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The
Most Frequently Asked Questions About Auto Insurance Reform
MANDATED
RATE REDUCTION
When
will I get my 15% reduction?
The Auto Insurance Cost Reduction Act requires insurance
companies to reduce their rates for a variety of insurance
policy coverages. Beginning March 22, 1999, insurance companies
will begin collecting approximately $700 million less in auto
insurance premiums. The actual rate reduction for individual
policyholders will vary depending on a number of factors including
policy changes, levels and types of coverage purchased and
number of drivers on a policy.
When
will the automobile insurance policy choices and lower rates
be available?
There are three ways you can benefit from the implementation
of the various reforms and the mandatory rate reduction:
- Purchase a new automobile insurance policy
after March 22, 1999. All policies sold after this date will
contain the new policy options and reflect the mandatory rate
reduction.
- Automobile insurance policies that are processed
for renewal by your insurance company on or after March 22,
1999 will contain the new policy options and reflect the mandatory
rate reduction. This means that if your policy expires in
the later part of April 1999, your renewal policy will likely
contain the new policy options and reflect the mandatory rate
reduction.
- If you wish to change your policy before
its scheduled renewal to take advantage of the new reforms,
contact your insurance agent. Remember that there are thousands
of auto insurance policies and there are likely to be a high
number of customer inquiries and requests for policy changes
Why
have some people’s rates increased even though they are
supposed to get a decrease?
Some people will see an increase in their premium because
of a number of factors. These include amounts and types of
coverage, changes in the value of vehicles insured and/or
the number of drivers on covered by the policy. Others may
see an increase because of tier rating. The law mandates that
implementation of tier rating be "revenue neutral."
This means that an insurer cannot collect more in total premium
from their policyholders because of tier rating. However,
the distribution of the premiums charged will change. According
to the Department of Banking & Insurance, the rates charged
for approximately 53 percent of all vehicles insured will
remain the same or decrease.
Tier rating should not be confused with the mandatory premium
rate reduction that will begin on March 22, 1999. The rate
reduction is part of a reform law (Automobile Insurance Cost
Reduction Act or AICRA) that became law in May 1998 and will
reduce premiums by approximately $700 million.
MEDICAL
TREATMENT PROTOCOLS AND DIAGNOSTIC TESTS
Will my
medical care for auto accident injuries be handled differently?
In an effort to combat tens of millions of dollars of fraud
and abuse in the state’s auto insurance system, the reform
law required the New Jersey Department of Banking & Insurance
to establish guidelines for the standard treatment of injuries
sustained in automobile accidents.
After months of research and dialogue with state boards that
license various medical professionals, the Department approved
a set of medical treatment guidelines and a list of valid
diagnostic tests. The new rules ensure that injured auto accident
victims receive prompt medical treatment from responsible
medical professionals while adding reasonable controls to
prevent widespread fraud and abuse.
Emergency medical treatment is not affected by the guidelines
and it remains the policyholder’s right to choose his
or her own physician.
Will
my physician lose the ability to exercise independent judgement?
No, your physician and other health care professionals will
determine the medical necessity of treatment. An independent
medical review board physician, not insurance company employees,
can resolve disputes that arise.
What
if my physician or I disagree with the treatment authorized
by my insurer?
Disputes regarding medical treatment provided under PIP may
be submitted for dispute resolution. A professional arbitrator
will review your dispute. You or IFA has the option of requesting
a review by an independent medical review board. Guidelines
established by the Department of Banking & Insurance assure
swift action on medical treatment disputes.
NAMED
EXCLUDED DRIVER
What does
it mean to exclude a driver from my policy?
If there is a vehicle on your policy that certain driver(s)
do not drive, you can exclude those driver(s) from being covered
by certain insurance coverages on that vehicle. The excluded
driver(s) will not have collision or comprehensive coverage
if they drive that vehicle.
What
happens if excluded driver uses a vehicle for which they have
been excluded?
If the "named excluded driver" operates a vehicle
that he/she has been excluded from, and is involved in an
accident there are no physical damage coverage benefits (collision
or comprehensive). The vehicle would continue to be covered
under the liability and personal injury protection coverages
regardless of who drives the car.
Does
the excluded driver provision apply to the rest of my policy
too?
Only physical damage coverage benefits (collision or comprehensive)
would not be available for the "excluded driver"
on the specific vehicle designated by you. The vehicle would
continue to be covered under the liability and personal injury
protection coverages regardless of who drives the car.
Why
would I want to exclude a driver from my policy?
By doing so, your comprehensive and collision premiums on
that car would not reflect this person’s claim experience,
driving, record and rating classification. You may be able
to reduce your premiums by excluding certain drivers from
driving specific vehicles.
OPTIONAL
LOWER PIP LIMITS
What happens
if I choose lower PIP limits and I am involved in an accident
that incurs medical bills in excess of my coverage?
Your policy will only cover you up to the limit you select
and you would be responsible for paying the rest of the cost
of medical treatment except in cases of certain catastrophic
injuries in which case your policy would provide up to $250,000
of medical coverage.
What
if I don’t choose any of these lower limit options?
If you do not choose any of the lower limit coverage options,
you will automatically be given the standard $250,000 of personal
injury protection or "no-fault" medical benefits
coverage.
BASIC
POLICY
What coverages
does the basic policy provide?
A basic policy offers $15,000 in personal injury protection
coverage and includes up to $250,000 of medical benefits coverage
for catastrophic-type injuries, $5,000 property damage liability
and an option to purchase $10,000 of bodily injury liability
coverage. If you purchase a basic policy, you cannot purchase
uninsured/underinsured motorist coverage. Companies can, at
their option, also offer to sell collision and comprehensive
coverages with this type of policy.
NEW THRESHOLD
TO LIMIT LAWSUITS
What are
the changes regarding my right to sue for pain and suffering?
Since 1989, New Jersey policyholders have been able to choose
between Bodily Injury Liability coverage with a Lawsuit (or
Verbal) Threshold and a No Threshold option. Your selection
of one of these thresholds determines your ability to sue
for "pain and suffering" for injuries you sustain
in an auto accident.
To reduce the number of non-serious and frivolous lawsuits,
a new "Limitation on Lawsuit" Threshold will replace
the present Lawsuit Threshold. The new threshold allows you
to sue for "pain and suffering" should someone else
injure in an accident if the injuries are: serious injuries
which your physician certifies are permanent in nature, death,
dismemberment, loss of a fetus, displaced fracture or results
in significant disfigurement or scarring.
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