This change would increase auto insurance in New Jersey | Notice
By Holly Bakke
With all of the issues New Jersey is currently facing – pandemic, unemployment, disrupted school life for children – I have to ask why the time has come to consider legislation that would result in a significant increase in auto insurance premiums. This is important for me to understand because when I took office as New Jersey Banking and Insurance Commissioner in 2002, 30 years of overregulation was replaced by a system that made auto insurance accessible and affordable for New Jersey drivers.
Has the crisis that led until 2002 been forgotten, when four of the six largest insurers were not doing business in New Jersey and the nation’s largest insurer announced it was leaving New Jersey. ‘State? When good drivers have spent months buying a policy, some resorting to denial letters on car dashboards as proof of coverage? When did 80% of drivers subsidize bad drivers? And that the 2003 reform law that changed everything, hailed by Democratic and Republican governors, offered consumers a choice of insurers, products and, above all, prices?
Working with Gov. Jim McGreevey and community leaders, the legislature replaced an outdated system with a competitive one that protected consumers and where businesses wanted to invest in New Jersey, creating new jobs. In no time, more than $ 170 million was returned to drivers in the form of refunds and price reductions. Today, there are more than 70 auto insurers competing for New Jersey drivers and the percentage of uninsured drivers is the lowest in the country, ensuring that more New Jerseyans are protected if they are in a car accident. car.
Now there is pending legislation that could make auto insurance a major issue for New Jersey drivers. The state Senate has passed S-111, which will increase insurance costs for the majority of drivers by prohibiting insurers from considering factors proven to reduce premiums for low-risk drivers.
Supporters of the bill say factors like homeownership and credit scores hurt urban and minority car owners, despite studies by insurance regulators in New Jersey and Maryland, the Federal Trade Commission and Georgetown University which show they accurately predict how risky a driver is and are not proxies for race or income.
A recent report from the Insurance Council of New Jersey found that the bill would increase premiums for all drivers, regardless of race or income, by nearly $ 400 on average per year, with even higher increases for the elderly, teachers and first responders. If this legislation is passed, good drivers will once again subsidize the insurance premiums of bad drivers.
Those who argue that minority and urban drivers are affected by the current system ignore fundamental reforms: varied economies and policy options; the immediate availability of insurance in what were once underserved areas and, most importantly, protections that ensure the system is fair for all. New Jersey was one of the first states to aggressively limit the use of credit scores by prohibiting insurers from accounting for unpaid bills due to illness, divorce, or death. in the family ; unbanked status and recent auto and home loan surveys. Consumer protection was at the forefront of auto reforms and remains so today.
New Jersey also requires insurers using insurance rating to inform policyholders of factors that affect rating; The use of insurance rating as the sole factor in determining rates is prohibited and companies must submit their rating model for approval by DOBI.
What should policymakers do for New Jersey drivers? They should enact legislation that ensures the automotive market evolves and remains competitive, providing consumers with choice of business, coverage and pricing, and that encourages companies to introduce new technologies and tools such as based pricing. on mileage.
The governor should also require a regular and thorough review of insurers’ pricing models to ensure that the protections in place are applied consistently and fairly. Unfortunately, S-111 / A-1657 does the exact opposite. This brings NJ back to a system that costs drivers more.
Holly Bakke, former New Jersey Banking and Insurance Commissioner, is Director of the Strategic Initiatives Management Group, where she focuses on promoting investments in emerging economies through the development of their banking and insurance sectors.
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