ASSEMBLY, No. 2625
STATE OF NEW JERSEY
210th LEGISLATURE
INTRODUCED JUNE 28, 2002
Sponsored by:
Assemblyman LOUIS D. GREENWALD
District 6 (Camden)
Assemblyman CHRISTOPHER "KIP" BATEMAN
District 16 (Morris and Somerset)
Co-Sponsored by:
Assemblywoman Cruz-Perez, Assemblymen Guear, Ahearn, Cryan, Edwards, Biondi, R.Smith, Conners, Merkt, Wolfe, DeCroce, Pennacchio, Barnes, Diegnan and S.Kean
SYNOPSIS
"New Jersey Automobile Insurance Competition and Choice Act."
CURRENT VERSION OF TEXT
As introduced.
(Sponsorship Updated As Of: 5/6/2003)
An Act concerning the regulation of the business of automobile insurance and revising various parts of the statutory law.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. (New section) This act shall be known and may be cited as the "New Jersey Automobile Insurance Competition and Choice Act."
2. (New section) The Legislature finds and declares:
a. The existence of a vibrant, competitive private passenger automobile insurance market in New Jersey is clearly in the best interests of the State;
b. Numerous insurance companies have left New Jersey in recent years and many other major insurers refuse to do business in our State, thus denying consumers the substantial benefits of a competitive automobile insurance market;
c. The private passenger automobile insurance regulatory system in New Jersey has long been characterized by numerous challenges and repeated efforts to address the difficulties associated with this line of insurance;
d. The Legislature has, from time to time, enacted various regulatory controls on the business of automobile insurance that, at the time of their enactment, were designed to address specific problems existing at the time of the enactments;
e. Many of these legislative controls have outlived their utility and the cumulative effect of their continuation is a regulatory system that stifles competition and has resulted in fewer and fewer automobile insurers doing business in the State;
f. The reduction in the number of automobile insurers doing business in the State has resulted in fewer choices for consumers and reduced competition, and any further reduction in insurers will jeopardize the availability of automobile insurance for the public and will undermine the continued economic development of the State;
g. The further diminution in the number of automobile insurers will have an adverse effect on the availability of other lines of insurance;
h. The best interests of consumers will be served by encouraging existing insurers to remain in New Jersey and new insurers to do business in the State;
i. The Legislature has determined that a modernized regulatory system that promotes robust competition among insurers will better serve the needs and interests of consumers;
j. This Legislature finds and declares that a competitive marketplace is the most effective and efficient regulator of insurance for consumers and that an informed and willing buyer purchasing a product from a capable and willing seller is the optimal economic model for the insurance marketplace;
k. An effective, competitive marketplace must enhance the role that well-informed consumers play in the competitive marketplace and should therefore provide timely and accurate information as to price, solvency and market conduct, so that consumers can enjoy the full benefits of the marketplace; and
l. The promotion of a competitive marketplace should not diminish the ability of the State to protect policyholders and the public generally from unfair insurance practices and it is therefore essential that the State retain the necessary regulatory authority to protect consumers and insure that the competitive market fairly and adequately serves consumers.
3. (New section) a. There is established in the Department of Banking and Insurance the Commission for the Advancement of Insurance Competition. The commission shall consist of 13 members as follows:
(1) Four public members, one member to be appointed by the President of the Senate, one member to be appointed by the Minority Leader of the Senate, one member to be appointed by the Speaker of the General Assembly, and one member to be appointed by the Minority Leader of the General Assembly;
(2) The Commissioner of Banking and Insurance, who shall serve ex-officio;
(3) The Chief Executive Officer and Secretary of the New Jersey Commerce and Economic Growth Commission;
(4) Seven members appointed by the Governor, as follows: a member of the New Jersey academic community with expertise in economics or business management; a representative of the Insurance Council of New Jersey; a representative of the National Association of Independent Insurers; a representative American Insurance Association; a representative of the Alliance of American Insurers; and two members who shall be licensed insurance producers authorized to transact personal lines insurance, including homeowners, private passenger non-fleet automobile, or property insurance for personal, family or household needs;
b. The members of the commission shall serve for two-year terms and until their successors are appointed and qualified. Any vacancy in the membership of the commission shall be filled for the unexpired term in the same manner as provided for the original appointment.
c. The commission shall annually elect from among its insurance industry members a chair and vice-chair. The commission shall meet at least two times a year and may hold additional meetings as necessary to discharge its duties.
d. Members of the commission shall be compensated and reimbursed for actual expenses reasonably incurred in the performance of their official duties and provided with office and meeting facilities and personnel required for the proper conduct of the commission's business.
e. Among its duties and responsibilities, the commission shall:
(1) Assist the Commissioner of Banking and Insurance in the study and review of the availability of personal lines insurance in this State;
(2) Identify and analyze barriers to personal lines insurance companies doing business in the State and formulate incentives to encourage insurers to do business in the State;
(3) Monitor the competitiveness of the personal lines insurance marketplace and engage in review and development activities as necessary to enhance competition among insurers and otherwise effectuate the purposes of this act;
(4) Make recommendations to the commissioner, as it deems necessary and appropriate, to develop and encourage a stable insurance marketplace, facilitate competition, and empower consumers; and
(5) Annually file a report and recommendations by September 1st of each year with the commissioner on the state of the personal lines insurance marketplace.
f. The commission shall organize upon appointment of its members and shall expire on December 31, 2006.
4. (New section) a. The Commissioner of Banking and Insurance shall implement a consumer information system regarding personal lines insurance, which includes homeowners, private passenger non-fleet automobile, and property insurance for personal, family or household needs, that:
(1) Recognizes and enhances the role well-informed consumers play in the competitive marketplace;
(2) Collects and disseminates relevant information to consumers in order to enhance their ability to make informed choices in their purchase of insurance products;
(3) Promotes competition among insurers; and
(4) Protects policyholders and the public from unfair market practices of insurers.
b. The commissioner shall develop, or cause to be developed, and utilize, a consumer information system to provide and disseminate price information, solvency information, consumer complaint ratios and other relevant information on a readily available basis to purchasers of personal lines insurance and which shall include the following:
(1) A compilation of representative rating examples, for each rating territory where applicable, for all insurers writing personal lines insurance;
(2) A compilation and explanation of commonly used insurance rating factors;
(3) Advisory materials on how consumers can improve their insurance rating factors, make informed insurance purchases, and make cost-saving choices;
(4) A single, uniform measure for consumer complaints and a complaint ratio for each company per state;
(5) Standardized solvency information;
(6) A point of contact for each insurer for the purpose of obtaining quotations for insurance; and
(7) Other relevant information.
c. The consumer information system may be developed by the department, in cooperation with other state insurance departments, through outside contractors or in any other appropriate manner. To the extent deemed necessary and appropriate by the commissioner, insurers, advisory organizations, statistical agents and other persons or organizations involved in conducting the business of personal lines insurance in this State shall cooperate in the development and utilization of a consumer information system and to increase the amount of competition in the State. To the extent practical, the commissioner shall utilize existing standardized measurements of the relevant information provided to consumers, and may eliminate any aspect of the system that becomes redundant or unnecessary as the result of general availability through alternate sources.
d. Each insurer providing personal lines insurance for the consumer information system shall provide the rating examples to the commissioner in a format to be established by regulation that will facilitate the comparison of the information by consumers, provided that the commissioner shall not require insurers to provide more than five rating examples per territory.
5. (New section) For the purposes of sections 6 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill):
"Automobile" means an automobile as defined in section 2 of P.L.1972, c.70 (C.39:6A-2).
"Automobile insurance" means insurance for an automobile, including coverage for bodily injury liability and property damage liability, comprehensive and collision coverages, uninsured and underinsured motorist coverage, personal injury protection coverage, additional personal injury protection coverage and any other automobile insurance required by law.
"Classification system" or "classification" means the process of grouping risks with similar risk characteristics so that differences in costs may be recognized.
"Commissioner" means the Commissioner of Banking and Insurance.
"Competitive market" means any market except those that have been found to be non-competitive pursuant to section 7 of P.L. , c. (C. ) (now before the Legislature as this bill).
"Department" means the Department of Banking and Insurance.
"Excessive" means a rate in a non-competitive market that is likely to produce a long-term profit that is unreasonably high for the insurance provided.
"Expenses" means that portion of a rate attributable to acquisition, field supervision, collection expenses, general expenses, taxes, licenses and fees.
"Inadequate" means a rate which is unreasonably low for the automobile insurance provided and: (1) the continued use of which endangers the solvency of the insurers using it; or (2) will have the effect of substantially lessening competition or creating a monopoly in any market.
"Loss adjustment expense" means the expenses incurred by the insurer in the course of settling claims.
"Market" is the Statewide interaction between buyers and sellers in the procurement of a line of insurance coverage pursuant to the provisions of P.L. , c. (C. ) (now before the Legislature as this bill).
"Non-competitive market" means a market that is subject to a ruling pursuant to section 7 of P.L. , c. (C. ) (now before the Legislature as this bill), that a reasonable degree of competition does not exist. For the purposes of this act, residual market mechanisms are non-competitive markets.
"Prospective loss cost" means that portion of a rate that does not include provisions for expenses, other than loss adjustment expenses or profit, and is based on historical aggregate losses and loss adjustment expenses adjusted through development to their ultimate value and projected through trending to a future point in time.
"Rate" means that cost of insurance per exposure unit whether expressed as a single number or as a prospective loss cost with an adjustment to account for the treatment of expenses, profit and individual insurer variation in loss experience, prior to any application of individual risk variations based on loss or expense considerations, and does not include minimum premiums.
"Residual market mechanism" means an arrangement, either voluntary or mandated by law, involving participation by insurers in the equitable apportionment of risks among insurers for insurance which may be afforded applicants who are unable to obtain insurance through ordinary methods.
"Supplementary rate information" means any manual or plan of rates, classification, rating schedule, minimum premium, policy fee, rating rule and any other similar information needed to determine an applicable rate in effect or to be in effect.
"Supporting information" means: (1) the experience and judgment of the filer and the experience or data of other insurers or organizations relied upon by the filer; (2) the interpretation of any statistical data relied upon by the filer; (3) a description of methods used in making the rates; and (4) other similar information relied upon by the filer.
"Trending" means any procedure for projecting losses to the average date of loss, or premiums or exposures to the average date of writing, for the period during which the policies are to be effective.
"Unfairly discriminatory" means a rate that cannot be actuarially justified. The term does not refer to rates that produce differences in premiums for policyholders with like loss exposures, but different expenses, or like expenses but different loss exposures, so long as the rate reflects such differences with reasonable accuracy.
6. (New section) The provisions of sections 5 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill) shall apply to all types of automobile insurance written on risks in this State by any insurer licensed or authorized to do business in this State.
7. (New section) a. A competitive market for automobile insurance is presumed to exist unless the commissioner, after notice and hearing, determines by clear and convincing evidence, that a reasonable degree of competition does not exist within that market based on two or more of the factors set forth in subsection b. of this section and issues a ruling to that effect.
A ruling issued pursuant to this section shall expire one year after issue unless rescinded earlier by the commissioner or unless the commissioner renews the ruling after a hearing and a finding as to continued lack of a reasonable degree of competition. Any ruling that renews the finding that competition does not exist within the market for automobile insurance shall include findings regarding: (1) the action the State and the commissioner have taken to return the market to a competitive market; and (2) an explanation regarding why those actions have failed to return the market to a competitive market.
b. The following factors shall be considered by the commissioner for purposes of determining if a reasonable degree of competition does not exist in a particular line of automobile insurance:
(1) The number of insurers or groups of affiliated insurers actively engaged in providing coverage in the market, taking into account the specialization traditionally associated with the line of insurance;
(2) Measures of market concentration and changes of market concentration over time, including, but not limited to, the Herfindahl-Hirschman Index (HHI) and the United States Department of Justice merger guidelines for an unconcentrated market;
(3) Ease of entry and exit and the existence of financial or economic barriers that could prevent new insurers from entering the market;
(4) The extent to which any insurer or group of affiliated insurers controls all or a dominant portion of the market and has actively sought to prevent competition;
(5) Whether the total number of insurers writing the line of insurance in this State is sufficient to provide multiple options;
(6) The availability of insurance coverage to consumers in the market; and
(7) The opportunities available to consumers in the market to acquire pricing and other consumer information.
c. The commissioner shall monitor, and take all reasonable actions to maintain, the degree and continued existence of competition in this State on an on-going basis. In doing so, the commissioner may utilize existing relevant information, analytical systems and other sources, or rely on any combination thereof. Monitoring activities may be conducted internally within the department, in cooperation with other state insurance departments, through outside contractors and in any other manner determined appropriate by the commissioner.
8. (New section) a. Rates for automobile insurance shall not be excessive, inadequate or unfairly discriminatory as determined in accordance with the provisions of sections 5 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill).
(1) No rate in a competitive market shall be considered excessive.
(2) No rate in a competitive market shall be considered unfairly discriminatory unless it classifies risk on the basis of race, color, creed or national origin. Risks may be classified in any way except that no risk shall be classified on the basis of race, color, creed or national origin. A rate is not unfairly discriminatory if it averages broadly among persons insured under a group, franchise or blanket policy, or a mass marketing plan.
b. In determining whether rates in a non-competitive market are excessive, inadequate or unfairly discriminatory, the commissioner may consider the following:
(1) Basic rate factors. Due consideration shall be given to past and prospective loss costs and expense experience within and outside of this State, to catastrophe hazards and contingencies, to events or trends within and outside of this State, to dividends or savings to policyholders, members or subscribers, and to all other factors and judgments deemed relevant by the insurer.
(2) Classification. Risks may be grouped by classifications for the establishment of rates and minimum premiums. Classification rates may be modified for individual risks in accordance with rating plans or schedules which establish standards for measuring probable variations in hazards or expenses, or both.
(3) Expenses. The expense provision shall reflect the operating methods of the insurer and its own past expense experience and anticipated future expenses.
(4) Contingencies and profits. The rates may contain a provision for contingencies and a provision for a reasonable underwriting profit, and may reflect investment income directly attributable to unearned premium and loss reserves.
(5) Other relevant factors. Any other factors available at the time of hearing may be considered.
9. (New section) a. If the commissioner determines that competition does not exist in the automobile insurance market and issues a ruling to that effect pursuant to section 7 of P.L. , c. (C. ) (now before the Legislature as this bill), the rates applicable to insurance sold in that market shall be regulated in accordance with the provisions of this section and sections 8, 10 and 11 of P.L. , c. (C. ) (now before the Legislature as this bill) applicable to non-competitive markets.
b. Any rate filing in effect at the time the commissioner determines that competition does not exist pursuant to section 7 of P.L. , c. (C. ) (now before the Legislature as this bill) shall be deemed to be in compliance with the laws of this State unless disapproved pursuant to the procedures and rating standards contained in this section and sections 8, 10 and 11 of P.L. , c. (C. ) (now before the Legislature as this bill) applicable to non-competitive markets.
c. Any insurer having a rate filing in effect at the time the commissioner determines that competition does not exist pursuant to section 7 of P.L. , c. (C. ) (now before the Legislature as this bill) may be required to furnish supporting information within 30 days of a written request by the commissioner.
d. Any rate filing that results in an overall increase for the filer of more than 10% in any twelve-month period shall be treated in accordance with the provisions of sections 8, 10 and 11 of P.L. , c. (C. ) (now before the Legislature as this bill) applicable to non-competitive markets as if the filing was a filing in a non-competitive market.
10. (New section) a. (1) For an automobile insurance rate filing in a competitive market, every insurer shall file with the commissioner all rates and supplementary rate information to be used in this State no later than 30 days after the effective date of the rate.
(2) For an automobile insurance rate filing in a non-competitive market, every insurer shall either file under the provisions of section 34 of P.L. 1997, c.51 (C.17:29A-46.6) and have the filing governed entirely by those provisions or file under the provisions of sections 5 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill) with the commissioner all rates, supplementary rate information and supporting information at least 30 days before the proposed effective date of the rate and have the filing governed by these provisions. The commissioner may give written notice, within 30 days of receipt of the filing, that the commissioner needs additional time, not to exceed 30 days from the date of the notice, to consider the filing. Upon written application of the insurer, the commissioner may authorize rates to be effective before the expiration of the waiting period or an extension thereof. A filing shall be deemed to meet the requirements of sections 5 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill) and shall become effective, unless disapproved pursuant to section 11 of P.L. , c. (C. ) (now before the Legislature as this bill) by the commissioner, before the expiration of the waiting period or an extension thereof.
(3) The filing shall be deemed in compliance with the filing provisions of this section unless the commissioner informs the insurer within 10 days after receipt of the filing as to what supplementary rate information or supporting information is required to complete the filing.
(4) Residual market mechanisms may file residual market rates.
b. An insurer may file its rates pursuant to this section by either filing its final rates or by filing a multiplier that will be applied to all of its existing rates.
c. Except for information that is trade secret, confidential, or proprietary, all rates, supplementary rate information and any supporting information filed pursuant to sections 5 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill) shall be open to public inspection on:
(1) The later on the date filed or the filing’s effective date, if subject to paragraph (1) of subsection a. of this section; or
(2) Upon filing, if subject to paragraph (2) of subsection a. of this section.
Copies may be obtained from the commissioner upon request and upon payment of a reasonable fee.
d. Notwithstanding any other provisions of this section to the contrary, upon written application of the insurer, stating the reason therefore, a rate in excess of or below that otherwise applicable may be used on any specific risk.
11. (New section) a. The commissioner shall disapprove a rate filed pursuant to section 10 of P.L. , c. (C. ) (now before the Legislature as this bill) in a competitive market only if the commissioner finds pursuant to subsection b. of this section that the rate is inadequate or unfairly discriminatory pursuant to subsection a. of section 8 of P.L. , c. (C. ) (now before the Legislature as this bill).
The commissioner may disapprove a rate filed pursuant to section 10 of P.L. , c. (C. ) (now before the Legislature as this bill) for use in a non-competitive market only if the commissioner finds that the rate is excessive, inadequate or unfairly discriminatory.
b. Prior to the expiration of the waiting period, or an extension thereof, of a filing made pursuant to section 10 of P.L. , c. (C. ) (now before the Legislature as this bill), the commissioner may disapprove, by written order, rates filed pursuant to that section, without a hearing. The order shall specify in what respect the filing fails to meet the requirements of sections 5 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill). Any insurer whose rates are disapproved pursuant to this section shall be given a hearing upon written request made within 30 days of disapproval.
If, at any time, the commissioner finds that a rate applicable to automobile insurance sold in a non-competitive market is excessive, inadequate or unfairly discriminatory, the commissioner may, after a hearing held upon not less than 20 days after written notice, issue an order disapproving the rate. The disapproval order shall not affect any contract or policy made or issued prior to the effective date set forth in the order. A policyholder may cancel a policy containing a disapproved rate without penalty.
If, at any time, the commissioner finds that a rate applicable to automobile insurance sold in a competitive market is inadequate or unfairly discriminatory, the commissioner may issue an order disapproving the rate. The disapproval order shall not affect any contract or policy made or issued prior to the effective date set forth in the order.
c. If the commissioner disapproves a rate pursuant to subsection b. of this section, the commissioner shall issue an order within 30 days of the close of any hearing specifying in what respect the rate fails to meet the requirements of sections 5 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill). The order shall state an effective date no sooner than 60 days after the date of the order when the use of that rate shall be discontinued and that the insurer shall have the option to use its rates that were in force at the time the now disapproved rate filing was made or the rates that the commissioner specifies in the order that would meet the requirements of sections 5 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill). This order shall not affect any contract or policy made or issued prior to the effective date set forth in the order. A policyholder may cancel a policy containing a disapproved rate without penalty.
d. If an order of disapproval is appealed pursuant to section 13 of P.L. , c. (C. ) (now before the Legislature as this bill), the insurer may implement the disapproved rate upon notification to the court, in which case any excess of the disapproved rate over, at the insurer’s option, either its rates that were in force at the time the now disapproved rate filing was made or the rates that the commissioner specifies in the order that would meet the requirements of the act shall be placed in a reserve escrow account established by the insurer. The court shall have control over the disbursement of funds from the reserve escrow account. Funds shall be distributed as determined by the court in its final order, except that de minimus refunds to policyholders shall not be required.
12. (New section) a. The commissioner may impose, after notice and hearing, a penalty for violations of sections 5 through 14 of the provisions of P.L. , c. (C. ) (now before the Legislature as this bill) determined in accordance with section 23 of P.L.1944, c.27 (C.17:29A-23).
b. Technical violations arising from systems or computer errors of the same type shall be treated as a single violation. In the event of an overcharge, if the insurer makes restitution including payment of interest, no penalty shall be imposed.
c. The commissioner may suspend or revoke the license of any insurer which fails to comply with an order of the commissioner within the time prescribed by the order, or any extension thereof which the commissioner may grant.
d. The commissioner may determine when a suspension of license shall become effective and the period of that suspension, which the commissioner may modify or rescind in any reasonable manner.
e. No penalty shall be imposed and no license shall be suspended or revoked except upon a written order of the commissioner, stating his findings, made after notice and hearing.
13. (New section) Any order, ruling, finding, decision or other act of the commissioner made pursuant to the provisions of sections 5 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill) shall be subject to judicial review in accordance with the Rules Governing the Courts of New Jersey. No action shall be brought against an insurer alleging that a rate subject to sections 5 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill) that the insurer is charging is contrary to law unless that person files a complaint with the commissioner requesting a hearing under section 11 of P.L. , c. (C. ) (now before the Legislature as this bill) and appeals any adverse order arising from that hearing to the courts in accordance with the Rules Governing the Courts of New Jersey.
14. (New section) a. All notices rendered pursuant to the provisions of sections 5 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill) shall be in writing and shall state clearly the nature and purpose of the hearing. All relevant facts, statutes and rules shall be specified so that the parties are fully informed of the scope of the hearing, including specific allegations, if any. If a hearing is required, all notices shall designate a hearing date at least 14 days from the date of the notice, unless this minimum notice period is waived.
b. All hearings pursuant to the provisions sections of 5 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill) shall be conducted in accordance with the provisions of the "Administrative Procedure Act" P.L.1968, c.410 (C.52:14B-1 et seq.), to the extent those provisions are consistent with the procedural requirements contained in sections of 5 through 14 of P.L. , c. (C. ) (now before the Legislature as this bill), except as expressly modified herein.
15. Section 34 of P.L.1997, c.151 (C.17:29A-46.6) is amended to read as follows:
34. a. [Notwithstanding] On or after the effective date of P.L. , c. (C. ) (now before the Legislature as this bill) and until January 1, 2006, notwithstanding section 14 of P.L.1944, c.27 (C.17:29A- 14), an insurer or rating organization may elect to file a proposed alteration to its rating system pursuant to the [expedited] a file and use process set forth in this section when the filer requests either an increase of no more than [3%] 10% prior to January 1, 2006 or any decrease in its Statewide average base rate prior to January 1, 2006, for private passenger automobile insurance.
b. A filer electing to use this [expedited] file and use process shall file with the commissioner that reasonable information necessary to support the rate change which the commissioner prescribes by regulation and a proposed effective date for the rates which shall be at least 60 days after the date of the filing. The prescribed filing requirements shall recognize the intent of this section to provide [an expedited] a file and use process and shall not require any information not required by a filing pursuant to section 14 of P.L.1944, c.27 (C.17:29A-14).
c. [If the commissioner] Notwithstanding the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), or any other provision of law to the contrary, the commissioner may disapprove the filing on a prospective basis only, if an administrative law judge has determined, after opportunity for a contested case hearing, that the filing will [not] produce rates that are excessive, inadequate for the safety and soundness of the insurer, or unfairly discriminatory between risks in this State involving substantially the same hazards and expense elements [approve the filing].
d. [A decision on the filing shall be rendered not later that 45 days after receipt of the filing, unless the commissioner grants an extension, in which case a decision shall be rendered not later than 60 days after receipt of the filing. A filing shall be complete and received when the filing is accompanied by a certification by a qualified actuary which states that the material, data and documentation, which is part of the filing, includes the documents set forth in regulations, supports the requested rate change and is consistent with generally accepted ratemaking principles of the actuarial profession. A filing shall be deemed to be approved unless rejected or modified by the commissioner within the time provided.] A filer may use the rates proposed in the rate filing on the proposed effective date of the filing. The filer may continue to use those rates until and unless the rates are disapproved by the commissioner pursuant to subsection c. of this section. Any such disapproval shall be prospective only. The order of disapproval shall contain an effective date of not less than 60 days after the effective date of the disapproval order.
e. The [commissioner shall not approve] filer shall not file any rate change pursuant to this [expedited] file and use process that results in an overall increase of more than [3% or an increase in any single coverage of more than 5%] 10% prior to January 1, 2006. In addition, a file and use rate change shall include the changes in rates resulting from the changes in the territorial rate cap established pursuant to section 7 of P.L.1983, c.65 (C.17:29A-36) as provided in section 17 of this amendatory and supplementary act. The change in rates resulting from the changes in the territorial rate cap alone shall be revenue neutral for the filer.
f. [An] Prior to January 1, 2006, an insurer shall not [file more than one request for an increase in rates] implement any rate increases pursuant to this section which combine to produce increases of more than 10% overall in any [twelve-month period] one calendar year.
(cf: P.L.1997, c.151, s.34)
16. Section 14 of P.L.1944, c.27(C.17:29A-14) is amended to read as follows:
14. a. With regard to all property and casualty lines, a filer may, from time to time, alter, supplement, or amend its rates, rating systems, or any part thereof, by filing with the commissioner copies of such alterations, supplements, or amendments, together with a statement of the reason or reasons for such alteration, supplement, or amendment, in a manner and with such information as may be required by the commissioner. If such alteration, supplement, or amendment shall have the effect of increasing or decreasing rates, the commissioner shall determine whether the rates as altered thereby are reasonable, adequate, and not unfairly discriminatory. If the commissioner shall determine that the rates as so altered are not unreasonably high, or inadequate, or unfairly discriminatory, he shall make an order approving them. If he shall find that the rates as altered are unreasonable, inadequate, or unfairly discriminatory, he shall issue an order disapproving such alteration, supplement or amendment. With respect to a filing for private passenger automobile insurance rates, the commissioner shall issue an order of approval or disapproval within 60 days of the date that the filing was made, otherwise the filing shall be deemed approved and the insurer may implement the rates for policyholders as set forth in the filing.
b. (Deleted by amendment, P.L.1984, c.1.)
c. If an insurer or rating organization files a proposed alteration, supplement or amendment to its rating system, or any part thereof, which would result in a change in rates, the commissioner [may, or] upon the request of the filer [or the appropriate division or office in the Department of Insurance] shall, certify the matter for a hearing. The hearing shall, at the commissioner's discretion, be conducted by himself, by a person appointed by the commissioner pursuant to section 26 of P.L.1944, c.27 (C.17:29A-26), or by the Office of Administrative Law, created by P.L.1978, c.67 (C.52:14F-1 et seq.), as a contested case. The following requirements shall apply to the hearing:
(1) The hearing shall commence within 30 days of the date of the request or decision that a hearing is to be held. The hearing shall be held on consecutive working days, except that the commissioner may, for good cause, waive the consecutive working day requirement. If the hearing is conducted by an administrative law judge, the administrative law judge shall submit his findings and recommendations to the commissioner within 30 days of the close of the hearing. The commissioner may, for good cause, extend the time within which the administrative law judge shall submit his findings and recommendations by not more than 30 days. A decision shall be rendered by the commissioner not later than 60 days, or, if he has granted a 30 day extension, not later than 90 days, from the close of the hearing. A filing shall be deemed to be approved unless rejected or modified by the commissioner within the time period provided herein.
(2) The commissioner, or the Director of the Office of Administrative Law, as appropriate, shall notify all interested parties, including the appropriate division or office in the Department of Banking and Insurance on behalf of insurance consumers, of the date set for commencement of the hearing, on the date of the filing of the request for a hearing, or within 10 days of the decision that a hearing is to be held.
(3) The insurer or rating organization making a filing on which a hearing is held shall bear the costs of the hearing.
(4) The commissioner may promulgate rules and regulations (a) to establish standards for the submission of proposed filings, amendments, additions, deletions and alterations to the rating system of filers, which may include forms to be submitted by each filer; and (b) making such other provisions as he deems necessary for effective implementation of this act.
d. (Deleted by amendment, P.L.1984, c.1.)
e. [In order to meet, as closely as possible, the deadlines in section 17 of P.L.1983, c.362 (C.39:6A-23) for provision of notice of available optional automobile insurance coverages pursuant to section 13 of P.L.1983, c.362 (C.39:6A-4.3) and section 8 of P.L.1972, c.70 (C.39:6A-8), and to implement these coverages, the commissioner may require the use of rates, fixed by him in advance of any hearing, for deductible, exclusion, set off and tort limitation options, on an interim basis, subject to a hearing and to a provision for subsequent adjustment of the rates, by means of a debit, credit or refund retroactive to the effective date of the interim rates. The public hearing on initial rates applicable to the coverages available under section 13 of P.L.1983, c.362 (C.39:6A-4.3) and section 8 of P.L.1972, c.70 (C.39:6A-8) shall not be limited by the provisions of subsection c. of this section governing changes in previously approved rates or rating systems.] (Deleted by amendment, P.L. , c. .)
(cf: P.L.1994, c.58, s.43)
17. Section 7 of P.L. 1983, c.65 (C.17:29A-36) is amended to read as follows:
7. a. Any filing made for the purpose of automobile insurance rate making shall indicate the actual rate needs of the filer; provided, however, that (a) each filer's rate classification definitions, as used by that filer, shall be uniform Statewide; (b) the automobile insurance rate charged an insured shall not exceed [two] three and one-half times the filer's territorial base rate for each coverage, exclusive of driving record surcharges and discounts; and (c) the automobile insurance rate of the base class in any territory for each coverage, exclusive of driving record surcharges and discounts for any filer shall not exceed 1.35 times the filer's [Statewide average] base rate in that territory for each coverage [exclusive of driving record surcharges and discounts for any basic policy issued or renewed at any time and for any standard policy issued or renewed before January 1, 2000 or the 180th day following approval of the common territorial rating plan pursuant to section 28 of P.L.1998, c.21 (C.17:29A-50), whichever first occurs] that was in effect for the twelve month period immediately preceding the effective date of any rating plan filed on or after January 1, 2003. The provisions of this subsection shall expire on January 1, 2006.
b. [No rating plan or rate filing applicable to any policy issued or renewed on or after January 1, 2000 or the 180th day following the approval of the common territorial rating plan provided for in sections 27 and 28 of P.L.1998, c.21 (C.17:29A-49 and 17:29A-50), whichever first occurs, shall be approved by the commissioner which creates territorial relativities which are significantly disproportionate to those in effect as of the effective date of P.L.1998, c.21 (C.39:6A-1.1 et al.).] (Deleted by amendment, P.L. c. .)
c. The automobile insurance rate of an automobile whose principal operator is 65 years of age or older shall not exceed one and one-quarter times the Statewide average rate for principal operators 65 years of age or older for each coverage, exclusive of driving record surcharges and discounts; provided, however, that no filer shall increase rates for principal operators 65 years of age or older as a result of the implementation of this section unless more than 50% of its insureds are principal operators 65 years of age or older.
d. [As a result of the filings made pursuant to sections 26 and 27 of P.L. 1998, c. 21 (C.17:29A-48 and 17:29A- 49) and subsections a., b. and c. of this section, the filer's aggregate premium for all territories shall not exceed the filer's aggregate premium in effect prior to the date established in subsection b. of this section.] (Deleted by amendment, P.L. , c. .)
As used in this section, base rate means the automobile insurance rate charged for an automobile that is not used in business and not used in going to and from work, except for the going to and from work distance included in the pleasure use classification of the filer, and where there is no youthful operator, as defined in the filer's classification system. The base rate class shall not include automobiles to which discounts apply under the filer's classification system, including, but not limited to, farmers' and senior citizens' automobiles or any discount from a standard rate provided for in the filer's tier rating system.
The provisions of this section shall be implemented after the implementation of the provisions of subsection a. of section 8 of P.L.1983, c.65 (C.17:29A-37).
(cf: P.L.1998, c.22, s.6)
18. Section 26 of P.L.1998, c. 21 (C.17:29A-48) is amended to read as follows:
26. a. Every insurer writing private passenger automobile insurance in this State and every rating organization establishing territorial rating plans on behalf of its member companies shall establish new territorial rating plans in place of the insurer's or filer's territorial rating plan in effect on June 1, 1998, which shall include territorial definitions, territorial relativity factors and territorial base rates, and which are in accordance with the provisions of sections 26 through 29 of this amendatory and supplementary act. The Commissioner of Banking and Insurance shall promulgate regulations establishing standards governing the establishment of new rating territories, which standards shall include, but not be limited to:
[a.] (1) Territories shall be defined in such a manner as to recognize throughout the territorial rating plan both qualitative similarities and qualitative differences in driving environments or mix of driving environments, which may include, but not be limited to, traffic density, population density, comparative severity of loss, and the degree of homogeneity within a territory in terms of driving environments, population, and driver classification, and the territory shall be comprised of towns or cities which are contiguous;
[b.] (2) Territories shall contain a sufficient number of exposures to result in statistically credible experience, in accordance with regulations established by the commissioner, and shall be defined in a manner which minimizes the effect of variability of loss in a territory on a year-to-year basis;
[c.] (3) Territory definitions shall take into account the impact of the overlapping of traffic patterns on exposure to loss, including the relative number of intraterritory trips and inter-territory trips applicable to each proposed territory, for which the commissioner shall make available to the insurer, filer, or the commission established pursuant to section 28 of this amendatory and supplementary act, appropriate information collected pursuant to the provisions of section 1 of P.L.1987, c.450 (C.43:21-14a) by the Department of Labor;
[d.] (4) Territories shall be created in a manner which results in an equable distribution of exposures among territories throughout the State and no territorial rating plan shall result in territories which are arbitrary, unfairly discriminatory, significantly disproportionate in terms of the number of exposures per territory, or created in a manner which is primarily for marketing purposes rather than measuring relativity of exposure to probable loss, or created in a manner which can be used to avoid the insurer's or filer's obligations under section 27 of P.L.1990, c.8 (C.17:33B- 15);
[e.] (5) Territories shall be created in a manner which does not result in disproportionate differences in territorial relativity factors or territorial base rates between contiguous territories with similar driving environments or similar mix of driving environments;
[f.] (6) Factors to be considered in establishing territorial rate relativities shall include taking into account similarities or differences in driving environments or mix of driving environments, including traffic density, population density, mix of driver classifications within a territory, including classifications capped pursuant to the provisions of section 7 of P.L.1983, c.65 (C.17:29A-36), comparative degree of severity of loss, and the relative number of intraterritory and inter-territory trips;
[g.] (7) Territories shall be defined in a manner which does not result in unfair inter-territorial subsidization among territories with significant differences in driving environments or mix of driving environments, population density, traffic density, mix of driver classifications, including classifications capped pursuant to the provisions of section 7 of P.L.1983, c.65 (C.17:29A-36) and comparative degree of severity of loss;
[h.] (8) For the purpose of defining territories and establishing territorial relativity factors, loss experience allocated to any territory by an insurer or filer [(1)] (a) shall take into account any recovery applicable to exposures in the territory which are attributable to subrogation or any other kind of recovery by the insurer reporting the losses and [(2)] (b) shall not include any loss attributable to capping of driver classifications pursuant to section 7 of P.L.1983, c.65 (C.17:29A-36).
The commissioner shall establish by regulation the minimum number of exposures which shall be deemed to meet the standard of being statistically credible for the purpose of defining territories.
b. All insurers shall file a revised territorial rating plan by January 1, 2003 regardless of whether the regulations referred to in subsection a. of this section have been adopted. If those regulations have not been adopted by July 1, 2002 or a territorial rating plan pursuant to section 28 of P.L.1998, c.21 (C.17:29A-50) has not been established by July 1, 2002, the insurer's revised territorial rating plan shall be filed pursuant to section 34 of P.L.1997, c.151 (C.17:29A-46.6) and governed by its provisions. If the regulations referred to in subsection a. of this section have been adopted and a revised territorial rating plan has been established by July 1, 2002, then the insurer’s territorial rating plan shall be subject to the provisions of section 27 of P.L.1998, c.21 (C.17:29A-49).
(cf: P.L.1998, c.22, s.5)
19. (New section) a. On or after January 1, 2006, no insurer shall decline a policy of automobile insurance based on race, color, creed, national origin, age, gender, marital status or sexual orientation.
b. For the purposes of this section:
"Automobile" means an automobile as defined in section 2 of P.L.1972, c.70 (C.39:6A-2).
"Automobile insurance" means insurance for an automobile including coverage for bodily injury liability and property damage liability, comprehensive and collision coverages, uninsured and underinsured motorist coverage, personal injury protection coverage, additional personal injury protection coverage and any other automobile insurance required by law.
"Decline" means:
(1) Refusal by an insurance producer to submit an application on behalf of an applicant to any of the insurers represented by the producer;
(2) Refusal by an insurer to issue an automobile insurance policy to a person upon receipt of an application for automobile insurance;
(3) The offer of automobile insurance coverage with less favorable terms or conditions than those requested by the person, except that the charging of a higher rate or premium pursuant to a filed rating plan shall not constitute a declination;
(4) The refusal by an insurer or producer to provide, upon the request of a person, an application form or other means of making an application or request for automobile insurance coverage; or
(5) The cancellation or nonrenewal of an automobile insurance policy.
"Insurance producer" means an insurance producer as defined in section 3 of P.L.2001, c.210 (C.17:22A-28).
"Insurer" means any insurer authorized or admitted to write automobile insurance in this State, but does not include any residual market mechanism implemented pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1).
20. Section 25 of P.L.1990, c.8 (C.17:33B-13) is amended to read as follows:
25. As used in section 25 through 33 of this 1990 amendatory and supplementary act:
"Automobile" means an automobile as defined in section 2 of P.L.1972, c.70 (C.39:6A-2).
"Automobile insurance" means insurance for an automobile including coverage for bodily injury liability and property damage liability, comprehensive and collision coverages, uninsured and underinsured motorist coverage, personal injury protection coverage, additional personal injury protection coverage and any other automobile insurance required by law.
"Commissioner" means the Commissioner of Banking and Insurance.
"Declination" means:
a. Refusal by an insurance agent to submit an application on behalf of an applicant to any of the insurers represented by the agent;
b. Refusal by an insurer to issue an automobile insurance policy to an eligible person upon receipt of an application for automobile insurance;
c. The offer of automobile insurance coverage with less favorable terms or conditions than those requested by an eligible person; or
d. The refusal by an insurer or agent to provide, upon the request of an eligible person, an application form or other means of making an application or request for automobile insurance coverage.
"Automobile insurance eligibility points" means points calculated under the schedule promulgated by the commissioner pursuant to section 26 of this act.
"Eligible person" means a person who is an owner or registrant of an automobile registered in this State or who holds a valid New Jersey driver's license to operate an automobile, but does not include any person:
a. Who, during the [three-year] five-year period immediately preceding application for, or renewal of, an automobile insurance policy has been convicted pursuant to R.S.39:4- 50 or section 2 of P.L.1981, c.512 (C.39:4-50.4a), or for an offense of a substantially similar nature committed in another jurisdiction; has been convicted of a crime of the first, second or third degree resulting from the use of a motor vehicle; or has been convicted of theft of a motor vehicle, except that for policies issued prior to the effective date of P.L. , c. (C. ) (now before the Legislature as this bill), the applicable period shall be three years;
b. Whose driver's license to operate an automobile is under suspension or revocation;
c. Who has been convicted, within the five-year period immediately preceding application for or renewal of a policy of automobile insurance, of fraud or intent to defraud involving an insurance claim or an application for insurance; or who has been successfully denied, within the immediately preceding five years, payment by an insurer of a claim in excess of $1,000 under an automobile insurance policy, if there was evidence of fraud or intent to defraud involving the automobile insurance claim or application;
d. Whose policy of automobile insurance has been canceled because of nonpayment of premium or financed premium within the immediately preceding two-year period, unless the premium due on a policy for which application has been made is paid in full before issuance or renewal of the policy;
e. Who fails to obtain or maintain membership or qualification for membership in a club, group, or organization, if membership is a uniform requirement of the insurer as a condition of providing insurance, and if the dues or charges, if any, or other conditions for membership or qualifications for membership are applied uniformly throughout this State, are not expressed as a percentage of the insurance premium, and do not vary with respect to the rating classification of the member or potential member except for the purpose of offering a membership fee to family units. Membership fees, if applicable, may vary in accordance with the amount or type of coverage if the purchase of additional coverage, either as to type or amount, is not a condition for reduction of dues or fees;
f. Whose driving record for the [three] five year period immediately preceding application for or renewal of a policy of automobile insurance has an accumulation of automobile insurance eligibility points as determined under the schedule promulgated by the commissioner pursuant to section 26 of this act [or], except that for policies issued prior to the effective date of P.L. , c. (C. ) (now before the Legislature as this bill), the applicable period shall be three years;
g. Who possesses such other risk factors as determined to be relevant by rule or regulation of the commissioner; or
h. After December 31, 2005, who has been unable to obtain automobile insurance from at least two insurers at rates not exceeding those applicable to the residual market, and who certifies that fact on a form approved by the commissioner.
"Insurance agent" or "agent" means an insurance agent as defined by subsection f. of section 2 of P.L.1987, c.293 (C.17:22A-2) and shall also include an insurance broker as defined by subsection g. of section 2 of P.L.1987, c.293 (C.17:22A-2) who has a brokerage relationship with an insurer or an insurance producer as defined in section 3 of P.L.2001, c.210 (C.17:22A-28).
"Insurer" means any insurer authorized or admitted to write automobile insurance in this State, but does not include [the New Jersey Automobile Full Insurance Underwriting Association created pursuant to sections 13 through 34 of P.L. 1983, c. 65 (C.17:30E-1 et seq.) or] any residual market mechanism implemented pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1).
(cf: P.L.1990, c.8, s.25)
21. Section 26 of P.L.1990, c.8 (C.17:33B-14) is amended to read as follows:
26. The commissioner shall, within 90 days of the effective date of this act, promulgate a schedule of automobile insurance eligibility points by rule or regulation adopted pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.). The schedule shall assess a point valuation to driving experience related violations and shall include assessments for violations of lawful speed limits within such increments as determined by the commissioner, other moving violations, and at-fault accidents. For the purposes of this section, an "at-fault accident" means an at-fault accident which results in payment by the insurer of at least a $500 claim; except that an at-fault accident shall not mean an accident occurring as a result of operation of any motor vehicle in response to a medical emergency if the operator at the time of the accident was a physician responding to the medical emergency. In addition to the schedule of automobile insurance eligibility points adopted by the commissioner, insurers may also assess automobile insurance eligibility points for any offense for which the Division of Motor Vehicles assigns points pursuant to section 1 of P.L.1982, c.43 (C.39:5-30.5) with the same number of points assigned by the Division of Motor Vehicles to the extent those offenses are not listed in the schedule of automobile insurance eligibility points. Insurers may also assess three automobile insurance eligibility points for each time that a policy of automobile insurance has been canceled because of nonpayment of premium or financed premium with a lapse of coverage of at least 30 days within the immediately preceding five-year period.
(cf: P.L.1997, c.381, s.1)
22. Section 27 of P.L.1990, c.8 (C.17:33B-15) is amended to read as follows:
27. On or after April 1, 1992, every insurer, either by one or more separate rating plans filed in accordance with the provisions of [section 6 of P.L.1988, c.156 (C.17:29A-45) prior to March 1, 1998, or] section 14 of P.L.1997, c.150, (C.17:29A-46.1) on or after March 1, 1998, or through one or more affiliated insurers, shall provide automobile insurance coverage for eligible persons.
b. No insurer shall refuse to insure, refuse to renew, or limit coverage available for automobile insurance to an eligible person who meets its underwriting rules as filed with and approved by the commissioner in accordance with the provisions of [section 7 of P.L.1988, c.156 (C.17:29A-46) prior to March 1, 1998 or] section 15 of P.L.1997, c.150 (C.17:29A-46.2) on or after March 1, 1998.
c. Notwithstanding the provisions of subsections a. and b. of this section to the contrary, any qualified insurer engaged in writing automobile insurance in an automobile insurance urban enterprise zone pursuant to section 22 of P.L.1997, c.151 (C.17:33C-4) may limit the number of exposures written through its UEZ agent or agents, or in the case of a qualified insurer doing business on a direct writing basis, the qualified insurer may limit the number of exposures written in an automobile insurance urban enterprise zone consistent with its marketing plans and goals as provided in subsection a. of section 21 of P.L.1997, c.151 (C.17:33C-3). Nothing in this subsection shall be construed to relieve a qualified insurer from its obligation under subsections a. and b. of this section to write all eligible persons residing within an automobile insurance urban enterprise zone through its non-UEZ agent points of access.
d. Notwithstanding the provisions of subsections a. and b. of this section to the contrary, an insurer may refuse to insure, refuse to renew, or limit coverage available for automobile insurance in any rating territory to an eligible person who does not meet its underwriting rules if that insurer has increased the total number of automobiles it insures in that rating territory during the previous four calendar quarters by 3% over the total number of automobiles it insured in that territory on the last day of the month ending four calendar quarters earlier. This relief from the requirement that an insurer provides automobile insurance coverage to all eligible persons is effective on the first day of the second calendar month after the end of the calendar quarter in which the 3% standard has been reached. If the total number of automobiles insured by the insurer in that rating territory at the end of a subsequent calendar quarter declines to less than 102.5% of the total number of automobiles insured in that territory on the last day of the month ending four calendar quarters earlier, then the insurer shall be subject to the provisions of subsections a. and b. of this section in that rating territory beginning on the first day of the second calendar month after the end of the calendar quarter in which that percentage decline has been reached until the end of a calendar quarter once the insurer exceeds the 3% standard in that rating territory, in which case the insurer shall be relieved from the eligible persons requirement effective on the first day of the second calendar month after the end of the calendar quarter in which the insurer once again exceeds the 3% standard in that rating territory. An insurer shall report to the commissioner the total number of automobiles it insures as of the last day of the month of each calendar quarter by rating territory and shall, at the time of the report, notify the commissioner whether the insurer is refusing to insure, refusing to renew or limiting coverage for eligible persons pursuant to this subsection d. The percentages set forth in this subsection d. shall increase by two percentage points if the commissioner certifies that the plan established pursuant to P.L.1970, c.215 (C.17:29D-1 et seq.), is insuring 10 percent or more of the aggregate number of private passenger automobile non-fleet exposures being written in the total private passenger automobile insurance market in this State and shall continue at that level until such time as the commissioner certifies that the plan is insuring less than 10 percent of the aggregate number of private passenger automobile non-fleet exposures being written in the total private passenger automobile insurance market in this State.
e. The commissioner may suspend, revoke or otherwise terminate the certificate of authority to transact automobile insurance business in this State of any insurer who violates the provisions of this section.
(cf: P.L.1997, c.151, s.24)
23. Section 30 of P.L.1990, c.8 (C.17:33B-18) is amended to read as follows:
30. [A] Except for an insurer that the agent represents which may refuse to insure, refuse to renew, or limit coverage available for automobile insurance to an eligible person who meets its underwriting criteria as provided in subsection d. of section 27 of P.L.1990, c.8 (C.17:33B-15), a licensed insurance agent shall, as a condition of licensure:
(1) Provide each eligible person seeking automobile insurance premium quotations for the forms or types of automobile insurance coverages which are offered by all insurers represented by the agent or with which the agent places risks;
(2) Not attempt to channel an eligible person away from an insurer or insurance coverage with the purpose or effect of avoiding an agent's obligation to submit an application or an insurer's obligation to accept an eligible person; and
(3) Upon request, submit an application of the eligible person for automobile insurance to the insurer selected by the eligible person.
If a UEZ agent has a contract with a qualified insurer pursuant to the provisions of section 22 of P.L.1997, c.151 (C.17:33C-4) and the UEZ agent is unable to place an otherwise eligible person with that qualified insurer because of the limitation on the number of exposures imposed by that qualified insurer on the UEZ agent, the UEZ agent shall be deemed to have met the requirements of this subsection, provided that the limitation on the number of exposures has been reached and the UEZ agent fulfills all applicable regulatory requirements.
b. With respect to automobile insurance, an insurer shall not penalize an agent by paying less than normal commissions or normal compensation or salary because of the expected or actual experience produced by the agent's automobile insurance business or because of the geographic location of automobile insurance business written by the agent.
(cf: P.L.1997, c.151, s.25)
24. Section 26 of P.L.1988, c.119 (C.17:29C-7.1) is amended to read as follows:
26. a. Notwithstanding the provisions of section 3 of P.L.1972, c.70 (C.39:6A- 3), a licensed insurer may, prior to January 1, 2006 in accordance with the restrictions in subsections b. and c. of this section, and on or after January 1, 2006 without any restrictions, refuse to renew a policy of private passenger automobile insurance that provides coverage required to be maintained pursuant to P.L.1972, c.70 (C.39:6A- 1 et seq.), except that no insurer shall refuse to renew a policy pursuant to subsections b. and c. of this section[:
(1)] in an amount in excess of 20% of the entire private passenger automobile insurance book of business of any one producer in force with the insurer at the end of the previous calendar year. For purposes of this paragraph, "producer" means a person licensed pursuant to P.L.1987, c.293 (C.17:22A- 1 et seq.) or P.L.2001, c.210 (C.17:22A-26 et seq.), who earned $10,000 or more from the insurer in the prior calendar year[; and
(2) unless the insured or operator insured under the policy in the five years immediately preceding renewal has had at least two of the following or any combination thereof: (a) an at-fault accident; or (b) a moving violation which was assessed at least four automobile insurance eligibility points; or (c) had been required, but failed, to maintain coverage mandated by section 4 of P.L.1972, c.70 (C.39:6A- 4) without lapse].
b. For each calendar year period, an insurer may issue notices of intention not to renew an automobile insurance policy in the voluntary market in an amount not to exceed 2% of the total number of voluntary market automobile insurance policies of the insurer, rounded to the nearest whole number, which are in force at the end of the previous calendar year in each of the insurer's rating territories in use in this State.
c. For every two newly insured automobiles which an insurer voluntarily writes in each territory during each calendar year period, the insurer shall be permitted to refuse to renew insurance on one additional automobile in that territory in excess of the 2% limitation established by subsection b. of this section, subject to a fair and nondiscriminatory formula developed by rule or regulation of the commissioner. The provisions of this subsection shall only apply to an insurer whose aggregate voluntary market share in an automobile insurance urban enterprise zone is reasonably proportionate to the insurer's voluntary Statewide market share as determined by the commissioner by regulation or in a rating territory in which the insurer demonstrates growth in the aggregate number of in-force exposures.
d. The provisions of this section shall not apply to any cancellation made pursuant to subsection (A) of section 2 of P.L.1968, c.158 (C.17:29C-7).
e. (Deleted by amendment, P.L.1997, c.151.)
f. Nothing in this section shall prohibit an insurer from refusing to renew, in addition to nonrenewals permitted in subsections b. and c. of this section, the policy of any insured who has: (1) provided false or misleading information in connection with any application for insurance, renewal of insurance or claim for benefits under an insurance policy; or (2) who has failed to provide, after written request by an insurer, the minimum information necessary to accurately rate the policy under terms and conditions set forth by the commissioner in regulations.
(cf: P.L.1997, c.151, s.27)
25. Section 1 of P.L.1988, c.118 (C.17:29A-5.6) is amended to read as follows:
1. As used in this act:
a. "Actual investment income" means that portion of income generated by investment of policyholder-supplied funds. Policyholder-supplied funds are the assets that offset the insurer’s total New Jersey private passenger automobile insurance unearned premium and loss reserves without regard to whether those funds came from private passenger automobile insurance policyholders or other policyholders or were from policyholder funds from the last five calendar years or earlier years. If the actual investment income earned by the insurer for any given calendar year is negative, then the insurer shall report zero dollars for its actual investment income for that calendar year.
b. "Actuarial gain" means the remainder obtained by subtracting the allowance for profit and contingencies from underwriting income, which remainder may be positive or negative.
c. "AIRE charges" and "AIRE compensation" mean, respectively, amounts paid to or received from the New Jersey Automobile Insurance Risk Exchange pursuant to section 16 of P.L.1983, c.362 (C.39:6A-22).
d. "Anticipated investment income" means the amount obtained by multiplying earned premium by the percentage of premium representing investment income and used in the insurer's approved rate filings or filings made pursuant to section 29 of P.L.1988, c.119 (C.17:29A-42), during the period of the three calendar-accident years being calculated, to calculate the allowance for profit and contingencies.
e. "Calendar-accident year" means the period from January 1 to December 31, during which, in the appropriate context:
(1) premium or investment income was earned;
(2) expenses were incurred; or
(3) accidents occurred which resulted in losses, loss adjustment expenses or AIRE compensation.
f. "Car year" means the unit of exposure equivalent to the insuring of one automobile for 12 months, two automobiles for six months each, three automobiles for four months each, and so forth.
g. "Commissioner" means the Commissioner of Banking and Insurance.
h. "Development adjustment," for a given calendar-accident year, means the difference obtained by subtracting:
(1) The sum of
(a) Losses and loss adjustment expenses for that calendar-accident year, developed to an ultimate basis and evaluated as of March 31 of the year preceding the year in which the profits report required by section 2 of this act is due; plus
(b) AIRE compensation for that calendar-accident year, developed to an ultimate basis and evaluated as of March 31 of the year in which the profits report is due; from
(2) The sum of
(a) Losses and loss adjustment expenses for that calendar-accident year, developed to an ultimate basis and evaluated as of March 31 of the year in which the profits report is due; plus
(b) AIRE compensation for that calendar-accident year, developed to an ultimate basis and evaluated as of March 31 of the year preceding the year in which the profits report is due.
i. "Excess investment income" means the remainder obtained by subtracting the anticipated investment income from the actual investment income earned by the insurer, which remainder may be positive or negative.
j. "Insurer" means an entity authorized or admitted to transact private passenger automobile insurance business in New Jersey[, but does not include the New Jersey Automobile Full Insurance Underwriting Association created pursuant to P.L.1983, c.65 (C.17:30E-1 et seq.)].
k. "Private passenger automobile insurance business" means direct insurance on private passenger automobiles as defined in subsection a. of section 2 of P.L.1972, c.70 (C.39:6A-2), excluding personal excess liability insurance and insurance on commercial vehicles.
l. "Total actuarial gain" means the sum of the actuarial gains for the [three] five calendar-accident years immediately preceding the due date of the profits report required by section 2 of this act, less the development adjustments for the calendar-accident years beginning with the [seventh] ninth calendar-accident year immediately preceding the due date of the profits report and ending with the [fourth] sixth calendar-accident year immediately preceding the due date of the profits report.
m. "Underwriting income" means the remainder obtained by subtracting the sum of all losses developed to an ultimate basis, all loss adjustment expenses developed to an ultimate basis, and all other expenses exclusive of UCJF assessments, from the sum of premiums earned and AIRE compensation developed to an ultimate basis, which remainder may be positive or negative.
n. "UCJF assessments" means amounts paid by insurers to the Unsatisfied Claim and Judgment Fund pursuant to section 3 of P.L. 1952, c. 174 (C.39:6-63).
o. "UCJF reimbursements" means amounts received by an insurer from the Unsatisfied Claim and Judgment Fund as a result of excess medical expense benefit payments by the insurer pursuant to section 2 of P.L.1977, c.310 (C.39:6-73.1).
(cf: P.L.1988, c.118, s.1)
26. Section 2 of P.L.1988, c.118 (C.17:29A-5.7) is amended to read as follows:
2. a. Each insurer, except those exempt from filing pursuant to section 6 of this act, shall annually file with the commissioner, on or before July 1 of each year, a profits report containing the information and calculations required by this section. The information shall be provided with respect to the insurer's New Jersey private passenger automobile insurance business separately for each of the following coverages and for all these coverages combined:
(1) Personal injury protection, including all options;
(2) Bodily injury liability, reported at total limits;
(3) Other liability, consisting of property damage liability and uninsured and underinsured motorist coverages, all reported at total limits;
(4) Physical damage, consisting of comprehensive and collision coverages, including all deductibles.
A separate profits report shall be filed for each insurer and each insurer in an insurance holding company system. Each insurance holding company system shall file a separate combined profits report for all insurers in its system. The excess profits computation for an insurance holding company system shall be performed on its combined profits report [, except that the commissioner may order an adjustment in the combined profits report if in his judgment, upon examining each insurer's profits report in the insurance holding company system, one or more of the insurers in that system are excessively subsidizing other insurers in that system].
b. The profits report shall contain the following information for each of the [seven] nine most recent calendar-accident years, with an evaluation date as of March 31 of the year in which the profits report is due:
(1) Losses paid;
(2) Losses developed to an ultimate basis;
(3) Loss adjustment expenses paid;
(4) Loss adjustment expenses developed to an ultimate basis;
(5) AIRE compensation received; and
(6) AIRE compensation developed to an ultimate basis.
c. The profits report shall contain the following information for the calendar-accident year ending December 31 immediately preceding the date the profits report is due:
(1) Premiums written;
(2) Premiums earned;
(3) [Other] All other expenses, itemized separately as follows:
(a) [Commissions] All commission and all brokerage fees;
(b) [Taxes] All taxes, all licenses and all fees;
(c) All AIRE charges;
(d) All UCJF [assessment] assessments;
(e) [Other] All other acquisition costs and all general expenses;
(f) [Policyholder] All policyholder dividends incurred by the insurer, including any excess profits refunded or credited to policyholders;
(g) The net of all catastrophe reinsurance premiums incurred and all sums paid or owed by a catastrophe reinsurer for losses that occurred during the calendar-accident year;
(4) Allowance for profit and contingencies, calculated by multiplying the premiums earned by the profit and contingency factors authorized for use with the insurer's approved rate filings;
(5) Anticipated investment income;
(6) Actual investment income; and
(7) UCJF reimbursements received.
d. The profits report shall include a clear and explicit calculation of each of the following items;
(1) Underwriting income for each of the [three] five calendar-accident years immediately preceding the date of the profits report;
(2) Actuarial gain for each of the [three] five calendar-accident years immediately preceding the date of the profits report;
(3) Excess investment income for each of the [three] five calendar-accident years immediately preceding the date of the profits report;
(4) Development adjustment for each of the four calendar-accident years specified in subsection l. of section 1 of this act;
(5) Total actuarial gain; and
(6) Excess profits.
e. No reports shall be made covering calendar year 2006 or later, unless ordered by the commissioner pursuant to section 23 of P.L.1988, c.118 (C.17:29A-5.8).
f. This section shall expire on January 1 of the year immediately following a determination by the commissioner pursuant to section 3 of P.L.1988, c.118 (C.17:29A-5.8) that profits for the New Jersey automobile insurance market averaged for five consecutive years have not exceeded the automobile insurance industry’s national average by 2.5 percent of earned premiums for that same period.
(cf: P.L.1988, c.118, s.2)
27. Section 3 of P.L.1988, c.118 (C.17:29A-5.8) is amended to read as follows:
3. a. The commissioner shall determine whether, based on external standardized profit reports, profits for the New Jersey automobile insurance market exceed the automobile insurance industry’s national average by 2.5 percent of earned premiums for each of the three most recent calendar years for which the computation has been made. If the reports so establish, then the commissioner shall order each insurer to determine if it owes any excess profits by performing the calculation in subsection b. of this section. If the external standardized profit reports do not establish profits for New Jersey automobile insurance business in excess of the national average by 2.5 percent of earned premium, in that three year period, then no insurer shall owe any excess profits and no excess profits report need be filed by any insurer under section 2 of P.L.1988, c.118 (C.17:29A-5.7).
b. Excess profits for an insurer shall exist if for the [three] five calendar-accident years immediately preceding the date the profits report is due, the sum of an insurer's total actuarial gain and excess investment income for all private passenger automobile coverages combined exceeds 2.5 percent of earned premiums [, except that the effect of a negative excess investment income shall be limited in the computation of excess profits, at the discretion of the commissioner, which discretion shall be exercised pursuant to a standard on the investment of policyholder-supplied funds pursuant to regulations promulgated by the commissioner not later than April 1 of the year in which excess profits reports are filed].
(cf: P.L.1988, c.118, s.3)
28. R.S. 17:17-10 is amended to read as follows:
17:17-10. a. When satisfied that a company has complied with all the requirements of this subtitle to entitle it to engage in business and that the proposed methods of operation of the company are not such as would render its operation hazardous to the public or its policyholders, the commissioner shall issue to the company a certificate authorizing it to commence business, specifying in the certificate the particular kind or kinds of insurance it is authorized to transact. The commissioner may refuse to issue a certificate of authority if he finds that any of the company's directors or officers has been convicted of a crime involving fraud, dishonesty, or like moral turpitude or that said persons are not persons of good character and integrity. No company shall transact the business for which it is incorporated until it has received the certificate from the commissioner. If any company fails to obtain the certificate of authority within one year from the date of the certificate of the Attorney General to its certificate of incorporation, as provided in R.S.17:17-5, the company shall, ipso facto, be dissolved and its certificate of incorporation be null and void.
b. No company licensed to transact insurance business in this State pursuant to chapter 17 of Title 17 of the Revised Statutes may surrender its certificate of authority or discontinue writing or renewing any kind or kinds of insurance specified in the certificate, except in accordance with [a plan to be] an informational filing submitted [by the company and approved by] to the commissioner, which [plan] filing shall [provide for an orderly withdrawal from the market and for the minimization of the impact of the surrender of the certificate or the discontinuance of the writing or renewing of any kind or kinds of insurance upon the public generally and upon the company's policyholders in this State. No surrender or discontinuance shall become effective until the approved plan has been complied with. In reviewing a plan for withdrawal submitted by the company, the commissioner shall consider, and may require as a condition of approval, whether some or all other certificates of authority issued pursuant to chapter 17 or 32 of Title 17 of the Revised Statutes held by the company or by other companies within the same holding company system as the company submitting the plan shall be required to be surrendered. The provisions of this subsection shall apply to any request for withdrawal, surrender or discontinuance filed on or after January 25, 1990] include the following elements for any withdrawals filed on or after the effective date of P.L. , c. (C. ) (now before the Legislature as this bill):
(1) notice to policyholders, issued no later than 60 days after the date of the informational filing, which notice shall state that the insurer intends to withdraw and that a plan of withdrawal has been filed with the commissioner;
(2) nonrenewals shall not be effective before the later of two years after the date of the informational filing or January 1, 2007;
(3) the insurer shall send two notices of nonrenewal from the insurer, the first at least one year prior to the date of nonrenewal, and the second notice of nonrenewal in compliance with the time limitations provided by law for that line of insurance.
Under this subsection b., the commissioner’s authority is limited to enforcing compliance with this subsection and enforcing the terms of the withdrawal plan as stated in the informational filing and, if the withdrawing insurer proposes to use a replacement carrier or carriers, approving or disapproving any replacement carrier or carriers pursuant to subsection c. of this section.
c. Notwithstanding the provisions of subsection b. of this section to the contrary, if the insurer finds either before or after the date of the informational filing a replacement carrier or carriers for the business that will not be renewed, then the insurer may nonrenew and transfer the business intended to be nonrenewed to the replacement carrier or carriers subject only to the requirements that the commissioner approve the replacement carrier or carriers, the nonrenewal notice be in compliance with the time limits provided by law for that line of insurance, and that an offer of coverage with the replacement carrier or carriers be made prior to the effective date of the nonrenewal. The commissioner shall not withhold his approval of a replacement carrier or carriers if that insurer is authorized to do business in the relevant line or lines of insurance in New Jersey and has the financial and business capability to write and service the business being transferred to it. The commissioner shall approve or disapprove the replacement carrier or carriers within 60 days of the later of the date of the filing by both the withdrawing insurer requesting approval of a replacement carrier or the filing by the replacement carrier requesting to be a replacement carrier.
d. Notwithstanding the provisions of subsection b. of this section to the contrary, the commissioner may waive the requirements of paragraph (2) of subsection b. of this section and the one-year nonrenewal notice of paragraph (3) of subsection b. of this section if the commissioner finds that a waiver is necessary to protect the solvency of the insurer making the filing to withdraw.
(cf: P.L.1990, c.8, s.71)
29. Section 72 of P.L.1990, c.8 (C.17:33B-30) is amended to read as follows:
72. a. An insurance company of another state or foreign country authorized under chapter 32 of Title 17 of the Revised Statutes to transact insurance business in this State may surrender to the commissioner its certificate of authority and thereafter cease to transact insurance in this State, or discontinue the writing or renewal of [one or more kinds of] private passenger automobile insurance specified in the certificate of authority, only after the submission of [a plan which provides for an orderly withdrawal from the market and a minimization of the impact of the surrender or discontinuance on the public generally and on the company's policyholders in this State. The plan shall be approved by the commissioner before the withdrawal or discontinuance takes effect. In reviewing a plan for withdrawal under this section, the commissioner shall consider, and may require as a condition of approval, whether some or all other certificates of authority issued pursuant to chapter 17 or 32 of Title 17 of the Revised Statutes held by the company or by other companies in the same holding company as the company submitting the plan should be surrendered. The certificate of authority of the company shall be deemed to continue in effect until the provisions of the approved plan have been carried out. The provisions of this section shall apply to any request for withdrawal, surrender or discontinuance filed on or after January 25, 1990] an informational filing submitted to the commissioner, which filing shall include the following elements for any withdrawals filed on or after the effective date of P.L. , c (C. ) (now before the Legislature as this bill):
(1) notice to policyholders, issued no later than 60 days after the date of the informational filing, which notice shall state that the insurer intends to withdraw and that a plan of withdrawal has been filed with the commissioner;
(2) nonrenewals shall not be effective before the later of two years after the date of the informational filing or January 1, 2007;
(3) the insurer shall send two notices of nonrenewal from the insurer, the first at least one year prior to the date of nonrenewal, and the second notice of nonrenewal in compliance with the time limitations provided by law for that line of insurance;
Under this subsection a., the commissioner’s authority is limited to enforcing compliance with this subsection, enforcing the terms of the withdrawal plan as stated in the informational filing, and, if the withdrawing insurer proposes to use a replacement carrier or carriers, approving or disapproving any replacement carrier or carriers pursuant to subsection b. of this section.
b. Notwithstanding the provisions of subsection a. of this section to the contrary, if the insurer finds either before or after the date of the informational filing a replacement carrier or carriers for the business that will not be renewed, then the insurer may nonrenew and transfer the business intended to be nonrenewed to the replacement carrier or carriers subject only to the requirements that the commissioner approve the replacement carrier or carriers, the nonrenewal notice be in compliance with the time limits provided by law for that line of insurance, and that an offer of coverage with the replacement carrier or carriers be made prior to the effective date of the nonrenewal. The commissioner shall not withhold his approval of a replacement carrier or carriers if that insurer is authorized to do business in the relevant line or lines of insurance in New Jersey and has the financial and business capability to write and service the business being transferred to it. The commissioner shall approve or disapprove the replacement of carrier or carriers within 60 days of the later of the date of the filing by both the withdrawing insurer requesting approval of a replacement carrier or the filing by the replacement carrier requesting to be a replacement carrier.
c. Notwithstanding the provisions of subsection a. of this section to the contrary, the commissioner may waive the requirements of paragraph (2) of subsection a. of this section and the one-year nonrenewal notice of paragraph (3) of subsection a. of this section if the commissioner finds that a waiver is necessary to protect the solvency of the insurer making the filing to withdraw.
(cf: P.L.1990, c.8, s.72)
30. Section 1 of P.L.1970, c.215 (C.17:29D-1) is amended to read as follows:
1. The Commissioner of Banking and Insurance may adopt, issue and promulgate rules and regulations establishing a plan for the providing and apportionment of insurance coverage for applicants therefor who are in good faith entitled to, but are unable to procure the same, through ordinary methods. Every insurer admitted to transact and transacting any line, or lines, of insurance in the State of New Jersey shall participate in such plan and provide insurance coverage to the extent required in such rules and regulations.
The governing board of any plan established pursuant to the commissioner's rules and regulations shall continue to exercise such administrative authority, subject to the commissioner's oversight and as provided in any rules and regulations promulgated pursuant to this section, as is necessary to ensure the plan's efficient operation, including, but not limited to, the authority to investigate complaints and hear appeals from applicants, insureds, producers, servicing carriers or participants about any matter pertaining to the plan's proper administration, as well as the authority to appoint subcommittees to hear such appeals. Any determination of an appeal by a plan's governing board shall be subject to review by the commissioner on the record below, and shall not be considered a contested case under the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B- 1 et seq.). The commissioner's determination shall be a final order and shall be subject to review by the Superior Court.
Any plan established pursuant to this section to provide insurance for automobiles, as defined in section 2 of P.L.1972, c.70 (C.39:6A- 2), shall provide:
a. For a rating system which shall produce rates for each coverage which are adequate for the safeness and soundness of the plan, and are not excessive nor unfairly discriminatory with regard to risks in the plan involving essentially the same hazards and expense elements, which rates may be changed from time to time by a filing with the commissioner [in a manner and form approved by the commissioner] proposed alterations pursuant to section 34 of P.L.1997, c.151 (C.17:29A-46.6), except that the 10 percent limitation set forth in subsections a. and e. of that section shall be inapplicable;
b. For rates charged to plan insureds which shall be sufficient to meet the plan's expenses and the plan's losses on an incurred basis, including the establishment and maintenance of actuarially sound loss reserves to cover all future costs associated with the exposure;
c. For a limited assignment distribution system permitting insurers to enter into agreements with other mutually agreeable insurers or other qualified entities to transfer their applicants and insureds under such plan to such insurers or other entities;
d. That it shall not provide insurance coverage for more than 10 percent of the aggregate number of private passenger automobile non-fleet exposures being written in the total private passenger automobile insurance market in this State. The plan shall provide for the cessation of the acceptance of applications or the issuance of new policies at any time it reaches 10 percent of market share, as certified by the commissioner, until such time that the commissioner certifies that the plan is insuring less than 10 percent of the aggregate number of private passenger automobile non-fleet exposures being written in the total private passenger automobile insurance market in this State;
e. [Except] Prior to January 1, 2006, except for risks written in automobile insurance urban enterprise zones pursuant to subsection i. of this section, that it shall not provide coverage to an eligible person as defined pursuant to section 25 of P.L.1990, c.8 (C.17:33B-13);
f. (Deleted by amendment, P.L.1997, c.151.)
g. That the plan shall not be subsidized by any source external to the plan;
h. That a qualified insurer who writes automobile insurance risks in those automobile insurance urban enterprise zones designated by the commissioner pursuant to section 20 of P.L.1997, c.151 (C.17:33C- 2) shall receive assigned risk credits for voluntary risks written in those designated automobile insurance urban enterprise zones as a direct writer or through a UEZ agent or agents or through any agent with whom the insurer has an in-force contract as of the effective date of P.L.1997, c.151 (C.17:33B-64 et al.). The commissioner shall establish by regulation the manner in which any qualified automobile insurer may utilize the provisions of this subsection. In no event shall that credit apply to reduce an insurer's obligations under subsection i. of this section; and
i. (1) For a voluntary rating tier to accommodate eligible persons, as defined in section 25 of P.L.1990, c. 8 (C.17:33B-13), residing in automobile insurance urban enterprise zones, designated by the commissioner pursuant to section 20 of P.L.1997, c.151 (C.17:33C- 2), to provide increased availability and encourage the voluntary writing of eligible persons residing in those zones;
(2) The rates utilized in this voluntary rating tier shall be the voluntary market rates in use by the insurer to whom the risk is assigned in that territory;
(3) The voluntary rating tier shall not provide insurance coverage for more than five percent of the aggregate number of private passenger automobile non-fleet exposures being written in the total private passenger automobile insurance market in this State, and the number of exposures written in the voluntary rating tier shall be included for computing the maximum number of exposures permitted to be written in the plan;
(4) The plan shall distribute risks submitted by qualified producers to insurers authorized to write automobile insurance in this State pursuant to a fair and nondiscriminatory formula established by the commissioner. The formula shall provide that insurers which have, and maintain, an aggregate voluntary automobile insurance market share in automobile insurance urban enterprise zones, which is reasonably equal to the insurer's voluntary Statewide market share excluding risks written in automobile insurance urban enterprise zones, shall be exempt from these distributions;
(5) Qualified producers may submit eligible person risks from automobile insurance urban enterprise zones to the plan for coverage in the voluntary rating tier. As used in this subsection i.: a "qualified producer" means a UEZ agent, as defined in section 19 of P.L.1997, c.151 (C.17:33C-1), who has met any limit on exposures that may be written in accordance with the UEZ agent's agreement with the appointing insurer pursuant to section 22 of P.L.1997, c.151 (C.17:33C-4); and a producer who: is duly licensed with property/casualty authority for the three years immediately preceding the effective date of P.L.1997, c.151 (C.17:33B-64 et al.); has no affiliation with a voluntary market insurer for the placement of automobile insurance; had an affiliation with a voluntary market insurer for the placement of automobile insurance that was terminated by the insurer in the last three years; demonstrates to the plan his competency, efficiency and effectiveness in the solicitation, negotiation and effectuation of automobile insurance as evidenced by any history of disciplinary actions or complaints against the producer, and other relevant factors; and conducts his business in an office in an automobile insurance urban enterprise zone. For purposes of this subsection i., `insurer" means an insurer or group of affiliated insurers admitted or authorized to transact the business of automobile insurance in this State;
(6) This subsection shall expire on the first day of the 61st month after the first policy using the voluntary rating tier required by this subsection was issued to a risk, as certified by the commissioner.
Prior to the adoption or amendment of such rules and regulations, the commissioner shall consult with such members of the insurance industry as he deems appropriate. Such consultation shall be in addition to any otherwise required public hearing or notice with regard to the adoption or amendment of rules and regulations.
The governing body administering the plan shall report annually to the Legislature and the Governor on the activities of the plan. The report shall contain an actuarial analysis regarding the adequacy of the rates for each coverage for the safeness and soundness of the plan.
(cf: P.L.1998, c.21, s.31)
31. Section 1 of P.L.1945, c.132 (C.54:18A-1) is amended to read as follows:
1. (a) Every stock, mutual and assessment insurance company organized or existing under any general or special law of this State, hereinafter referred to as "domestic insurance company," and every stock, mutual and assessment insurance company organized or existing under the laws of another state or foreign country, hereinafter referred to as "foreign insurance company," and transacting business in this State shall annually on or before March 1, file with the Director of the Division of Taxation, in the form as the director and the Commissioner of Banking and Insurance may prescribe, a return under oath or affirmation signed by a duly authorized officer or agent of the company, containing such information as may be deemed necessary and shall at the same time pay to the director an annual tax, in each calendar year, in the amount specified in sections 2 and 3 of P.L.1945, c.132 (C.54:28A-2 and 54:18A-3). At the same time, a duplicate original of the return shall be filed with the Commissioner of Banking and Insurance. The tax shall be based on net premiums on contracts of insurance covering property and risks located within this State written during the calendar year ending December 31 next preceding.
(b) Effective for calendar years ending on December 31, 1980 and thereafter, every foreign insurance company subject to the provisions of subsection (a) of this section, shall pay to the Director of the Division of Taxation on or before March 1, 1981, and on or before March 1 of each year thereafter an amount equal to one-half of the tax payable under subsection (a) hereof on the company's business done during the preceding calendar year. Every foreign insurance company subject to the provisions of subsection (a) of this section, shall pay to the Director of the Division of Taxation on or before June 1, 1989, and on or before June 1 of each year thereafter an amount equal to one-half of the tax payable under subsection (a) hereof on the company's business done during the preceding calendar year. Each such payment shall be in addition to the tax payable under subsection (a) hereof and shall be considered as a partial payment of the tax which will become due under subsection (a) hereof, upon the following March 1.
(c) Effective for calendar years ending on December 31, 1981 and thereafter, every domestic insurance company shall:
(1) On March 1, 1982, pay the tax due under subsection (a) of this section based on the company's business done during the calendar year 1981 less any franchise tax paid to counties or municipalities in this State during the calendar year 1981.
(2) On March 1, 1982 make an installment payment of taxes due under subsection (a) of this section on the company's business done during the calendar year 1982, which payment shall amount to one-half of the prior year's premium tax without deduction for any franchise tax paid to counties or municipalities of this State.
(3) On June 1, 1982 and each June 1 thereafter, make a second installment payment on taxes due under subsection (a) of this section on the company's business done during the current calendar year, which payment shall amount to one-half of the prior year's premium tax without a deduction for any franchise tax paid to counties or municipalities of this State.
(4) On March 1, 1983 and each March 1 thereafter, pay the balance of any tax due under subsection (a) of this section based on the company's business during the preceding calendar year and make an installment payment in an amount equal to one-half of the tax payable under subsection (a) of this section on the company's business done during the preceding calendar year.
(d) Nothing in this section requiring a partial payment of tax shall be deemed to apply to premiums for fire insurance risks on properties in this State paid to an insurer which is not organized under the laws of this State or to premiums for marine insurance risks.
(e) In the calculation of the tax due in accordance with subsection (a) hereof, every insurance company shall be entitled to a credit in the amount of the tax paid as a partial payment in the preceding calendar year and shall be entitled to the return of any amount so paid which shall be found to be in excess of the total amount payable in accordance with this section.
(f) If the franchise tax paid to counties and municipalities of this State during the calendar year 1981 exceeds the amount of the tax due under subsection (a) of this section, no refund or credit shall be allowed.
(g) Effective for calendar years ending on December 31, 2005 and thereafter, in the calculation of the tax due in accordance with subsection (a) hereof, every insurance company shall be entitled to a credit for each policy-year of automobile insurance, covering a vehicle where those policies of insurance are written in a rating territory whose base rates exceed the Statewide average base rates for such coverages written by the company by an amount to be determined by the State Treasurer, in consultation with the Commissioner of Banking and Insurance, provided further that the company has provided a credit or reduction in premium to the policyholder purchasing coverage in those territories equivalent to the tax credit herein established. For the purposes of this subsection (g), "automobile insurance" means insurance for an automobile, including coverage for bodily injury liability and property damage liability, comprehensive and collision coverages, uninsured and underinsured motorist coverage, personal injury protection coverage, additional personal injury protection coverage and any other automobile insurance required by law. The amount of the tax credit, and the equivalent premium credit or reduction, shall be determined by regulations promulgated by the State Treasurer in consultation with the commissioner, provided that no company shall be required to provide premium credits or reductions to any policyholder if the cumulative effect of those premium credits or reductions would exceed the total premium tax obligation. The per-policy tax credit shall be apportioned so that the total anticipated tax credits for all insurance companies shall not exceed the total anticipated premium tax less $103,000,000. In the event a company provides premium reductions or credits which in the aggregate exceed the company's total premium tax obligation for the calendar year, the excess shall be applied as a carry forward tax credit for the following year, to be applied to the tax otherwise due under this section.
(cf: P.L.1989, c.81, s.1)
32. (New section) The commissioner may promulgate rules and regulations in accordance with the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to effectuate the provisions of this act, however, the lack of such regulations shall not delay the effective date of any provision of this act.
33. Sections 26 and 27 of P.L.1998, c.21 (C.17:29A-48 and 49) and sections 25 through 33 of P.L.1990, c.8 (C.17:33B-13 through 21) are repealed effective January 1, 2006.
34. (New section) Sections 1 through 4 and 15 through 33 shall take effect immediately and sections 5 through 14 of this act shall take effect January 1, 2006.
STATEMENT
This bill, the "New Jersey Automobile Insurance Competition and Choice Act," seeks to move New Jersey toward a competitive automobile insurance market over a period of four years. Because numerous automobile insurers have ceased doing business in this State in recent years and because many other major insurers refuse to do business in New Jersey, the bill establishes a modernized regulatory system that encourages competition among automobile insurers in order to better serve the needs and interests of consumers.
For the transition period, from the time that the bill is enacted until December 31, 2006, there is established a 13-member Commission for the Advancement of Insurance Competition to: assist the Commissioner of Banking and Insurance in identifying barriers to automobile insurers doing business in this State; develop activities necessary to encourage competition among insurers; and recommend ways to facilitate competition and inform consumers.
During the four year transition period, the bill provides that automobile insurers may file for up to a 10% rate increase 60 days in advance. After the expiration of the 60-day period, the commissioner may disapprove the rate on a prospective basis only, provided an administrative law judge has determined that the rate filing would produce rates that are excessive, inadequate for the safety and soundness of the insurer, or unfairly discriminatory between risks in this State involving substantially the same hazards and expense elements.
Thereafter, the bill establishes a modernized and competitive procedure which promotes price competition among automobile insurers; protects policyholders and the public against adverse effects of excessive, inadequate or unfairly discriminatory rates; and provides necessary regulatory authority in the absence of a competitive marketplace.
The bill provides that a competitive automobile insurance market is presumed to exist unless the commissioner determines that a reasonable degree of competition does not exist within the market and issues a ruling to that effect. As provided in the bill, in a competitive market, every automobile insurer shall file all rates and supplementary materials to be used in this State no later than 30 days after the effective date of the rate. The commissioner may disapprove a competitive market rate only upon a finding that the rate is inadequate or unfairly discriminatory. In a non-competitive market, any filing that results in an overall increase of more than 10% in any 12-month period must receive the prior approval of the commissioner.
The bill provides that automobile insurers shall file revised territorial rating plans by January 1, 2003 regardless of whether the commissioner has issued regulations outlining criteria for new territorial maps. In addition, the current base rate cap for each coverage is increased from 2.5% to 3.5%, during the four year transition period, until competitive rating becomes effective.
Under the bill, the "take-all-comers" provisions enacted in 1990 are phased out by January 1, 2006, and are replaced by barring automobile insurance declinations on the basis of race, color, creed, national origin, age, gender marital status or sexual orientation. During the transition period, an insurer may review the prior five years of driver accident and motor vehicle violation history to determine eligibility for automobile insurance in the voluntary market. In addition, if an insurer increases by 3% in a particular territory its total number of insured private passenger automobiles, the insurer is relieved from the "take-all-comers" provisions, unless the insurer's annual increase goes below 2.5%. Other provisions of the bill provide that an insurer may not be relieved of its "take all comers" obligations if the residual market mechanism reaches its maximum level of 10% of the market, in which case, an insurer would be required to increase its total number of insured private passenger automobiles in a particular territory by 5% before being relieved of that obligation.
The bill revises certain provisions pertaining to excess profits for automobile insurers by establishing that excess profits shall only be calculated if profits for the New Jersey automobile insurance market exceed the industry's national average by 2.5% of earned premiums for the prior three-year period.
The bill also removes certain restrictions with respect to the withdrawal of automobile insurers from the State. Rather than requiring the prior approval of the commissioner and the surrender of other licenses if an insurer pursues a withdrawal from doing business in this State, the bill provides for the informational filing of a plan of withdrawal by an insurer, timely notification to policyholders, and the ability to transfer its automobile insurance business to a replacement insurer so long as that insurer is in a financial position to assume that book of business.
Finally, the bill allows for a premium tax credit beginning in tax-year 2005 to automobile insurers that write policies in certain territories, provided, however, that the insurer has reduced premiums to policyholders in that territory by an amount equivalent to the tax credit.