Myth
vs. Fact:
The Facts about New Jersey’s Auto Insurance Reform
MYTH:
Most people will not receive any significant rate reduction.
FACT:
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.
MYTH:
Auto insurance reform will result in injured victims receiving
insufficient medical care when they need it the most.
FACT:
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
(DOBI) 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 DOBI 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/her own
physician.
MYTH:
Insurance companies are earning unheard of profits at the
expense of policyholders.
FACT:
New Jersey’s 7.4 percent return on net worth for 1997
is marginal at best, especially compared to the insurance
industry nationally. New Jersey continues to rank as one of
the worst states for automobile insurance profitability in
the country. In fact over the last ten years, auto insurance
profits (as a return on net worth) averaged only 3.5 percent
in New Jersey, compared to a countrywide average of 9.9 percent.
In addition,
New Jersey has the toughest excess profits law in the country.
Under New Jersey’s excess profits law, insurers are allowed
a six- percent after-tax operating profit, including income
from investments. While a few companies have rebated dividends
to policyholders in the past, the majority of insurance companies
continue to post minimal profits and in some cases, serious
losses.
Under
the new reform law, insurers will reduce their premiums by
approximately $700 million.
MYTH:
The medical profession was not permitted to review the regulations
in order to make sure proper medical treatment will be available.
FACT:
The process used by the Department of Banking & Insurance
to develop the medical treatment guidelines included months
of research and dialogue with state boards that license various
medical professionals, the Division of Consumer Affairs and
the Department of Health and Senior Services.
MYTH:
Auto insurance reform is an attempt to force managed care.
FACT:
The new medical treatment guidelines are very different from
managed care. In a managed situation, you must use the services
of a physician who is part of a network of doctors. Under
the new medical guidelines, it remains the policyholder’s
right to choose his/her own physician and emergency medical
treatment is not effected.
Your
physician and other health care professionals will determine
the medical necessity of treatment. An independent medical
review board physician, not insurance company employees, will
resolve disputes that arise.
MYTH:
Trial attorneys and chiropractors are the only ones who care
for the policyholders and victims of car accidents.
FACT:
Insurance companies provide New Jersey citizens and businesses
with the economic security necessary to survive the unpredictable
and sometimes devastating events of modern everyday life.
In the last three years, insurance companies have paid over
$3.2 billion in policyholder claims to pay for chiropractor,
hospital and other medical provider bills. Over the past eight
years, insurers have paid more than $12 billion to settle
"pain and suffering" lawsuits filed against policyholders.
MYTH:
People will no longer be able to have their own doctor treat
them for car accident injuries. Doctors will not be able to
exercise their own independent medical judgment.
FACT:
Under the new medical guidelines, it remains the policyholder’s
right to choose his/her own physician and emergency medical
treatment is not affected.
After
months of research and dialogue with state boards that license
various medical professionals, the Department of Banking &
Insurance 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.
MYTH:
The new "basic policy" will encourage people to
buy less insurance than they need.
FACT:
New Jersey law requires all motorists to be insured. The basic
policy presents a more affordable insurance option to drivers
who could not previously afford the high levels of coverage
mandated by law. Basic policies will typically have premiums
of $500 or less and offer only $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.
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