Reforms don't appease car insurers
Wednesday, February 19, 2003
By MARK PERKISS
TRENTON - Making it easier for auto insurance companies to reject applicants. Requiring carriers to give customers three coverage options with different price quotes. Making it easier to put poor drivers in more expensive, higher-risk pools.
Those are some of the provisions of a revised draft auto
insurance reform bill being considered by lawmakers.
The draft legislation, which was obtained by The Times, was outlined by Gov.
James E. McGreevey last month. The bill is an effort by the administration to
help quell turmoil in New Jersey's insurance market, attract new companies and
aid consumers who increasingly are having trouble finding coverage.
"If we're going to require people to have auto insurance,
they have to be able to get it, and it has to be affordable," Banking and
Insurance commissioner Holly Bakke said last month.
Insurance industry advocates say the bill as currently drafted does not go far
enough to improve things for them. Consumer advocates say the proposal strikes
the right balance.
Unlike past reform efforts, which focused mainly on trying to reduce rates for
New Jersey drivers, which are among the highest in the country, the proposed
legislation deals primarily with regulatory reforms on insurance companies.
Among the highlights of the revised bill are provisions phasing out New Jersey's "take all comers" rules by 2009 and reducing the number of motor vehicle points that companies need to declare people poor drivers and place them in more expensive, higher-risk pools.
Under the bill, instead of being forced to write policies for
all but the worst drivers, companies who increase their business in set
geographical areas by 5 percent next year would be able to turn people away.
The bill also allows insurers to place drivers in a higher-priced
"substandard" category when they get four points on their license
instead of the current six.
That provision, which fits with McGreevey's oft-stated goal that "Good
drivers should not be paying for bad drivers," could lead to rate increases
for about 250,000 drivers.
The bill requires insurers to offer customers three coverage options, each with
different price quotes, and also requires them to notify customers when they
request rate increases.
Those provisions have insurance industry advocates crying foul.
"If this bill passes as written, which I think is unlikely," it will
present problems for companies, said John Tiene, president of the Insurance
Council of New Jersey, an industry group. "It adds burdensome regulations
to companies that already are under the most onerous regulations in the
country."
Ernie Landante, a spokesman for the Coalition for Auto Insurance Competition, an
industry group that helped write an earlier version of the bill, said the
revised legislation is flawed because it does not ease New Jersey's restrictions
on companies that want to leave the state.
"No company wants to do business where, if they can't make
money or lose money, they are trapped like a caged animal," he said.
"Changing that will tell outside insurers that this is an attractive state
to do business in and that will attract them."
Pete Guzzo, director of Consumers for Civil Justice, praised the proposed
legislation.
"I think what the governor has achieved is a good balance between the
practical day-to-day business necessities of insurance companies and the rights
of consumers for both adequate protection and benefits and reasonable
cost," he said.
Guzzo said he was particularly pleased with provisions that require the
Department of Banking and Insurance to rule on rate increase applications within
90 days. Currently companies complain that the department can take a year or
longer to rule on rate requests.
"That's going to help companies by giving them some consistency, but it
will also help consumers because it will do away with companies asking for 30
percent to 60 percent increases because the department has taken more than a
year to decide on a smaller rate increase and now the company says it needs
more," Guzzo said.
NOTE: Contact Mark Perkiss at mperkiss@njtimes.com or at (609) 943-5727.