a long way to go and cracking down on fraud needs to be a big part of that continuing effort.”

DeAngelo said the New Jersey Office of the Insurance Fraud Prosecutor is currently unable to prosecute reverse rate evasion cases because state law does not include it as a form of insurance fraud.

The New Jersey Office of the Insurance Fraud Prosecutor has documented a growing trend of New Jersey residents insuring in North Carolina and Pennsylvania to avoid higher insurance rates, according to Assemblyman Joseph Lagana, the bill’s co-sponsor. “The prosecutor has been suggesting this change in the law for more than four years, and we’re going to finally get this done for the benefit of all law-abiding New Jerseyans,” said Lagana.

The Coalition Against Insurance Fraud, an anti-fraud alliance in Washington, D.C., welcomed the bill’s passage and urged the governor to sign and enact the bill into law.

“Turning premium dodging into an insurance crime would add enforcement teeth to New Jersey’s efforts to clamp down on rate evasion,” said Howard Goldblatt, the Coalition’s director of government affairs. “The stronger likelihood of a criminal conviction also could help deter others from making the mistake of defrauding their auto insurer.”

The Coalition said that under the bill, convicted drivers could face as much as 10 years in state prison and fines of up to $150,000.

Premium evaders from New Jersey often use North Carolina and neighboring Pennsylvania as destination states, and New York premium evaders have been caught illicitly registering their vehicles in Iowa and Pennsylvania, the Coalition said.

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