SENATE URBAN POLICY AND PLANNING COMMITTEE

STATEMENT TO

SENATE, No. 1024

with committee amendments

STATE OF NEW JERSEY

DATED: JUNE 6, 1996

      The Senate Urban Policy and Planning Committee reports favorably, and with committee amendments, Senate Bill No.1024.

      Senate Bill 1024, as amended by the committee, requires the Commissioner of Insurance to review the overall availability of automobile insurance in this State and designate by regulation those urban-based geographic areas where increased access to automobile insurance should be encouraged. These areas are to be known as automobile insurance urban enterprise zones (UEZs). To assist in this review, the commissioner may appoint an advisory committee composed of representatives of automobile insurers, insurance producers and urban area residents. The bill permits the commissioner to conduct periodic reviews for the purpose of changing the designation of automobile insurance UEZs to ensure that the automobile insurance UEZ program established by this bill is being applied to the urban areas of the State most in need of greater access to automobile insurance.

      The bill authorizes the commissioner to establish standards that must be met in order to qualify an insurer as eligible to participate in the automobile insurance urban enterprise zone program. Under the terms of the bill, a qualified insurer would be eligible for one credit against an assigned risk obligation for each new risk written in an automobile insurance UEZ. A qualified insurer would also be able to non-renew insurance on two automobiles in any territory, except in an automobile insurance UEZ, for every three newly insured automobiles voluntarily written in an automobile insurance UEZ. These non-renewal credits would only be permitted in territories in which the insurer experiences growth in the aggregate number of in-force exposures. Moreover, these non-renewal credits may not be used for purposes of other non-renewal credits permitted under current law.

      The bill allows a qualified insurer to implement special procedures with regard to agents appointed in an automobile insurance UEZ.

      The bill also requires a comprehensive study on the effects that territorial rate caps have on the availability of automobile insurance in the voluntary market as well as adjusts the permissible cap rates for certain automobile insurance coverages to promote greater availability of automobile insurance in the automobile insurance UEZs.

      The committee does not intend that the bill would increase the obligations of carriers with respect to their agents who are not subject to the provisions of P.L.1970, c.217 (C.17:22-6.14a).

      As amended, Senate Bill 1024 is identical to Assembly Bill 1759 (1R).

      The committee amended the bill to:

►    require that, in addition to other standards established by the commissioner to become a qualified UEZ automobile insurer, an insurer must demonstrate that it has a plan to increase access to automobile insurance for consumers residing in an automobile insurance UEZ;

►    clarify that a qualified insurer will receive one assigned risk credit for every "new" voluntary risk written in an automobile insurance UEZ;

►    provide that for every three newly insured automobiles written by a qualified insurer in an automobile insurance UEZ, the insurer may non-renew two additional automobiles in a non-UEZ rating territory that has experienced growth in the aggregate number of in-force exposures;

►    permit the Commissioner of Insurance to suspend or revoke an insurer's certification as a qualified insurer, if the commissioner determines that the insurer engaged in the UEZ program experiences a pattern of decreases in its in-force exposures in an automobile insurance UEZ over a period of two or more years;

►    clarify that pursuant to the conditions of an orderly and non-discriminatory non-renewal plan filed with the commissioner, a terminated UEZ agent will continue to receive commissions for any renewal business pursuant to the terms of the contract in force at the time of termination, provided that the UEZ agent maintains a valid New Jersey insurance producer's license and has not been replaced as the broker of record by the insured; and

►    make it an unfair trade practice for an insurer to exert pressure on a producer with an in-force contract as of the effective date of this bill to replace that contract with a UEZ contract.

MINORITY STATEMENT

Submitted by Senators Rice and O'Connor

      This bill fails to recognize and address the real reason that auto insurance is unavailable in urban areas. Redlining and discriminatory practices by the insurance industry against urban based agents and consumers is the real problem.

      Instead of enforcing compliance with laws already enacted or requiring that insurers work with urban based agents, the bill would provide incentives to the industry to comply with the law.

      One of these financial incentives is the cap adjustment contained in section 12 of the bill. This section of the bill would result in increased rates for non-mandatory insurance coverage such as comprehensive and collision. The effect of these rate increases would be to make these coverages less affordable and price more urban drivers out of this market.

      The cost of auto insurance throughout the entire State is an onerous burden. It is especially onerous in urban areas who are already paying significantly higher rates than the rest of the State. Many senior citizens and single parents will be unable to afford any increase in insurance rates.

      It is poor public policy to reward an industry that violates the law, however, that is what this bill would do at the expense of the consumer.