SENATE, No. 1053

STATE OF NEW JERSEY

INTRODUCED MAY 2, 1996

By Senators CASEY and ADLER

An Act concerning the protection of insurance consumers, establishing the Office of Insurance Consumer Advocate, amending P.L.1944, c.27, P.L.1988, c.156 and P.L.1994, c.58, supplementing Title 17 of the Revised Statutes and providing an appropriation therefor.

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

    1. (New section) The Legislature hereby finds that since the abolition of the Department of the Public Advocate and the position of Public Advocate in 1994, consumers in this State have not had an advocate on their behalf with regard to rate increases sought by insurance companies doing business in this State or the availability of affordable insurance coverages; that recent attempts by insurers to raise their rates in the area of Medicare supplemental (Medigap) insurance would adversely affect the senior citizens of the State; that New Jersey once again leads the nation in the cost of automobile insurance; that the availability and cost of homeowner's insurance in the urban and coastal areas of the State continues to be a problem not sufficiently addressed by the Department of Insurance; and that lack of availability of automobile insurance in the inner cities and urban areas of the State due to the failure of insurers to recruit aggressively insureds in those markets results in many uninsured drivers on New Jersey's roads and highways.

    The Legislature, therefore, declares that it is the public policy of this State to secure adequate representation for the insurance-buying consumer; and to this end there should be established as an agency of State Government the Office of Insurance Consumer Advocate, to receive, investigate and resolve complaints concerning insurance industry practices which directly impact the consumers of this State and to represent and protect insurance buying consumers in proceedings before and appeals from the Department of Insurance, which is charged with the regulation of the insurance industry.

    2. (New section) There is hereby established in the Executive Branch of the State Government the Office of the Insurance Consumer Advocate. For the purposes of complying with the provisions of Article V, Section IV, paragraph 1 of the New Jersey Constitution, the Office of the Insurance Consumer Advocate is allocated to the Division of Consumer Affairs in the Department of Law and Public Safety, but, notwithstanding this allocation, the office shall be independent of any supervision or control by the division or the department or by any board or officer thereof.

    3. (New section) The administrator and chief executive officer of the office shall be the Insurance Consumer Advocate or advocate, who shall be a person qualified by training and experience to perform the duties of the office. The advocate shall be appointed by the Governor, with the advice and consent of the Senate, and shall serve at the pleasure of the Governor during the Governor's term of office and until the appointment and qualification of the advocate's successor. The advocate shall devote his entire time to the duties of the position and shall receive a salary as shall be provided by law. Any vacancy occurring in the position of advocate shall be filled in the same manner as the original appointment; provided, however, that whenever the advocate resigns, becomes ineligible to serve for any reason, or is removed from office, the Governor shall appoint an acting advocate who shall serve until the appointment and qualification of the advocate's successor, but in no event longer than six months from the occurrence of the vacancy, and who shall exercise during that period all the powers and duties of the advocate pursuant to the provisions of this act.

    4. (New section) The advocate, as administrator and chief executive officer of the office, shall:

    a. Administer and organize the work of the office and establish therein such administrative subdivisions as may be necessary, proper and expedient. The advocate may formulate and adopt rules and regulations and prescribe duties for the efficient conduct of the business, work and general administration of the office;

    b. Appoint and remove officers, investigators, stenographic and clerical assistants and other personnel as may be required for the conduct of the office, subject to the provisions of Title 11A (Civil Service) of the New Jersey Statutes, and other applicable statutes, and within the limits of funds appropriated or otherwise made available therefor;

    c. Prepare schedules of rates to be paid for services rendered other than by staff, taking into account the nature of the services, the time involved, the skill and experience required and other pertinent factors;

    d. Institute or cause to be instituted legal proceedings or processes consistent with the Rules Governing the Courts of the State of New Jersey and the practice of law therein as may be necessary properly to enforce and give effect to any of the advocate's powers or duties;

    e. Have authority to promulgate and adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations as necessary to carry out the purposes of this act.

    5. (New section) a. The advocate shall represent and protect the insurance consumers of this State in proceedings before and appeals from decisions of the Department of Insurance, which is charged with the regulation of the insurance industry, including the fixing of insurance rates. The advocate may initiate any such proceedings when the advocate determines that a discontinuance or change in a rate is in the public interest of the insurance consumers of this State. For purposes of this act, "public interest" means an interest or right arising from the Constitution, decisions of court, common law or other laws of the United States or of this State inhering in the citizens of this State or in a broad class of citizens.

    b. Whenever the advocate represents the public interest, in a proceeding initiated by an insurance company or nonprofit service plan subject to Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes, for authority to increase or change the charges for insurance, the advocate shall send each insurer, nonprofit service plan or rating organization involved in that proceeding a statement of the compensation and expenses of counsel, experts and assistants employed by the office in the proceeding, together with an appropriate allocation to that insurance company, nonprofit service plan or rating organization of its fair share thereof.

    6. 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.

    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] Office of the Insurance Consumer Advocate, established by P.L. , c. (C. ) (now before the Legislature as this bill) 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 Insurance] Office of the Insurance Consumer Advocate 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, setoff 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.

(cf: P.L.1994, c.58, s.43)

    7. Section 5 of P.L.1988, c.156 (C.17:29A-44) is amended to read as follows:

    5. a. A filer may charge rates for private passenger automobile insurance in the voluntary or residual market which are not in excess of the following:

    (1) For private passenger automobile personal injury protection coverage, residual bodily injury and property damage insurance, the maximum permissible annual rate increase applicable to each rate level utilized by an insurer in the voluntary market pursuant to section 6 of P.L.1988, c.156 (C.17:29A-45) or by any plan established pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1) to provide insurance for automobiles, as defined in section 2 of P.L.1972, c.70 (C.39:6A-2), shall be a Statewide average rate change of not more than the last published increase in the medical care services components of the national Consumer Price Index, all urban consumers, U.S. city average, plus three percentage points.

    (2) For private passenger automobile physical damage coverage, the maximum permissible annual rate increase applicable to each rate level utilized by an insurer in the voluntary market pursuant to section 6 of P.L.1988, c.156 (C.17:29A-45) or by any plan established pursuant to section 1 of P.L.1970, c.215 (C.17:29D-1) to provide insurance for automobiles, as defined in section 2 of P.L.1972, c.70 (C.39:6A-2), shall be a Statewide average rate change of not more than the last published increase in the automobile maintenance and repair components of the national Consumer Price Index, U.S. city average, plus three percentage points.

    b. For the purposes of this section, "Statewide average rate change" means the total Statewide premium for all coverages combined at the rates in effect at the time of the filing for each rate level.

    c. Any change in excess of the rate changes permitted by paragraphs (1) and (2) of subsection a. shall be subject to the provisions of P.L.1944, c.27 (C.17:29A-1 et seq.).

    d. If, at any time, the commissioner believes that an increase in either or both of the published indices will produce rate levels which are excessive, he may modify the Statewide average rate change which may be used pursuant to this section.

    e. A filer may implement a change in rate level, pursuant to subsection a. of this section, in whole or in part, in a single or in multiple filings by making an informational filing with the commissioner in a manner and form approved by the commissioner. The filing shall include a statement of the reason or reasons for the change in rate level, including, but not limited to, the claim and expense experience of the individual filer.

    f. Other than filings made pursuant to subsection c. of this section, the provisions of subsection c. of section 14 of P.L.1944, c.27 (C.17:29A-14) shall not apply to any filing made pursuant to this section. However, the commissioner shall provide a copy of any filing made or other information provided by a filer pursuant to the provisions of this section to the [appropriate division or office in the Department of Insurance] Office of the Insurance Consumer Advocate, established by P.L. , c. (C. ) (now before the Legislature as this bill). The [appropriate division or office in the Department of Insurance] insurance consumer advocate may challenge a rate change implemented pursuant to subsection a. of this section after the effective date of the rate change by filing such challenge in writing with the commissioner within 30 days of the effective date of the rate change. The commissioner shall hear the matter on an expedited basis and shall render a final determination within six months of the date of filing. The commissioner may, for good cause, extend this six-month period up to an additional three months. If [that division or office in the Department of Insurance] the insurance consumer advocate prevails, the commissioner shall reduce or rescind the rate change as appropriate. If the commissioner reduces or rescinds a rate change as a result of a challenge by the [appropriate division or office in the Department of Insurance] insurance consumer advocate filed pursuant to the provisions of this subsection, the filer shall bear the cost of the reasonable expenses incurred by [that division or office in the Department of Insurance] the insurance consumer advocate in maintaining the challenge.

    g. (Deleted by amendment, P.L.1995, c.151.)

(cf: P.L.1995, c.151, s.2)

    8. Section 13 of P.L.1994, c.58 (C.52:27E-60) is amended to read as follows:

    13. [a.] Those functions of the [Division of Rate Counsel in the Department of the Public Advocate] Department of Insurance related to matters pending before the Commissioner of Insurance, including representation in any pending insurance rate cases and the power to levy assessments solely for the costs of experts to analyze rate applications and to appear as witnesses at hearings, are transferred to and assumed by the [Department of Insurance, which shall be represented in any rate litigation by the Attorney General] Office of the Insurance Consumer Advocate, established by P.L. , c. (C. ) (now before the Legislature as this bill.

    b. Whenever, in any law, rule, regulation, order, reorganization plan, contract, document, judicial or administrative proceeding or otherwise, reference is made to the Division of Rate Counsel in the Department of the Public Advocate or the officers thereof, with respect to insurance rate cases, the same shall mean and refer to the [Department of Insurance] Office of the Insurance Consumer Advocate.

(cf: P.L.1994, c.58, s.13)

    9. There is appropriated to the Office of Insurance Consumer Advocate the sum of $200,000.

    10. This act shall take effect immediately.

STATEMENT

    This bill establishes the Office of Insurance Consumer Advocate to protect the public interest of the insurance consumers of this State with regard to the availability and cost of insurance and reestablishes certain functions which had previously been performed on behalf of the public by the Public Advocate. The Department of the Public Advocate was abolished in 1994.

    In response to the perceived need for an independent advocate to act on behalf of insurance consumers, this bill provides for the appointment of an insurance consumer advocate. The advocate would be responsible for representing and protecting the insurance consumers of this State in proceedings before and appeals from the Department of Insurance, which is charged with the regulation of the insurance industry, including the fixing of insurance rates. In addition, the bill provides that costs be borne by the insurer whenever the advocate represents the public interest in a proceeding initiated by an insurance company or nonprofit service plan subject to Title 17 of the Revised Statutes or Title 17B of the New Jersey Statutes for authority to increase or change their insurance rates.

    The bill includes an appropriation of $200,000 for the establishment of the Office of Insurance Consumer Advocate.