NJ Insurance Reform Puts Consumers in the Driver's Seat
Three years ago, New Jersey drivers could not purchase auto insurance—at any price. An overregulated insurance market had created a detrimental environment, causing major insurers to flee the marketplace and leaving consumers defenseless without the NJ car insurance they needed.
But in June 2003, state legislators affiliated with both political parties enacted reform legislation to overhaul the entire NJ car insurance marketplace. As a result, insurance companies are now reinvesting in the state and growing their businesses, and consumers have the tools they need to make informed choices and get affordable car insurance—putting them in the driver's seat.
Some measures included in reforms were legislation allowing NJ car insurance companies to set individual claims risk rates, upon which premiums could then be determined. This removed state government from the mix and gave state insurers the ability to compete for consumers' business. The "excess profit" law requiring insurance companies to issue refunds if they earned more than 6 percent profit was also challenged, enabling insurance companies to remain financially lucrative—and causing them to run back to the NJ car insurance marketplace. Efforts to curb abuse and fraud were instituted, and consumers were given the freedom to help determine insurance company products according to their individual needs.
These 2003 reforms escorted competitive pricing into the New Jersey car insurance marketplace and placed downward pressure on car insurance rates. Millions of dollars have been placed back in New Jersey consumers' pockets as a result.
"The difference between the auto insurance market three years ago and the market today is that a new auto insurance company coming to New Jersey is no longer big news," said former New Jersey Department of Banking and Insurance Commissioner Holly C. Bakke. "In 2005, New Jersey drivers will find even more choices in companies, coverage and cost…."
More than 53 percent of the New Jersey auto insurance marketplace reflects deflating prices, further evidencing the economic impact these changes have brought, according to Jaimee Gilmartin, New Jersey Department of Banking and Insurance spokeswoman.
"334 million dollars have been returned to policyholders in the form of rate reductions and dividends from insurance companies," Gilmartin said.
But financial gain is only the beginning of consumer benefits brought about by state auto insurance reform. The Department of Banking and Insurance's goals of attracting new insurance carriers to the state, increasing marketplace competition and thereby offering consumers lower NJ car insurance rates has been accomplished, as increasing numbers of carriers have either reentered the market or come on board for the first time. Agents are now more accessible, service is timelier and choices are more plentiful, affording all New Jersey residents their choice in auto insurance coverage. Consumers now even have a hand in the way their policies are written.
"New Jersey consumers are in the driver's seat," said Acting Governor Richard J. Codey. "The state's auto insurance marketplace offers more choices for consumers, and that means lower costs. New Jersey has become the kind of marketplace where companies want to do business and grow."
New Jersey is the most densely populated state in the nation—which means a lot of cars on the road and a correspondingly increased number of accidents. In the past this translated into large consumer expenditure, but this is not necessarily the case anymore.
Along with insurer competition have come expanded protections, increased consumer options and stronger insurer services. More than 1,500 new NJ car insurance agents have been appointed in the state since 2003, making auto insurance more accessible to all New Jersey consumers. After years of shunning drivers, state insurers are now competing for new policyholders.
Even previously uninsurable drivers are contributing to the New Jersey auto insurance system for the first time. The state's new "Basic Policy," titled this for both the minimal coverage and minimal cost it affords, provides Medicaid recipients with low cost car insurance for a miniscule $365 a year. More than 10,000 New Jersey drivers have now enrolled, and are no longer draining the system of its valuable financial resources.
Over the next year, the New Jersey Department of Banking and Insurance plans to remain focused on recruiting new insurance companies, retaining existing ones and exploring the use of technology to reduce risk and lower auto insurance rates.
"Consumers can look forward to more good news," says now Acting Commissioner Donald Bryan.
And, according to governor Codey, "New Jersey consumers deserve choice and competition, and when it comes to auto insurance, they're finally getting it. It's about time New Jersey consumers took the…wheel!"
