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"Your auto insurance policy will be not renewed."
Every day for the next two years, hundreds of New Jersey drivers will receive the message that their auto insurer will not renew their coverage. And unless state legislators act quickly, these drivers will find they have few places to turn in this market bereft of consumer choice.
Starting in September, State Farm Indemnity will send out notices to the owners of four thousand cars every month informing them that their auto insurance coverage will not be renewed, as part of the order governing State Farm Indemnity's withdrawal from the New Jersey market. The remaining State Farm Indemnity auto policies are scheduled to be non-renewed sometime after 2005. An additional 20,000 policy holders of the Robert Plan will get that same nonrenewal message this fall. And several other insurers are already over their capacity and have previously received permission from the Department of Banking and Insurance to stop writing new policies because of their financial condition.
"Thousands of drivers will soon face the ugly truth about auto insurance in New Jersey," said John Friedman, chairman of the Coalition for Auto Insurance Competition. "Excessive regulation has forced more than two dozen insurance companies to flee New Jersey, leaving drivers with insufficient choice and options."
To complicate matters, the ability of New Jersey's few remaining insurers to handle the influx of policies is in doubt.
"One of New Jersey's other major insurers, New Jersey Manufacturers, has reported that it is already swamped with calls from drivers desperately trying to find coverage, and not a single State Farm Indemnity or Robert Plan policyholder has received the nonrenewal letter," continued Friedman. "Of the remaining insurance companies, 18 percent are exempt from the take-all-comers law because of their financial condition and are not accepting new customers. This underscores the immediate need to address how the state regulates the auto industry."
The Coalition for Auto Insurance Competition has been working to educate New Jersey drivers and policy makers to prevent an unprecedented statewide auto insurance crisis precipitated by the deterioration of the financial health of New Jersey's auto insurance industry. It points to the state's excessive regulation of auto insurance as the culprit behind the lack of sufficient auto insurance choice and competition.
"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 change, companies will lack an incentive to remain and invest in New Jersey," continued Friedman. "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."
The Coalition is calling for passage and enactment of the New Jersey Auto Insurance Competition and Choice Act (A-2625), sponsored by Assemblyman Lou Greenwald. The legislation outlines reforms that will attract more auto insurers to New Jersey by permitting companies to use industry-accepted standard underwriting methods already used in nearly every state. It also adjusts the low ceiling on company profits to permit a reasonable rate of return.
"Until reforms are made that promote greater consumer choice and industry competition, insurers will continue to lack the incentive to grow and invest capital in New Jersey, leaving drivers in a lurch," said Friedman. "Unfortunately, it seems that many of the states' leaders are content to avoid this issue until the market collapses."
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, and two have left in the last year.
The Coalition welcomes the participation of consumers, businesses, and associations who seek to work together to bring about meaningful and responsible auto insurance reform. Members include the National Association of Independent Insurers, Insurance Council of New Jersey, American Insurance Association, New Jersey Chamber of Commerce, Independent Insurance Agents of New Jersey, Citizens for a Sound Economy, National Association of Mutual Insurance Companies, New Jersey Association of REALTORS, Professional Insurance Agents of New Jersey, New Jersey Food Council, New Jersey Retail Merchants Association, NJ SEED (Society for Environmental, Economic Development), Somerset County Chamber of Commerce and the Commerce and Industry Association of New Jersey.