N.J. Drivers ‘Clear Winners’ Under ’03 Reforms, Claims Industry Report

June 5, 2006

New Jersey drivers are the “clear winners” due to auto insurance reforms enacted by lawmakers in 2003 according to the Property Casualty Insurers Association of America (PCI), which released a report about the positive effects of auto insurance reform in the Garden State.

PCI touted its pro-reform report as legislation was unveiled in Massachusetts to accomplish changes similar to those realized in New Jersey. Gov. Mitt Romney has said New Jersey should be the model for Massachusetts.

But reform opponents in the Bay State have argued that New Jersey is not a good example to follow. They maintain that New Jersey has the nation’s highest premiums and that drivers are charged based on unfair rating factors.

But the PCI report paints a picture of a market that has been totally turned around to the benefit of consumers, particularly in urban areas.

Since passage of the New Jersey Automobile Insurance Competition and Choice Act of 2003, 17 companies have entered the marketplace and the number of top 20 national companies has almost doubled since 2002, the PCI report claims.

Insurers are providing more product options for consumers, including a special limited policy for low-income drivers.

Carriers have made more than 1,500 new agency appointments, PCI found.

“National companies have decided to enter or re-enter the state’s auto insurance market after a long absence,” said Richard Stokes, regional manager and counsel for PCI. “Competition has improved since the bill went into effect. All major carriers are working to increase their presence in the market by writing more policies and providing consumers with more choices and additional products and services.”

Also, 47,000 previously uninsured motorists are now insured.

“The legislation has encouraged more companies to set up operations in the state to serve a variety of market segments. This movement is especially significant in urban areas because it gives residents greater choice and coverage options at competitive prices,” Stokes added.

The Massachusetts Coalition for Affordable Auto Insurance for All, led by domestic insurers Commerce and Arbella Mutual, opposes reform legislation that would clear the way for an assigned risk plan and grant insurers more pricing freedom.

The group’s ads feature testimonials from individuals identified as New Jersey drivers who claim that changes in their state have hurt, not helped, them. Individuals claim their rates went up because of their credit score, occupation or education level.

“If Massachusetts passes the auto insurance reform like they did in New Jersey, they’ll be sorry,” says Jennifer, one of several drivers from New Jersey out to warn Massachusetts drivers about pending reforms.

“I’m a police officer and I feel like I’m being robbed,” says another Garden State insured.

The ad campaign can be viewed at www.autoinsurancetruth.com.

The New Jersey-oriented ads are intended to counter commercials by another insurance industry-backed group, Fairness for Good Drivers, that decry what the group says is a lack of fairness and choice in the current Massachusetts auto insurance system.

This group of insurers advocates replacing the process where the state annually sets the rates for all insurers with a competitive system and it supports implementation of an assigned risk plan.

Currently, only 19 companies are actively doing business in Massachusetts and most of the best-known national companies including Progressive, GEICO, State Farm and Allstate do not insure autos in Massachusetts.

These ads can be viewed at www.fairnessforgooddrivers.com.

In its report, PCI suggests that New Jersey still has work to do to improve its insurance climate including adopting a medical fee schedule; addressing the cost effects stemming from the weakened verbal threshold as a result of the June 2005 New Jersey Supreme Court ruling (in DiProspero vs. Penn); and updating its territorial rating regulations.

“We are pleased that auto insurance reform is moving ahead for the benefit of consumers, especially in the urban areas. But it is important to remember what it was like in the past. Unless further reforms are made and become permanent, it may be difficult to reach a more stable and predictive insurance marketplace,” Stokes said.

PCI is composed of more than 1,000 member insurance companies. In New Jersey, PCI says its members represent 65.1 percent of the personal auto market.

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