Auto Insurance
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Your front-page article on uninsured drivers (Sept. 3) quotes consumer sources that accuse the insurance industry of blocking more stringent enforcement measures of automobile insurance laws. Based on my knowledge of the industry, I find this hard to believe.
Although the insurance industry is not empowered to enforce auto insurance laws, it generally supports authorities who do - motor vehicle bureaus, local police, state agencies.
As a broker of automobile insurance policies, I believe it’s important that consumers understand that the industry is on their side. To be exact, we are on the side of our clients, the policyholders.
The industry long ago recognized the problem of uninsured drivers and the adverse effects they have on our clients. To lessen the effect, insurance carriers lobbied strenuously for legislation to protect policyholders. The result was uninsured-motorist coverage, which allows policyholders to collect remuneration for injury incurred as a result of an accident caused by an uninsured motorist.
The coverage was designed to benefit the insured, not the insurer, and does not increase profits for insurance carriers. Indeed, it reduces profits. For example, while insured accident victims receive benefits owed to them from their insurance companies, there is no provision that enables these carriers to recover their payout from the uninsured who caused the accident.
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Mandatory Auto Insurance Really Raises Rates
‘’Uninsured Drivers Create Other Kinds of Wreckage'’ (front page, Sept. 3) suggests that enforcing mandatory automobile insurance laws has the favorable impact of reducing auto insurance rates. Every study on compulsory auto liability insurance has demonstrated that such laws accelerate the cost of such insurance. Enforcement increases the cost of administration to taxpayers and is ineffective.
The purpose of liability insurance is to protect the assets of the offending party, not to provide solace for the injured. For that purpose, liability insurance is inefficient. A Department of Transportation study shows that only 44 percent of the dollars paid in reaches the injured victim.
People who have no assets to protect have no reason to buy the coverage. As a result, when compelled to buy coverage, people find ways to use it, thus increasing, rather than decreasing, the impact on rates.
Those who go without coverage have worse loss experience than those who have coverage. When those who go without are forced into the insurance pool, they raise the loss experience level and have an upward impact on rates. A solid case can be made that enforcement of auto liability insurance laws increases premiums, the reverse of what you suggest. Only trial lawyers, who want every accident to involve deep pockets, might benefit from compulsory liability insurance laws.
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Making Bad Risks Good Business
Recently, an executive at State Farm said he could not make money selling auto insurance to speeders, hit-and-run drivers, drunken drivers and other menaces.
“We love attitudes like that,” said Bruce Marlow, chief operating officer of the Progressive Corporation. “Prejudices like that allow us to succeed.”
Progressive, the nation’s 38th-largest property and casualty insurer, has earned an enviable living by committing what seems to be heresy: It specializes in covering drivers whose coverage has been rejected or canceled by other insurers.
These pariahs not only include drivers with blemished records but also people rejected as too old or too young, because they own a fast car like a Maserati or Lamborghini or because they do not speak English. In the process, Progressive has become not only one of the largest issuers of “nonstandard” auto policies in the United States but also one of the most profitable auto insurers of any type.
Indeed, most insurers no longer hope to make money on auto insurance. They look to other lines of insurance or to investment income for profit. But since 1980, Progressive has consistently made money from its offbeat auto insurance business, producing an average annual return on investment of 23.6 percent companywide.
Under the 25-year stewardship of Peter B. Lewis, Progressive’s 57-year-old president and chief executive, the company has grown to $1.3 billion in revenues and 6,000 employees from $6 million in revenues and 100 employees.
“Progressive pretty much provides an example of how to run a successful insurance company,” said Richard Haverland, executive vice president of the Great American Holding Corporation, a Cincinnati-based insurance group
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Judge Rules on Auto Insurance
LEAD: In a major test of Gov. Jim Florio’s car insurance plan, a State Superior Court judge said today that while the law needs further legal scrutiny, the state could immediately begin collecting an estimated $50 million in surcharges from the insurance industry.
In a major test of Gov. Jim Florio’s car insurance plan, a State Superior Court judge said today that while the law needs further legal scrutiny, the state could immediately begin collecting an estimated $50 million in surcharges from the insurance industry.
Judge Paul Levy ordered a hearing to determine whether the law unconstitutionally prevents the insurers from making reasonable profits.
Judge Levy, acting on a suit brought by the State Farm Mutual Automobile Insurance Company, also ordered the collection of surcharges to be submitted to the clerk of Superior Court instead of to the State Treasury, pending the outcome of the hearing. The judge said if the money were paid to the Treasury, insurance companies would not have any recourse to get it back.
An assistant Attorney General, Douglas Eakeley, said the state would appeal Judge Levy’s decision to hold another hearing to the Appellate Division of State Superior Court.
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New Jersey Auto Insurance to Help Consumers
Your editorial about my plan for auto insurance reform in New Jersey ('’No-Fault Faults for New Jersey'’ Jan. 25) correctly points out that car insurance rates will go down by more than 20 percent, but it incorrectly suggests that the plan ignores the problems of phony insurance claims and repair fraud.
To the contrary, I have proposed a serious crackdown on fraud and theft.
Borrowing from an effective system in New York, New Jersey would institute a mandatory photo inspection law. Insured cars would be photographed to make sure they exist and are not previously damaged. We expect it will reduce fraud and theft in New Jersey, as it has in New York.
In addition, insurance companies will be required to submit their own plans for reducing fraud and theft or face penalties that include reduced premiums for collison and comprehensive coverage.
Other reforms I have proposed, such as eliminating the antitrust exemption for insurance companies and ending the use of age, sex and marital status to set rates, will create a more rational insurance climate. New Jersey drivers believe correctly that the car insurance system is unfair and that insurance costs too much. These changes and others will create a fair and rational insurance system for the first time in many years.
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Changes Readied For Auto Insurance
LEAD: NEW JERSEY drivers, who have long clamored for a major reconstruction of the state’s ailing and expensive insurance system, may soon get the changes they have been waiting for.
NEW JERSEY drivers, who have long clamored for a major reconstruction of the state’s ailing and expensive insurance system, may soon get the changes they have been waiting for.
In the weeks since Gov. Jim Florio’s Fair Automobile Insurance Reform Act swept through the Legislature, the State Department of Insurance has been busy drafting the regulations necessary to make Mr. Florio’s far-reaching plan a reality.
This week, department officials say, they will take a major first step in that direction by issuing a bulletin describing proposed regulations that will establish a schedule of motor vehicle violations for which ‘’eligibility points'’ will be assessed against a person’s license.
The points, which are different from Division of Motor Vehicles points, will be used, along with other criteria, to define a class of ‘’good drivers,'’ who will enjoy lower rates than those who are more prone to accidents.
In addition, they say, within the next several months, other regulations will be enacted that will change the way auto insurance is bought and sold in New Jersey.
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Florio Presents Plan for Reducing Car Insurance Costs About 20%
LEAD: Laying blame for high automobile-insurance costs on the insurance industry, Gov. Jim Florio today proposed a drastic change in the way automobile insurance works in New Jersey with a plan his aides said would reduce what drivers pay to $860 annually, from $1,112, within one year.
Laying blame for high automobile-insurance costs on the insurance industry, Gov. Jim Florio today proposed a drastic change in the way automobile insurance works in New Jersey with a plan his aides said would reduce what drivers pay to $860 annually, from $1,112, within one year.
The Governor’s plan represents a head-on confrontation with a seemingly intractable problem and with powerful business groups, most notably the insurance industry.
Central to the plan is the elimination of the Joint Underwriting Association, an organization the state created in 1983 to insure high-risk drivers. The organization now insures 40 percent of the state’s drivers and has a debt of $3 billion.
Mr. Florio’s plan would impose taxes and assessments of $1.4 billion on insurance companies to reduce the association’s debt. It would also eliminate the $212 a year that all drivers in the state pay to support the association.
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Going Toe-to-Toe Over Car Insurance Bills in New Jersey
LEAD: Gov. Jim Florio won a test of wills with one of the nation’s insurance giants last week, but the war over who will ultimately pay the bills for the state’s $3 billion auto insurance fiasco is certain to be a long one.
Gov. Jim Florio won a test of wills with one of the nation’s insurance giants last week, but the war over who will ultimately pay the bills for the state’s $3 billion auto insurance fiasco is certain to be a long one.
Governor Florio and his Insurance Commissioner, Samuel Fortunato, sent a message to the insurance industry that it cannot simply walk away from the mess it helped create by dumping millions of drivers into the Joint Underwriting Association, a state-financed insurance pool, while it insures only the best risks.
What the state did was tell ITT Hartford, one of the biggest insurers in the nation, that if it wanted to pull out of the auto insurance business in New Jersey, it would have to give up lucrative business in lines like health and homeowner’s policies as well. ‘’If they won’t play by the rules,'’ an angry Mr. Florio said, ‘’we won’t let them sell us anything.'’
The Hartford’s president and chairman, Donald Frahm, then retreated from the company’s announced intention to withdraw from the auto insurance market in the state.
The reason was fairly clear: The company’s private auto insurance business in the state amounts to $17 million a year, but its total business - including health, life, homeowner and other policies - comes to $308 million.
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Reduction in Car Insurance Rates Set For March, but Not All Wil Benefit
The Whitman administration has scheduled the long-awaited 15 percent reduction in auto insurance rates for March 22, but almost half of the state’s drivers will not get the full savings and some will instead face higher rates.
Administration officials say only 52 percent of the state’s drivers will see a 15 percent reduction or more in their auto insurance bills when they renew their policies this year. The savings will be smaller or nonexistent for about 36 percent of the state’s drivers, including motorists with good driving records. And rates will rise for 12 percent of the state’s drivers.
The reason for the disparity in rates is that the state last fall allowed insurance companies to create a new pricing system that raises premiums for drivers who fall into certain categories, such as older people and owners of inexpensive cars, regardless of their driving records.
The Whitman administration approved the new approach, known as a tiered system, after ending the insurance companies’ practice of imposing surcharges on drivers who received speeding tickets or who were involved in accidents.
While the old surcharge resulted in higher rates for about 15 percent of the state’s drivers, the new tiered system is expected to increase premiums for up to 48 percent of the state’s drivers.
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‘ No-Fault’ Auto Insurance a Key Issue, But Few States Have Implemented Plans
The question of who should pay the hospital bills for the victims of automobile accidents was raised – and often argued – in 28 state legislatures this year but in most of them the issue, “no-fault” insurance, was consigned to the limbo of committees and study groups
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