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The state's insurance crisis took yet another turn for the worse today when the New Jersey Department of Banking and Insurance allowed New Jersey Manufacturers Insurance Group, the state's largest insurer, a respite from quoting rates to drivers seeking coverage from its subsidiary, New Jersey Re-Insurance Company.
The move dramatically increases the already serious difficulties drivers have in obtaining auto insurance. New Jersey Re-Insurance Company writes about 2,000 new auto insurance policies monthly.
According to John Friedman, chairman of the Coalition for Auto Insurance Competition, the move is further evidence that New Jersey's auto insurance laws and regulation require immediate reform.
"The state's auto insurance marketplace is unstable and dysfunctional, requiring immediate reform that instills more company competition and more choices for consumers," said Friedman.
New Jersey Manufacturers says it was left with little choice after a deluge of callers, many lacking coverage after their previous companies left the state market, overwhelmed the company's offices. The heavy demand from drivers seeking auto insurance coverage interrupted the company's regular day-to-day operations, forcing the insurer to apologize for service delays to its 700,000 policyholders. The company says it will take 56 days to clear up the backlog for quotes.
"Today's announcement underscores the immediate need to address the state's excessive regulation of the auto insurance industry, which is pushing companies out of New Jersey and continues to threaten the stability and sustainability of New Jersey's auto insurance market," Friedman said. "Insurers are either leaving the state, paying other companies to take their New Jersey business or asking the state to be exempted from existing rules. Consumers and companies alike are finding themselves in a 'perfect storm' of marketplace failure. It is imperative that we move forward with legislation to restore competition to New Jersey's auto insurance market."
The state's decision is the latest in a series of events that have restricted the ability of drivers to obtain coverage. In the past year, seven auto insurers have stopped doing business in New Jersey. Twenty-six companies have withdrawn from the state during last decade. Last summer, State Farm, once the state's largest insurer, obtained approval to non-renew 4,000 policies a month for the next three years as part of that company's withdrawal from the state. The Robert Plan ceased writing policies in September, and in January of this year two more insurers, Central Mutual and Merchants Insurance, announced they were leaving the state.
"Good intentions have led us down the wrong path," continued Friedman. "We need a regulatory system that doesn't force auto insurers from our state or into insolvency, but rather permits companies to compete in an active market."
The Department of Banking and Insurance has placed 19 other auto insurance companies under close monitoring due to their poor financial condition. Together these companies are responsible for 28 percent of all auto policies in the state. Today's decision will place even greater pressure on these firms, increasing the chances that more will abandon the market, further stressing an already damaged industry. The collapse of the state auto insurance system, predicted for years by industry specialists, has become a serious possibility.
"With comparatively few auto insurers remaining in New Jersey, the loss of any others will add pressure on an industry near the breaking point," said Friedman. "Many companies are already straining their capacity of policyholders."
Although Governor James E. McGreevey called for auto insurance reform in his State of the State address, the legislature has yet to act on S-1999 or A-2625, the New Jersey Automobile Insurance Competition and Choice Act. New Jersey officials must act now, before the industry is further crippled, and more drivers frustrated.
"Drivers need a regulatory system that promotes competition, encourages companies to sell auto insurance, and creates a stable market that offers more choices for consumers. Every day that goes by without legislative action is a day where the state risks further deterioration and, ultimately, collapse of the auto insurance market," Friedman concluded.
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, Latino Chamber of Commerce of Mercer County and the Commerce and Industry Association of New Jersey.