Not Registered?
 
A Recent History of New Jersey Auto Insurance

The Automobile Insurance Cost Reduction Act of 1998

The Automobile Insurance Cost Reduction Act of 1998 (AICRA) was a significant change in New Jersey Auto Insurance legislation that was designed to address the high cost of New Jersey Automobile Insurance. A number of dramatic changes were applied to the New Jersey Auto Insurance system as a result of this new law and it has impacted the New Jersey driver and New Jersey Auto Insurance Companies in many ways. Most significantly, the law provided that the consumer is given more choice in selecting coverage limits, and that New Jersey Auto Insurance Companies be protected from insurance fraud and abuse.

Each year New Jersey Auto Insurance Companies incur tremendous expense from legal, medical, and auto repair sources. The Automobile Insurance Cost Reduction Act of 1998 (AICRA) was aimed squarely at helping New Jersey Auto Insurance Companies control the spiraling cost of lawsuits, medical treatments, and vehicle repairs. The thinking behind the new law was that by eliminating frivolous lawsuits, inappropriate medical treatment, and other types of fraud that the New Jersey Auto Insurance Companies would be able to charge New Jersey Drivers lower premiums. As a matter of fact, the legislation required New Jersey Auto Insurance Companies reduce their premiums by 15 percent across the board for all New Jersey Drivers.

All New Jersey Drivers who purchased new Automobile Insurance policies, or whose policies were renewed on or after March 22, 1999 benefited from the implementation of the New Jersey Auto Insurance reforms and the mandatory rate reduction. It is important for New Jersey Drivers to familiarize themselves with the changes that resulted from the implementation of the Automobile Insurance Cost Reduction Act of 1998 (AICRA).

Summary of the New Jersey Auto Insurance Changes that Resulted from the Automobile Insurance Cost Reduction Act of 1998 (AICRA)

Consumer Choice

The New Jersey Driver is provided more choices under the new law. These choices provide the option to choose coverage limits that best fit the individual needs of the driver at the time they purchase or renew their New Jersey Auto Insurance policy. The new law let the consumer purchase either a "standard" New Jersey Auto Insurance policy, or a new "basic" New Jersey Auto Insurance policy.

Basic Policy

The new “basic” policy allows vehicle owners to purchase lower amounts of certain coverage than New Jersey law previously required. 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 a consumer purchases a basic policy, they can not purchase uninsured/underinsured motorist coverage. New Jersey Auto Insurance Companies can, at their option, also offer to sell collision and comprehensive coverage with this type of policy.

Standard Policy

The “standard” policy offers consumers a variety of coverage options; New Jersey State law requires that the New Jersey Driver purchase certain minimum limits for three coverage types:

Personal Injury Protection – PIP pays for injuries to the Insured Driver and passengers, no matter who is at fault in an accident. New Jersey Auto Insurance companies must offer up to $250,000 of PIP coverage.

Liability Coverage – Bodily Injury Liability pays for injuries the Insured Driver causes to others in an accident. Under a standard policy the minimum coverage required is $15,000 for injuries to one person and $30,000 for all injuries in an accident. Property Damage Liability pays for damage the Insured Driver causes to others’ property from an accident. The minimum required coverage is $5,000.

Uninsured/Underinsured Motorist – This coverage protects the Insured Driver against damages and injuries caused by drivers who are uninsured or inadequately insured. This coverage is not available under a basic policy. Minimum limits are the same as for the liability coverage and the basic deductible is $500 for property damage.

Optional Coverage -- Collision coverage pays to repair the Insured Driver’s car after an accident, no matter who is at fault. Comprehensive coverage pays for auto theft, glass breakage and damage from vandalism, fire, flood and flying rocks and debris.

Options on PIP Limits

New Jersey Drivers also have choices with regard to their personal injury protection or PIP benefits coverage. New Jersey law previously mandated that all policyholders purchase $250,000 of PIP benefits. PIP pays for injuries to you and your passengers, no matter who is at fault in an accident. Under the AICRA reform law, individuals purchasing a ‘standard’ policy have the option of choosing various levels of coverage, $250,000, $150,000, $75,000, $50,000 or $15,000. All the options include catastrophic-type injury coverage of up to $250,000. If you do not choose among these options, you will automatically be given the standard $250,000 of coverage.

The reform law also encouraged New Jersey Auto Insurance Companies to develop various deductible, co-payment and pre-certification plans to combat fraud and abuse of auto insurance medical benefits. Consumers should carefully review these plans.

The Named Excluded Driver Provision mandates that New Jersey Auto Insurance companies offer the option of excluding certain household members from coverage on a New Jersey Auto Insurance policy. If there are vehicles on the policy that certain driver(s) living in the household do not drive, those drivers can be excluded from having coverage on those vehicles. If the "named excluded driver" operates the vehicle, then the physical damage coverage benefits (collision or comprehensive) would be not be available. The vehicle would continue to be covered under the liability and personal injury protection coverage regardless of who drives the car.

Cost Containment & Anti-Fraud Measures

The reform law also included several initiatives to cut costs and combat fraud and abuse. There are some new Auto Insurance definitions in your New Jersey Auto Insurance policy. The reform law requires New Jersey Auto Insurance Companies to include new definitions for the terms medical expense, medical supplies, economic loss, health care provider and medical necessity in their policies. This is meant to combat unnecessary treatment and unscrupulous medical providers by clarifying what these terms mean and the insurance benefits they cover.

Medical Treatment Protocols and Diagnostic Test

In an effort to combat tens of millions of dollars of fraud and abuse in the New Jersey 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.

Under these guidelines, it remains the policyholder’s right to choose their own physician.

New PIP Dispute Resolution System

Prior to the reform law, disputes over excessive or inappropriate medical treatment were resolved by panels of lawyers -- not doctors -- and a typical claim could take 12 to 18 months to be processed. Under the new arbitration system, independent medical review boards of doctors and full-time professional arbitrators will review and settle disputes regarding medical benefits.

New Threshold to Limit Lawsuits

Since 1989, New Jersey Auto Insurance policyholders have been able to choose between Bodily Injury Liability coverage with a Lawsuit (or Verbal) Threshold or a No Threshold option. The selection of one of these thresholds determines the 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 replaced the present Lawsuit Threshold. The new threshold allows you to sue for "pain and suffering" should someone else injure you in an accident and the injuries are: serious injuries which your physician certifies are permanent in nature or result in death, dismemberment, loss of a fetus, displaced fracture, significant disfigurement or scarring.

New Threshold to Limit Lawsuits

Since 1989, New Jersey Auto Insurance policyholders have been able to choose between Bodily Injury Liability coverage with a Lawsuit (or Verbal) Threshold or a No Threshold option. The selection of one of these thresholds determines the 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 replaced the present Lawsuit Threshold. The new threshold allows you to sue for "pain and suffering" should someone else injure you in an accident and the injuries are: serious injuries which your physician certifies are permanent in nature or result in death, dismemberment, loss of a fetus, displaced fracture, significant disfigurement or scarring.

Office of Insurance Fraud Prosecutor

The reform law created the Office of the Insurance Fraud Prosecutor. The Prosecutor, who works within the New Jersey Attorney General’s Office, is charged with investigating and prosecuting suspected insurance fraud.

Body Shop Repair Provision

This provision preserves the right for an insured driver to choose the auto body shop or repair facility of their choice. If the auto body shop or repair facility that is selected does not have a prior arrangement with the New Jersey Auto Insurance Company it may be required that the auto body shop repair the vehicle under the same terms and conditions as the Insurance Companies network of auto repair shops. In this case, the shop chosen by you would be required to sign a notification that your manufacturer or dealer warranty or lease agreement may be jeopardized.

Mandated Rate Reduction

AICRA reform law required New Jersey Auto Insurance Companies to reduce rates for certain policy coverage. The overall result is a premium reduction of approximately 15% for a "typical" policy. In March 1999, New Jersey Auto Insurance Companies filed new Auto Insurance rates that reduced the rates they charge by over $700 million as required by the AICRA legislation.

Territorial Rating Commission: Rating Territories to be Revised

New Jersey state law places a cap on the Auto Insurance premiums that can be charged in certain areas of the state, even though these areas generate more accidents, claims and lawsuits than other parts of New Jersey. The result is that Auto Insurance premiums in these capped areas are inadequate to cover the losses that are generated there and force other New Jersey Drivers to subsidize the rates. The new reform law mandated a state-appointed commission review and revised these geographic territories for the first time in over 50 years. Implementation of these revisions began after January 1, 2000.

Eliminating Surcharges

Prior to the passage of AICRA, the state Legislature eliminated mandatory insurance surcharges and moved New Jersey to a new and more responsible system of charging automobile insurance premiums – tiered rating. The new tiered rating system is designed to identify and provide the lowest premium to low risk-drivers, rather than simply penalizing motorists for accidents and DMV violations. New Jersey Auto Insurance Companies consider a number of risk characteristics, including driving record, years of experience, vehicle type and coverage limits when determining a driver’s tier placement. Companies have developed a variety of tiered programs for the different types of drivers and vehicles they insure. This makes it more important than ever for consumers to shop around because tier systems and rates can vary considerably.

The New Jersey Automobile Insurance Competition and Choice Act of 2003

The New Jersey Automobile Insurance Competition and Choice Act of 2003 is largely responsible for the recent return of Auto Insurance Companies who had abandoned the sate in the 1990’s. The 2003 law instituted rate reform and an expedited Rate Process that was expanded from 3% to 7%. The law also relaxed a number of prior approval requirements.

 
REPORT A CLAIM
1.877.432.2277
claims@ifaauto.com
MAKE A PAYMENT
1.877.567.8940
payments@ifaauto.com
CHANGE YOUR POLICY
1.877.432.2277
underwriting@ifaauto.com