SENATE, No. 1042

 

STATE OF NEW JERSEY

 

INTRODUCED MAY 2, 1996

 

 

By Senators RICE and LIPMAN

 

 

An Act establishing the automobile insurance urban enterprise zone program, amending P.L.1970, c.215, P.L.1970, c.217, P.L.1988, c. 119, P.L.1990, c.8, and supplementing Title 17 of the Revised Statutes.

 

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

    1. (New section) The Legislature finds and declares:

    a. That the creation of business incentives aimed at increasing and promoting economic activity in specially designated Urban Enterprise Zones has been effectively utilized by the State in the past.

    b. That consumers located in a limited number of the State's urban centers would benefit from an increase in the number of locations at which they could secure automobile insurance.

    c. That to better serve the needs of automobile insurance consumers and stimulate competition and economic activity, access to automobile insurance needs to be expanded in certain defined urban areas of the State.

    d. That the development of increased access to automobile insurance needs to be encouraged by establishing incentives for insurers to increase their writings in these urban centers through, among other things, the appointment of urban enterprise zone agents.

    e. That there be conducted a comprehensive study on the effects that territorial rate caps have on the overall availability of automobile insurance and that in conducting the study, other highly urbanized locations in the nation be examined.

 

    2. (New section) As used in this act:

    "Automobile" means an automobile as defined pursuant to subsection a. of section 2 of P.L.1972, c.70 (C.39:6A-2).

    "Automobile insurance urban enterprise zone" means a geographic area identified and designated by the commissioner pursuant to section 3 of this act.

    "Automobile insurance urban enterprise zone program" or "program" means an automobile insurance urban enterprise zone program established pursuant to section 3 of this act.

    "Automobile insurer" means an insurer admitted or authorized to transact the business of automobile insurance in this State.

    "Commissioner" means the Commissioner of Insurance.

    "Eligible person" means an eligible person as defined in section 25 of P.L.1990, c.8 (C.17:33B-13).

    "Qualified insurer" means an automobile insurer that is a qualified insurer pursuant to section 4 of this act.

    "Urban enterprise zone agent" or "UEZ agent" means a producer who is licensed pursuant to P.L.1987, c.293 (C.17:22A-1 et seq.), is appointed by a qualified insurer to represent it in an automobile insurance urban enterprise zone under the terms of this act and maintains a bona fide office within that automobile insurance urban enterprise zone.

 

    3. a. The commissioner shall establish in a fair and equitable manner an automobile insurance urban enterprise zone program designed to encourage greater availability of automobile insurance in certain urban areas of this State as designated pursuant to this section of this act. The program shall provide for incentives that the commissioner deems necessary to encourage qualified insurers to increase their writing of automobile insurance business in those areas and that adequately safeguard the interests of policyholders and the public.

    b. The commissioner shall undertake a review of the availability of automobile insurance in this State and shall identify and designate as automobile insurance urban enterprise zones those urban-based geographic areas in which consumers would benefit from increased access to automobile insurance. In making this determination, the commissioner shall consider, among other things, representation by automobile insurers in those rating territories historically deemed underserved. To assist in this review, the commissioner may appoint an advisory committee composed of representatives of automobile insurers and producer associations and individuals who reside in urban areas of this State. Automobile insurance urban enterprise zones designated pursuant to this section shall be defined by regulations promulgated by the commissioner. The commissioner shall conduct periodic reviews of the availability of automobile insurance throughout the State and may amend the regulations to modify the composition of designated automobile insurance urban enterprise zones for the purpose of furthering the intent of this act.

 

    4. (New section) a. The commissioner shall establish by regulation standards for a qualified insurer. These standards may include, but not be limited to, demonstration by the automobile insurer that it has a plan to assist newly appointed UEZ agents in developing the skills necessary to manage a successful business; procedures to monitor and evaluate the impact of efforts to expand services to urban areas; and materials designed to assist urban consumers in understanding automobile insurance coverages. For an automobile insurer doing business on a direct writing basis, the standards may include, but not be limited to, the insurer's marketing plans and goals for increasing its writing of risks in automobile insurance urban enterprise zones.

    b. An automobile insurer, which meets the applicable standards established pursuant to subsection a. of this section, may certify to the commissioner that it is a qualified insurer.

    c. An automobile insurer that certifies to the commissioner that it meets the standards established pursuant to subsection a. of this section shall be considered a qualified insurer for the purposes of this act. If at any time the commissioner determines that a qualified insurer fails to meet the standards established pursuant to subsection a. of this section, or if the commissioner determines it necessary for the protection of the public, he may suspend or revoke the insurer's certification as a qualified insurer. If an automobile insurer certifies that it meets the standards for becoming a qualified insurer and it does not meet those standards, that insurer shall not be a qualified insurer for purposes of this act and may, at the discretion of the commissioner, be subject of a fine of not more than $25,000.

    d. Only qualified insurers shall be eligible to participate in the automobile insurance urban enterprise zone program.

 

    5. (New section) a. A qualified insurer may appoint a UEZ agent or agents. Any appointment of a UEZ agent shall comply with the provisions of section 15 of P.L.1987, c.293 (C.17:22A-15), except when there is a conflict with a provision of this act or any regulation promulgated thereunder, this act is controlling. An agency contract between a qualified insurer and a UEZ agent shall be in writing, set forth specific duties and responsibilities of the parties regarding the obligations imposed pursuant to this section and section 4 of this act, and detail the provisions of any limit on the number of exposures provided in subsection b. of this section.

    b. A qualified insurer may limit the number of exposures written through a UEZ agent. An eligible person applying for automobile insurance coverage after the limit is reached shall be advised by the UEZ agent that coverage may be available from another agent of the qualified insurer or direct from the qualified insurer if the insurer is a direct writer. Any such limit shall be imposed on an equitable and nondiscriminatory basis consistent with the provisions of subsections a. and b. of section 27 of P.L.1990, c.8 (C.17:33B-15) until the specified limit is reached.

    c. The commissioner shall establish by regulation requirements that shall be satisfied if a qualified insurer limits the number of exposures written through a UEZ agent, and the manner in which a qualified insurer engaged in the business of automobile insurance on a direct writer basis may utilize the provisions of this section.

 

    6. (New section) a. The commissioner shall study the effect of territorial rating caps imposed on automobile insurance rates pursuant to section 7 of P.L.1983, c.65 (C.17:29A-36). The study shall include an evaluation of the general market conditions resulting from the imposition of territorial rating caps, including, but not limited to: market availability; affordability of automobile insurance coverage; the actuarial soundness of, and statistical basis for, territorial cap systems; and the creation of competitive market conditions.

    In conducting this study, the commissioner shall examine the rating systems in use in other highly urbanized areas of this nation.

    b. The commissioner shall report his findings and recommendations within 12 months of the effective date of this act to the Governor and the Legislature.

 

    7. Section 27 of P.L.1990, c.8 (C.17:33B-15) is amended to read as follows:

    27. a. 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) 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).

    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 P.L. , c. (now before the Legislature as this bill) may limit the number of exposures written through its UEZ agent or agents. 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. 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.1990, c.8, s.27)

 

    8. Section 30 of P.L.1990, c.8 (C.17:33B-18) is amended to read as follows:

    30. a. 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 P.L. , c. (now before the Legislature as this bill) 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.1990, c.8, s.30)

 

    9. Section 1 of P.L 1970, c.215 (C.17:29D-1) is amended to read as follows:

    1. The Commissioner of 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.

    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;

    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. 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. That insurers who write automobile risks in those urban territories designated by the commissioner shall receive one assigned risk credit for every two voluntary risks written in those designated territories; [and]

    g. That the plan shall not be subsidized by any source external to the plan; and

    h. That a qualified insurer who writes automobile insurance risks in those automobile insurance urban enterprise zones designated by the commissioner pursuant to section 3 of P.L. , c. (now before the Legislature as this bill) shall receive one assigned risk credit for every one voluntary risk written in those designated automobile insurance urban enterprise zones through its UEZ agent or agents. The commissioner shall establish by regulation the manner in which a qualified insurer engaged in the business of automobile insurance on a direct writing basis may utilize the provisions of this subsection.

    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.1995, c.151, s.1)

 

    10. 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, in accordance with subsections b. and c. of this section, 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.).

    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. (1) 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 one additional policy of automobile insurance 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. For the purposes of this section, "voluntarily writes" shall not include any exposure voluntarily written by or assigned to an insurer to meet any quota established pursuant to section 26 of P.L.1983, c.65 (C.17:30E-14).

    (2) For every one newly insured automobile which a qualified insurer voluntarily writes in an automobile insurance urban enterprise zone through its UEZ agent pursuant to P.L. , c. (now before the Legislature as this bill) during each calendar year period, a qualified insurer shall be permitted to refuse to renew insurance on one additional automobile in any rating territory except in an automobile insurance urban enterprise zone. The commissioner shall establish by regulation the manner in which a qualified insurer engaged in the business of automobile insurance on a direct writing basis may utilize the provisions of this subsection.

    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. The commissioner shall monitor the implementation and operation of this section and shall report his findings, including any legislative proposals, to the Senate Labor, Industry and Professions Committee and the Assembly Insurance Committee, or their successors, within three years of the effective date of this act.

(cf: P.L.1988, c.119, s.26)

 

    11. Section 1 of P.L.1970, c.217 (C.17:22-6.14a) is amended to read as follows:

    1. a. In the event that a policy is canceled by the insurer, either at its own behest or at the behest of the agent or broker of record, the unearned premium, including the unearned commission, shall be returned to the policyholder.

    b. In the event that a policy of insurance, issued by the automobile insurance plan established pursuant to P.L.1970, c.215 (C.17:29D-1) or any successor thereto, is canceled by reason of nonpayment of premium to the insurer issuing the policy or nonpayment of an installment payment due pursuant to an insurance premium finance agreement, the broker of record for that policy may retain the full annual commission due thereon and, if a premium finance agreement is not involved, the effective date of cancellation of the policy shall be no earlier than 10 days prior to the last full day for which the premium paid by the insured, net of the broker's full annual commission, would pay for coverage on a pro rata basis in accordance with rules established by the commissioner.

    c. Contracts between insurance companies and agents for the appointment of the agent as the representative of the company shall set forth the rate of commission to be paid to the agent for each class of insurance within the scope of such appointment written on all risks or operations in this State, except:

    (1) Reinsurance.

    (2) Life insurance.

    (3) Annuities.

    (4) Accident and health insurance.

    (5) Title insurance.

    (6) Mortgage guaranty insurance.

    (7) Hospital service, medical service, health service, or dental service corporations, investment companies, mutual benefit associations, or fraternal beneficiary associations.

    Said rates of commission shall continue in force and effect unless changed by mutual written consent or until termination of said contract as hereinafter provided. Failure to achieve such mutual consent shall require that the agent's contract be terminated as hereinbelow provided. The rate of commission being paid on each class of insurance on the date of enactment hereof shall be deemed to be pursuant to the existing contract between agent and company.

    d. Termination of any such contract for any reason other than one excluded herein shall become effective after not less than 90 days' notice in writing given by the company to the agent and the Commissioner of Insurance. No new business or changes in liability on renewal or in force business, except as provided in subsection l. of this section, shall be written by the agent for the company after notice of termination without prior written approval of the company. However, during the term of the agency contract, including the said 90-day period, the company shall not refuse to renew such business from the agent as would be in accordance with said company's current underwriting standards. The company shall, during a period of 12 months from the effective date of such termination, provided the former agent has not been replaced as the broker of record by the insured, and upon request in writing of the terminated agent, renew all contracts of insurance for such agent for said company as may be in accordance with said company's then current underwriting standards and pay to the terminated agent a commission in accordance with the agency contract in effect at the time notice of termination was issued. Said commission can be paid only to the holder of a valid New Jersey insurance producer's license. In the event any risk shall not meet the then current underwriting standards of said company, that company may decline its renewal, provided that the company shall give the terminated agent and the insured not less than 60 days' notice of its intention not to renew said contract of insurance.

    e. The agency termination provisions of this act shall not apply to those contracts:

    (1) in which the agent is paid on a salary basis without commission or where he agrees to represent exclusively one company or to the termination of an agent's contract for insolvency, abandonment, gross and willful misconduct, or failure to pay over to the company moneys due to the company after his receipt of a written demand therefor, or after revocation of the agent's license by the Commissioner of Insurance; and in any such case the company shall, upon request of the insured, provided he meets the then current underwriting standards of the company, renew any contract of insurance formerly processed by the terminated agent, through an active agent, or directly pursuant to such rules and regulations as may be promulgated by the Commissioner of Insurance, or

    (2) which are entered into between a qualified insurer and a UEZ agent pursuant to section 5 of P.L. , c. (now before the Legislature as this bill).

    f. The Commissioner of Insurance, on the written complaint of any person stating that there has been a violation of this act, or when he deems it necessary without a complaint, may inquire and otherwise investigate to determine whether there has been any violation of this act.

    g. All existing contracts between agent and company in effect in the State of New Jersey on the effective date of this act are subject to all provisions of this act.

    h. The Commissioner of Insurance may, if he determines that a company is in unsatisfactory financial condition, exclude such company from the provisions of this act.

    i. Whenever under this act it is required that the company shall renew a contract of insurance, the renewal shall be for a time period equal to one additional term of the term specified in the original contract, but in no event to be less than one year.

    j. The provisions of subsection b. of this section shall not apply to policies written by the New Jersey Automobile Full Insurance Underwriting Association established pursuant to sections 13 through 34 of P.L.1983, c.65 (C.17:30E-1 et seq.).

    k. The New Jersey Automobile Full Insurance Underwriting Association established pursuant to sections 13 through 34 of P.L.1983, c.65 (C.17:30E-1 et seq.), shall not be liable to pay any commission required by subsection b. of this section on any policies written by the association prior to January 1, 1986.

    l. A company which terminates its contractual relationship with an agent subject to the provisions of subsection d. of this section shall, at the time of the agent's termination, with respect to insurance covering an automobile as defined in subsection a. of section 2 of P.L.1972, c.70 (C.39:6A-2), notify each named insured whose policy is serviced by the terminated agent in writing of the following: (1) that the agent's contractual relationship with the company is being terminated and the effective date of that termination; and (2) that the named insured may (a) continue to renew and obtain service through the terminated agent; or (b) renew the policy and obtain service through another agent of the company.

    Notwithstanding any provision of this section to the contrary, no insurance company which has terminated its contractual relationship with an agent subject to subsection d. of this section shall, upon the expiration of any automobile insurance policy renewed pursuant to subsection d. of this section which is required to be renewed pursuant to section 3 of P.L.1972, c.70 (C.39:6A-3), refuse to renew, accept additional or replacement vehicles, refuse to provide changes in the limits of liability or refuse to service a policyholder in any other manner which is in accordance with the company's current underwriting standards, upon the written request of the agent or as otherwise provided in this section, provided the agent maintains a valid New Jersey insurance producer's license and has not been replaced as the broker of record by the insured. However, nothing in this section shall be deemed to prevent nonrenewal of an automobile insurance policy pursuant to the provisions of section 26 of P.L.1988, c.119 (C.17:29C-7.1).

    The company shall pay a terminated agent who continues to service policies pursuant to the provisions of this subsection a commission in an amount not less than that provided for under the agency contract in effect at the time the notice of termination was issued. A terminated agent who continues to service automobile insurance policies pursuant to this subsection shall be deemed to be an insurance broker as defined in section 2 of P.L.1987, c.293 (C.17:22A-2), and not an agent of the company, except that the terminated agent shall have the authority to bind coverage for renewals, additional or replacement vehicles, and for changed limits of liability as provided in this subsection to the same extent as an active agent for the company. The company shall provide the terminated agent with a written copy of its current underwriting guidelines during the time the agent continues to service policies pursuant to this subsection.

    If a terminated agent who is continuing to service policies pursuant to the provisions of this subsection violates the written underwriting guidelines of the company in such a manner or with such frequency as to substantially affect the company's ability to underwrite or provide coverage, the company may discontinue accepting renewal and service requests from, and paying commissions to, the terminated agent; provided, however, that the company provides the terminated agent with at least 45 days' written notice which shall include a detailed explanation of the reasons for discontinuance. A copy of this notice, along with supporting documentation providing evidence that the terminated agent received proper notice of discontinuance pursuant to this subsection and evidence in support of the company's action, shall be sent by the company to the Division of Enforcement and Consumer Protection in the Department of Insurance.

    The provisions of this subsection shall not apply to any policy issued by the New Jersey Automobile Full Insurance Underwriting Association created pursuant to the provisions of P.L.1983, c.65 (C.17:30E-1 et seq.).

    m. A qualified insurer which terminates its contractual relationship with its UEZ agent pursuant to paragraph (2) of subsection e. of this section shall terminate its relationship in accordance with the following provisions:

    (1) The qualified insurer shall give the UEZ agent at least 60 days' written notice of termination. Notice of termination shall be on a form prescribed by the commissioner and shall indicate the date of termination and the reason therefore. A copy of the notice of termination shall be sent to the commissioner.

    (2) Notwithstanding the provisions of section 1 of P.L. 1970, c. 217 (C. 17:22-6.14a) and section 26 of P.L. 1988, c. 119 (C. 17:29C-7.1), a qualified insurer may refuse to renew the business written through a UEZ agent in an orderly and non-discriminatory manner over the course of at least a three-year period commencing on the effective date of termination of its relationship with its UEZ agent. A qualified insurer intending to refuse renewal business written by a terminated UEZ agent shall notify the commissioner and file its plan for complying with the requirements of this paragraph prior to the date of the UEZ agent's termination.

    (3) The terminated UEZ agent shall continue to receive commissions for any renewal business pursuant to the terms of the contract in force with the qualified insurer 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. A terminated UEZ agent who continues to service automobile insurance policies shall be deemed to be an insurance broker and not as the UEZ agent of the qualified insurer.

(cf: P.L.1989, c.129, s.1)

 

    12. This act shall take effect on the 180th day after enactment.

 

 

STATEMENT

 

    The bill 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 for a qualified insurer and thus eligible to participate in the automobile insurance UEZ program. Under the terms of the bill, a qualified insurer would be eligible for certain incentives such as: one credit against an assigned risk obligation for each risk written in an automobile insurance UEZ and the ability to non-renew one exposure in any territory, except in an automobile insurance UEZ, for every voluntary risk written in an automobile insurance UEZ.

    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.


 

Establishes the automobile insurance urban enterprise zone program.