Printer Friendly

New Coalition Seeks Reforms to Prevent Auto Insurance Crisis.

Business Editors

TRENTON, N.J.--(BUSINESS WIRE)--February 7, 2002

Seeking to prevent an unprecedented statewide auto insurance capacity crisis precipitated by the deterioration 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 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 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 and more than a third fewer than neighboring New York and Pennsylvania. 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. 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 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, Independent Insurance Agents of New Jersey and the National Association of Mutual Insurance Companies.
COPYRIGHT 2002 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2002, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Publication:Business Wire
Date:Feb 7, 2002
Previous Article:Xi Software and Missiontrek Announce Agreement to Produce ResearchAgent.
Next Article:Frost Brown Todd LLC's Client Wins Major Patent Infringement Case Against America's Largest Hair Dryer Manufacturer.

Related Articles
Auto insurance industry turns up heat on government plan.
TURKEY - Feb. 19 - Ecevit Hits Sezer.
Armed for action: independent agents in many states have mounted successful grass-roots campaigns to push for new laws and regulations.
The cost of the uninsured.
Homegrown health care.
Fighting the good fight: in Fighting Immigration Anarchy, author Daniel Sheehy recounts the stories of everyday American patriots who are battling to...
State of recovery: after years of tinkering, New Jersey's auto insurance market is finally well tuned.
Coalition opens doors to health care.

Terms of use | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters