AAI Reports Concerns with Implementation of Some N.J. Auto Regulations

October 6, 2003

The Alliance of American Insurers submitted comments to New Jersey’s Department of Banking and Insurance expressing support for the Department’s efforts to move quickly in implementing the auto insurance reform legislation signed into law in June.

The Department has proposed 16 different regulations that seek to implement the changes recommended by the State Legislature to help assure a stable, predictable and fair auto insurance marketplace.

“We commend the Department and the Governor for seeking to quickly resolve the difficulties in the auto insurance marketplace that have been brewing over the last three decades,” said Richard Stokes, the Trenton-based Northeast Region manager for the Alliance. “The legislation makes major changes to help restore competition to the marketplace that will attract insurers to New Jersey and provide consumers with cost affordable insurance.”

Stokes, however, expressed concern with certain provisions of the proposed regulations.

“Specifically, we are looking at the potential for fraud and abuse unless changes are made to the proposal establishing Special Auto Insurance Policies for Medicaid recipients, and in the requirements for notification of cancellation of auto insurance policies,” he said. “While we support opportunities that assure drivers can meet the mandatory insurance requirements, creation of a special funding source for the Special Automobile Insurance Policy for Medicaid recipients may have an adverse impact. Some medical providers may see this as a new opportunity that will increase their revenue sources regardless of its impact on automobile insurance costs and whether appropriate medical care is provided the accident victim. We are particularly concerned that the Special Policy will permit trauma centers and acute-care hospitals to receive payments at the higher personal injury protection (PIP) rates than they are presently receiving. What makes auto accident victims’ injuries any different than Medicaid patients’ injuries? We would ask the Department to help resolve these differences in order to provide appropriate but not discriminatory rates for all patients.

“We are also concerned that the Special Policy will not be funded properly. New Jersey has had a history of improperly funding special programs that become a liability of the insurance industry for years to come.”

The Department reportedly expects the costs of this coverage to be around $365.

“We submit that the cost should be determined through the standard fair and impartial actuarial review,” continued Stokes. “Furthermore, we would point out that the legislative mandate that the policy be uniform throughout the State will undoubtedly increase costs for certain drivers and reduce costs for others.”

Stokes said the Alliance is very supportive of the anti-fraud provisions of the new laws, especially the provision allowing insurers to cancel a policy if a customer knowingly provides materially false or misleading information on the application. But he also urged the Department to consider a central tracking system to help identify false and misleading insurance applications.

“Without a central tracking system, an insured who provides materially false information or fails to meet certain underwriting rules, will simply move to another insurer for coverage. If other insurers are able to identify such applicants, the purpose and intent of this proposal can more fully be realized. Honest and truthful drivers will benefit from a central tracking system. We would urge the Department to work closely with the New Jersey Office of Insurance Fraud Prosecutor to coordinate a central tracking system that could provide immeasurable benefits to reduce underwriting fraud.”

Was this article valuable?

Here are more articles you may enjoy.