February 22, 2004

By: Tom Fredericks
Website: http://www.1st-in-cars.com

Legislative Measure Would Wipeout Auto Insurance Rate Reduction

Legislation that creates an entirely new class of lawsuit against insurance companies, and would add billions to the cost of insurance for homeowners, motorists and business owners, was considered by the Assembly Consumer Affairs & Regulated Professions Committee today. If enacted, the measure would wipeout the recent 15 percent auto insurance rate reduction and push premiums for life, auto, homeowners and commercial liability insurance higher, according to the Insurance Council of New Jersey.

Claim settlement costs would rise by almost $2 billion a year under this measure, said John Tiene, ICNJ’s Chief Administrative Officer. This is not the time to bend to pressure from unhappy trial attorneys who are feeling the impact of auto insurance reform. Assembly Bill A-1805, sponsored by Assemblymen Paul DiGaetano and Joe Doria, would specifically create a new type of lawsuit under New Jersey’s unfair claim settlement practices and consumer fraud laws. As ICNJ points out, though, New Jersey consumers already have that right and can go to court and sue their insurance company. This bill would allow lawyers to twist current claim settlement and consumer fraud laws and regulations, and bring unnecessary lawsuits significantly increasing the cost of insurance for all consumers. The fact is that current New Jersey law and regulations regarding claims settlement practices are among the toughest in the nation, stated Tiene.

Any consumer can have their complaint or concern reviewed by the Division of Enforcement & Consumer Protection, an agency recognized nationally for its aggressive history of energetic consumer protection, Tiene continued. Policyholders also have an advocate in the recently established, independent Office of Insurance Claims Ombudsman. The Ombudsman is responsible for investigating consumer complaints, monitoring implementation of insurance laws and responding to consumer inquiries about insurance policy. Recent reforms cut $750 million out of the auto insurance system, said Tiene. Now those who are feeling the impact of reform are pressuring the Legislature to create a new way to keep the money flowing.

In their recent review of auto insurance, state legislators found that frivolous lawsuits were a major factor for our state’s highest-in-the nation premiums. By creating a new category of lawsuit just one year after reforms to limit frivolous lawsuits that justified a mandatory 15 percent reduction in auto insurance rates, the Legislature would simply be substituting one type of lawsuit for another and dramatically increase the cost of insurance.

While powerful, moneyed interests may support this measure, Legislators should not assume that consumers do, remarked Tiene. California voters recently voted by a 2 to 1 margin to halt the re-establishment of a similar measure when they realized the financial impact it had on their lives. A 1979 California court decision allowed third-party claimants to bring these new types of lawsuits in that state for almost ten years before the decision was overturned. The result was that during that ten-year period the average bodily injury liability claim shot from $3,434 to $8,272 -- a 140% increase!

About The Author:

Tom Fredericks is a successful author and regular contributor to http://www.1st-in-cars.com.  Great car accessories and parts plus financing, insurance and leasing tips.