New Coalition Seeks Reforms to Prevent Auto Insurance Crisis.
TRENTON, N.J.--(BUSINESS WIRE)--February 7, 2002
Seeking to prevent an unprecedented statewide auto insurance capacity crisis precipitated by the deterioration de·te·ri·o·ra·tion
The process or condition of becoming worse. of the auto insurance industry's financial health in New Jersey, a new statewide organization today urged Trenton lawmakers to significantly reform New Jersey's auto insurance laws and regulations to create a stable and competitive market.
The Coalition for Auto Insurance Competition, a New Jersey-based group open to businesses, associations and consumers, cited the state's regulation of auto insurance as the culprit behind limited competition by discouraging dis·cour·age
tr.v. dis·cour·aged, dis·cour·ag·ing, dis·cour·ag·es
1. To deprive of confidence, hope, or spirit.
2. To hamper by discouraging; deter.
3. insurance companies from doing business in New Jersey, setting the stage for a capital reserve shortage.
"We need a regulatory system that promotes competition, encourages companies to sell auto insurance in New Jersey, and creates a stable market that offers more choices for consumers," said John Friedman, chairman of the Coalition for Auto Insurance Competition. "Four out of the six largest insurers in America already do not do business in New Jersey and when the state's largest auto insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual.
An insurer is frequently an insurance company and is also known as an underwriter. completes withdrawal, that number will increase to five out of six."
The latest figures show New Jersey has 47 percent fewer companies selling auto insurance than Illinois Illinois, river, United States
Illinois, river, 273 mi (439 km) long, formed by the confluence of the Des Plaines and Kankakee rivers, NE Ill., and flowing SW to the Mississippi at Grafton, Ill. It is an important commercial and recreational waterway. and more than a third fewer than neighboring neigh·bor
1. One who lives near or next to another.
2. A person, place, or thing adjacent to or located near another.
3. A fellow human.
4. Used as a form of familiar address.
v. New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of and Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York . More than twenty auto insurance companies have left New Jersey in the past ten years.
"With comparatively few auto insurers remaining in New Jersey, the loss of the state's largest will create significant pressure on companies' capital reserves, straining their capacity to take on more policyholders," said Friedman.
Capacity describes the volume of business an insurer can accept based on the size of its capital base surplus. Insurers must hold surpluses equal to at least one-third the premiums it collects from policyholders. If surpluses fall below the one-third standard, it signals that the company may be financially unstable unstable,
adj 1. not firm or fixed in one place; likely to move.
2. capable of undergoing spontaneous change. A nuclide in an unstable state is called
radioactive. An atom in an unstable state is called
excited. . Companies with high financial ratings maintain their surplus at much higher levels.
"Having to operate under the state's restrictive and difficult regulatory regime where insurers are told what products to sell, to whom they must sell to and how much to charge, companies will lack an incentive to remain and invest in New Jersey," continued Friedman.
The group is calling for reforms that will attract more auto insurers to New Jersey, spurring competition and increasing consumer choice. These reforms include permitting companies to use industry-accepted standard underwriting Underwriting
1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).
2. The process of issuing insurance policies. methods already used in nearly every state and adjusting the low ceiling on company profits to permit a reasonable rate of return.
"It's only natural to expect that consumers will shop around for the best deal if they have more choices. Competition and choice benefit consumers and when companies compete, consumers win," said Friedman.
The Coalition for Auto Insurance Competition was formed by the auto insurance industry's trade associations (American Insurance Association, Insurance Council of New Jersey, National Association of Independent Insurers) and member companies. The Coalition welcomes the participation of businesses, associations and consumers who seek to work together to bring about meaningful and responsible auto insurance reform in New Jersey. Other participants include the New Jersey Retail Merchants Association, New Jersey Food Council, Citizens for a Sound Economy Citizens for a Sound Economy (CSE) is a conservative political group operating in the United States, whose self-described mission is "to fight for less government, lower taxes, and less regulation. , Independent Insurance Agents of New Jersey and the National Association of Mutual Insurance Companies.