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In 2nd run for governor, McGreevey just seeks to stabilize rates
Originally appeared in the Bergen Record on Tuesday, October 9, 2001
When he ran for governor four years ago, Democrat Jim McGreevey slammed auto insurance companies and promised voters he would cut rates by 10 percent.
But this year, the Democratic gubernatorial candidate is offering voters a far less ambitious proposal: stabilizing rates.
Speaking Monday at a Dodge dealership in Woodbridge, where he is mayor, McGreevey outlined an auto insurance plan that includes tougher penalties for auto insurance fraud, the restoration of the state's public advocate to intervene in auto insurance rate hearings, and a crackdown on uninsured drivers.
McGreevey acknowledged that his plan would not result in immediate reductions in rates, but would at the very least stabilize rates.
Industry experts said McGreevey's plan could save little and may actually end up raising insurance rates.
McGreevey's less ambitious plan comes as an auto insurance crisis looms in New Jersey. Eleven of the six-dozen insurers operating in the state are seeking rate increases, and several insurers are seeking to leave New Jersey, including the State Farm Indemnity Co. and AIG, respectively the state's largest and sixth-largest auto insurers.
State Farm and AIG insure about one million cars total, one out of every five vehicles in the state. Other companies could not easily absorb such a large number of vehicles because they lack the capital to write large numbers of new policies.
"New Jersey deserves a governor who will put our drivers first, who will stand up to the insurance industry, and who will crack down on fraud and abuses that have driven up costs for all of us," McGreevey said, surrounded by charts detailing proposed increases by auto insurers.
But just a few minutes later as reporters peppered him with questions, McGreevey took the side of the car insurance industry, saying he understood the frustration of car insurers like State Farm, which had been denied rate increases by the state.
He said the administration of acting Gov. Donald DiFrancesco was playing politics by denying increases, even when they were justified, to curry favor with voters.
"The process is devoid of any integrity," he said.
McGreevey's quick change shows the delicate, if not impossible, tightrope he must walk, trying to appease motorists angry at the nation's highest average auto rates while not further alienating insurers eager to abandon New Jersey.
McGreevey's opponent, Bret Schundler, has proposed a more radical program, including allowing motorists to save as much as one-third of their auto insurance premium by agreeing not to bring lawsuits for "pain" and "suffering" against motorists who are at fault in an accident.
Schundler spokesman Bill Guhl said McGreevey's plan did not offer a solution to the auto insurance problem because it doesn't cut rates. He said McGreevey doesn't support limiting lawsuits because he is backed by trial lawyers, who benefit from lawsuits.
McGreevey offered few details about his program, saying he would toughen penalties for doctors and auto mechanics and other professionals who commit auto insurance fraud. He said that would reduce some of the 15 percent of premiums that goes to pay fraudulent claims.
But Robert Hunter, insurance director of the Consumer Federation of American and a former Texas insurance commissioner, said the 15 percent number is "highly exaggerated."
Hunter said New Jersey has already been among the most aggressive states in fighting insurance fraud, tightening its criminal penalties over the last several years, thus making it difficult to get additional insurance premium savings by increasing fraud-fighting efforts.
At most, Hunter said, McGreevey's enhanced battle against fraud could save 1 percent off a policy. "It's nonsense," he said.
McGreevey's plan to crack down on uninsured motorists, that some estimates put as high as 600,000 motorists, involves the implementation of a computerized database and a vehicle sticker program.
But Hunter said there have been problems with such computerized systems in other states. In any case, he said, uninsured motorists account for no more than 5 percent of a premium. Hunter said McGreevey, with a concerted effort, might be able to shave off 1 percent.
McGreevey also called for a panel of doctors and chiropractors to review and possibly change protocols that limit medical treatment for soft-tissue auto accident injuries to about 60 days of treatment.
Auto insurance companies say such protocols have reduced fraud and cut their costs by about 5 percent. Both medical and groups representing trial lawyers had challenged the protocols in court and lost.
Hunter said changing the protocols to allow for more treatment would likely result in rate increases.
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