Auto Insurance
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TWO former New Jersey insurance commissioners say they have come up with a plan to sell automobile insurance at below the current average market rates.
TWO former New Jersey insurance commissioners say they have come up with a plan to sell automobile insurance at below the current average market rates.
The two, Richard C. McDonough, who was commissioner from 1972 to 1974, and James J. Sheeran, who served from 1974 to 1982, said the answer lay in the formation of a nonprofit, policyholder-owned company. Such a company, Mr. McDonough and Mr. Sheeran say, could sell insurance at rates 15 percent below the average of those charged on the open market and 20 percent below those paid by motorists in the state-run Joint Underwriting Association.
The association was created in 1983 to provide insurance for those with poor driving records, but the reluctance of private insurance companies to write new business in the state has caused more than two million drivers to be covered by the association. The companies say thay are reluctant to write polices in New Jersey because of, among other things, the state’s high accident rate and the generous medical benefits that accident victims are entitled to under state law.
Since 1985 the Democratic-controlled State Senate and Republican-controlled State Assembly have passed several bills featuring different approaches to lowering insurance premiums, but the two houses failed to reach a compromise on a major revision until late last year.
The bill enacted then orders insurance companies to remove motorists with clean records from the underwriting association and sets up a system for making drivers with poor records pay higher premiums. Sharing in Profits and Losses
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PERSONAL FINANCE; Hunting for Bargains in Insurance
Most consumers think nothing of conducting an exhaustive time-consuming search for the best deal on such items as a compact disk player or an air conditioner. But insurance? That’s a different matter. ‘’Insurance is about negative, troubling ideas, like your house burning down, your car being stolen or someone dying; no one wants to face it,'’ said Kevin Foley, Deputy Superintendent of the New York State Insurance Department.
Most consumers think nothing of conducting an exhaustive time-consuming search for the best deal on such items as a compact disk player or an air conditioner. But insurance? That’s a different matter. ‘’Insurance is about negative, troubling ideas, like your house burning down, your car being stolen or someone dying; no one wants to face it,'’ said Kevin Foley, Deputy Superintendent of the New York State Insurance Department. ‘’People just grab the first thing they hear about.'’
That’s foolhardy, experts say. The price of similar automobile policies can vary by as much as 50 percent and life and homeowners’ plans by as much as 35 percent. With that in mind, consumers are well advised to take the time to shop around. Indeed, the search should start as early as three to four months before your current policy is up for renewal, said Patrick Breslin, spokesman for the New Jersey Department of Insurance.
Before beginning, it is imperative to have a clear idea of the coverage you need, and in what amount. Bear in mind that the more complicated the product, the more difficult it will be to measure one insurer’s offer against another.
In the case of auto insurance, dropping collision and comprehensive coverage as the car gets older is usually recommended, as is increasing the deductible to the highest level you feel comfortable with. And homeowners’ coverage should only insure your house for what can be destroyed or stolen, not for the land or foundation, experts say. As for life insurance, most consumer groups advocate term insurance even though many people prefer to combine their life insurance protection with their savings, opting for whole life, universal or variable plans.
These decisions, as difficult as they may be, should be made early on, usually with a financial planner, accountant or insurance agent. Once you know what you want, how do you go about singling out the best deal from 5,000 insurance companies nationwide?
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Auto Insurance Is Daunting Issue for Jersey Rivals
As the race for governor heats up, candidates are beginning to confront the high cost of automobile insurance, an issue that infuriates almost everyone in New Jersey and is understood by practically no one.
As the race for governor heats up, candidates are beginning to confront the high cost of automobile insurance, an issue that infuriates almost everyone in New Jersey and is understood by practically no one.
With insurance premiums now averaging more than $1,000 a year and consumer groups expressing their growing rage at rallies around the state, Republican and Democratic candidates in recent weeks have offered solutions ranging from deregulation to a government takeover of the industry.
In most cases, the politicians have promised that under their leadership insurance premiums could go down.
The question of who is responsible for the current mess has sparked a bitter exchange between two top Republican candidates, Representative James A. Courter and the Assembly Speaker, Charles L. Hardwick. Each says the other could have done more to protect the public from greedy special interests and from government policies that went wildly awry. Underwriting Association
‘’He is a Johnny come lately on this issue,'’ Mr. Hardwick said of Mr. Courter. ‘’He had not said one word on car insurance and suddenly he comes in with a bad proposal, and is trying to gain some cheap advantage with it. I don’t think he will get away with it.'’
An aide to Mr. Courter, Gordon Hensley, pointed out that Mr. Hardwick had voted to establish a state underwriting body, the Joint Underwriting Association, to insure motorists with poor driving records. The association is now $2.5 billion in debt and is generally acknowleged to be a public policy fiasco.
‘’The bottom line is that Jim Courter is the only guy who didn’t vote for the J.U.A.,'’ Mr. Hensley said. ‘’Don’t forget that.'’
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CONSUMER’S WORLD; Car Insurance: Two Choices
As the national clamor for lower automobile insurance premiums continues, one proposal for a solution is beginning to catch the attention of consumer advocates and the insurance industry. The idea is simple: state legislation that would give the driver a choice between no-fault and fault-based policies.
As the national clamor for lower automobile insurance premiums continues, one proposal for a solution is beginning to catch the attention of consumer advocates and the insurance industry. The idea is simple: state legislation that would give the driver a choice between no-fault and fault-based policies.
Drivers of private passenger cars would have the option of selecting either fault-based liability policies, with higher premiums, or virtually pure no-fault policies, with lower premiums, that do not let individuals sue.
Project New Start, a nonprofit group with industry and consumer backing, has been established to prod the states into accepting the plan. Virginia Knauer, the consumer affairs adviser to Presidents Nixon, Ford and Reagan, was named its national chairwoman.
‘’Some of the states are in a crisis right now with high auto insurance rates,'’ Mrs. Knauer said. ‘’We’ve been talking about savings of 30, 40, 50 percent.'’
At a national conference on auto insurance in Alexandria, Va., last month, Mrs. Knauer presented her group’s plan, which stems from proposals by Jeffrey O’Connell, a law professor at the University of Virginia who helped write the first no-fault model law in 1966. New Jersey instituted a similar approach on Jan. 1 when it began to permit motorists to choose between reserving the right to sue or agreeing not to seek legal action in most situations. ‘A Feasible Approach’
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Automobile Insurance Debate Intensifies
THE automobile insurance hearing was intended as an explanation of the Joint Underwriting Association, specifically its $2.9 billion deficit and the $222 annual charge that policyholders pay now to bail it out.
THE automobile insurance hearing was intended as an explanation of the Joint Underwriting Association, specifically its $2.9 billion deficit and the $222 annual charge that policyholders pay now to bail it out.
Some light was shed on three major problem areas - an inadequate financial underpinning at the start of the association, reportedly excessive fees for insurance companies that wrote the association’s policies and settled claims with state money, and failure to reduce the number of motorists in the association.
Some intriguing suggestions about a possible fraud of $600 million were left unexplored.
In the end, the atmosphere turned part political theater, part prosecutor’s summing up a criminal trial, part bully pulpit and part harangue against the auto insurance industry in the state.
And in this election year in the state, as voter resentment and confusion over auto insurance rates are deepening, anxiety about political fallout is growing among elected officials here.
At center stage for the hearing’s final 45 minutes was Assemblyman Michael F. Adubato, Democrat of Newark, who is co-chairman of the Assembly’s Ad Hoc Committee on the Joint Underwriting Association, which held the session last week. Mr. Adubato was the chief architect of the bill that in 1984 created the association, a state underwriting body that provides insurance to motorists rejected by private companies.
At times scolding, at times lecturing, Mr. Adubato accused the Kean administration of undercutting the association and the insurance industry of overcharging policyholders by $2 billion in five years, and tossed some barbs at Insurance Commissioner Kenneth D. Merin and three of his predecessors, seated in a row at the hearing table.
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Why Auto Insurance Costs So Much
NEW JERSEY drivers, who currently pay the highest automobile insurance premiums in the nation, can expect to see their rates double by the turn of the century, officials say, unless comprehensive, industry-wide changes are immediately undertaken.
NEW JERSEY drivers, who currently pay the highest automobile insurance premiums in the nation, can expect to see their rates double by the turn of the century, officials say, unless comprehensive, industry-wide changes are immediately undertaken.
While competing solutions to the deepening crisis abound, industry experts agree that any major change in the system requires a thorough understanding of the nature and origins of the problem itself. But even the experts often disagree on precisely where the problem lies.
‘’It’s been a comedy of errors,'’ said Assemblyman Gerald H. Zecker, Republican of Clifton and chairman of the Assembly’s Insurance Committee, referring to the continuing struggle to stabilize rates and effectively regulate the industry. The situation has grown so complex, he said, that many legislators fail to fully understand the issues involved.
Most official assessments of the crisis, however, reduce the issue to several common denominators that go from the simple to the complex; from the high cost of automobile parts to the esoteric machinations of the state’s Joint Underwriting Association, which was established to insure those with poor driving records but ended up insuring almost half of the state’s drivers.
According to a spokesman for the State Department of Insurance, Leonard Karp, the average auto insurance premium in 1988 was about $1,000, up from $735 in 1984.
But legislation enacted this year is a step in the right direction toward lower premiums, said Kenneth D. Merin, the State Insurance Commissioner.
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Auto Insurance: Wide Changes Are Sought
AS automobile insurance rates rise and the Joint Underwriting Association sinks deeper into debt, New Jersey officials and insurance industry experts agree that the current system is ripe for sweeping changes.
AS automobile insurance rates rise and the Joint Underwriting Association sinks deeper into debt, New Jersey officials and insurance industry experts agree that the current system is ripe for sweeping changes.
And while the gubernatorial candidates offer plans to improve the automobile insurance system, alternative solutions are also being suggested by lawmakers, lobbyists, insurance groups and citizens’ organizations.
The concern comes at a time, experts say, when average premiums in the state are the highest in the nation and when the Joint Underwriting Association, the state-sponsored agency that insures almost half of New Jersey’s drivers, is battling a $3 billion deficit.
The proposals suggested so far include an overhaul of the existing system, the elimination of mandatory insurance coverage and a ‘’pay at the pump'’ system that would establish special funds to pay the medical costs and damage claims of accident victims.
But with scores of bills already offered in the State Legislature and with each special-interest group pushing its own agenda, the legislative support needed to pass any auto insurance proposal is difficult to amass.
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The Wrong Road to Auto Insurance
The California Supreme Court’s recent decision on Proposition 103 contains a lesson for the nation: On the subject of automobile insurance, there’s no free ride. Instead of seeking relief from high rates in plebiscites, consumers would do better to demand measured, rational legislative remedies, beginning with genuine no-fault insurance.
The California Supreme Court’s recent decision on Proposition 103 contains a lesson for the nation: On the subject of automobile insurance, there’s no free ride. Instead of seeking relief from high rates in plebiscites, consumers would do better to demand measured, rational legislative remedies, beginning with genuine no-fault insurance.
The court ruling seemed at first to be a great victory for supporters of Proposition 103, which was passed by voters in November in response to soaring auto insurance rates. The court found no constitutional bar to most of its provisions. But the one exception was critical and it could render the initiative all but meaningless in financial terms.
The most radical provision would have reduced premiums for all policyholders to levels 20 percent below those of November 1987. Drivers with good records would get an extra 20 percent drop. Only insurance companies facing a ‘’substantial threat of insolvency'’ would be exempted.
The California court, citing the due process clauses of the Federal and state Constitutions, modified that clause to require only a showing of a ‘’fair and reasonable return'’ for a company to be exempted. There is no evidence that insurors have been gouging Californians for excessive profits. And spokesmen for the industry express confidence they can show their rates of return - about 3 percent in 1987 and 1988 - to be ‘’fair and reasonable.'’
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Truth About Auto Insurance
Like their counterparts in California, New Jersey drivers are fed up with soaring auto insurance bills and won’t let state officials rest until they’ve done something about it. Even so, Governor Kean’s latest proposal to placate angry drivers is a non-starter, at best puckish and at worst irresponsible.
Like their counterparts in California, New Jersey drivers are fed up with soaring auto insurance bills and won’t let state officials rest until they’ve done something about it. Even so, Governor Kean’s latest proposal to placate angry drivers is a non-starter, at best puckish and at worst irresponsible.
The truth is that there’s only one realistic way to reduce premiums soon: cut services provided by insurers. One expensive service that few New Jerseyans (other than claimants’ lawyers) would miss is the right to collect damages in court.
There’s no great mystery as to why average insurance rates in New Jersey are $1,000 and climbing rapidly. The state has the second-highest number of accidents per mile driven and the fourth-highest theft rate. It also has the second-highest per capita income, which is reflected in higher medical and auto repair costs. Moreover, since 1973, New Jersey has required insurers to cover all medical expenses in accidents, no matter who was at fault.
Pressed to do something about rates, the state capped premiums for all drivers with good driving records. Insurance companies responded by refusing to cover most young drivers and residents of densely populated, high-risk areas - fully half the drivers in the state.
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Consumers Win a Victory on Auto Insurance
Your analysis of California’s Proposition 103, which was passed by voters last November in response to soaring insurance rates ('’The Wrong Road to Auto Insurance,'’ editorial, May 13), was off track. The California Supreme Court struck two provisions but left salient parts of the initiative intact.
These (1) prohibit arbitrary cancellation or nonrenewal of policies; (2) require auto insurers to offer policies to good drivers at a 20 percent discount; (3) prohibit discrimination such as territorial rating (red lining); (4) repeal the industry’s exemption from state antitrust laws; (5) allow banks to sell insurance, facilitating competition; (6) make the insurance commissioner an elected post, rather than a political appointee beholden to the industry; (7) allow consumer participation in agency proceedings, and most important, (8) subject all auto, property and casualty insurance rates to prior approval by the Department of Insurance.
When you say ‘’the ruling thus cuts the heart from Proposition 103,'’ you could not be more wrong. Indeed, the industry’s legal challenge relied heavily on trivial, technical claims that would have annulled the entire initiative. They were most concerned with the provisions the court upheld.
The provision the court struck down involved hardship relief for insurance companies from rates permitted in the first year after the law’s approval. These interim rates are to be 20 percent below 1987 levels. The court upheld the rollback, rejecting the insurer’s claim that it was arbitrary. But the court stated that relief must be granted if a company can ‘’prove that a higher rate is constitutionally required.'’
You apparently agree with the industry that it can easily prove current rates are ‘’fair and reasonable,'’ thus allowing widespread exemption from the rollback. But insurance companies can no longer keep two sets of books, one for regulators, showing continuing losses, and the other for investors and management, showing growth and profit. Full disclosure is now required of such items as investment income. For example, State Farm Mutual claims its present earnings are inadequate and has petitioned the insurance commissioner for a 9.7 percent rate increase. Yet, its 1988 consolidated statement (property and casualty) showed nearly $2 billion in added surplus - a 13.6 percent increase over 1987.
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