After years of steady declines, New Jersey’s notoriously high auto insurance rates are on the rise again. And, to stem the tide, the Christie administration is proposing new rules that would limit the kinds of medical care injured drivers can receive under their auto policies.
The proposed rules could rekindle debate over auto insurance, an issue that dominated New Jersey for decades, when angry motorists regularly revolted against paying rates that were nearly always the most expensive in the nation.
The administration’s proposal also renews the long fight over who rules in disputes over injured motorists. Insurance companies have long sought these proposed changes, saying they will cut premiums. Consumer advocates today said they will hurt accident victims.
New Jersey auto insurance bills got smaller from 2005 to 2008 after former Gov. James E. McGreevey deregulated the insurance market. In 2008 – the most recent year for national figures – New Jersey stood third in the nation, at $1,081 per car.
But state officials say rates began to rise again in 2009, and continue to this day.
“The vast majority of the auto insurance companies in the state sought increases,” said Department of Banking and Insurance spokesman Marshall McKnight.
McKnight could not say how much average rates have risen, adding that insurance companies are not required by law to disclose hikes if they don’t exceed 7 percent per year.
The proposed rules would place limits on personal injury protection, which covers medical expenses for accident victims. McKnight said 97 percent of the rate hikes over over the past two years were because of the rising cost of medical expenses.
Almost all New Jersey motorists have $250,000 in PIP coverage, McKnight said, while the national average is closer to $5,000.
“That makes the auto insurance policy in New Jersey compared with the rest of the nation inherently more expensive,” he said.
Phyllis Salowe-Kaye, director of the advocacy group New Jersey Citizen Action, said the changes would hurt motorists.
“It’s just another hit at the consumer,” she said. “It’s another form of taxation.”
For injured drivers, only those procedures outlined in medical journals would be fully covered. Instead of going to chiropractors or ambulatory surgical centers, for example, policyholders might have to visit a hospital.
Officials say the current rules are too vague and allow drivers to get medical treatment insurance companies were never supposed to provide. “Some providers essentially found loopholes in the system we had set up,” McKnight said.
Salowe-Kaye, however, said injured motorists should have more of a say. “If a consumer chooses to go to a chiropractor rather than an orthopedist, that’s their choice,” she said.
For insurance companies, the savings would come through an expedited claims process on covering medical expenses, according to officials. In disputes over what should be covered, carriers would spend less on legal fees through arbitration by directing more cases to their internal appeals boards first and potentially resolving them there without the need for outside lawyers.
In one dispute, McKnight said, a client was awarded $17 but the insurer had to pay $1,500 to the attorney, plus its own legal costs.
Insurance companies welcomed the Christie administration’s proposal, which would not require legislative approval.
“Medical costs in every arena have been increasing over the last 15 to 20 years,” said Pat Breslin, spokesman for the state’s largest insurer, New Jersey Manufacturers Group. Breslin said PIP costs cover up to 35 percent of premiums, and the rules change could lead to lower bills for policyholders.
But Salowe-Kaye said the state should also look into insurers’ profit margins and their administrative costs if it’s serious about protecting consumers. “We should be focusing on the insurance companies,” she said.