In an effort to curb the rising cost of personal-injury protection benefits and claims, the New Jersey Department of Banking and Insurance proposed new regulations Monday.
New Jersey's PIP coverage accounted for 97 percent of all rate increase requests from automobile insurers in 2010, according to the proposal.
"Over the last two years, car insurance rates in the state of New Jersey have gone up. Roughly 99 percent of consumers in the state have experienced an increase in car insurance, and most of this has been driven by the PIP costs," DOBI spokesman Ed Rogan said.
Several of the key changes would be to establish registration requirements for PIP vendors, creating a uniform internal appeal process for disputes and reducing the number of disputes that go to alternate dispute resolution, or ADR, procedures.
"We expanded the fee schedule to bring the fees that providers can charge more standard," Rogan said. "The system that the Department of Banking and Insurance put forward today imposes some common-sense changes on the system, standardizes some of the fees and looks to reform the arbitration system."
"Being able to add more procedures to the fee schedule, it adds more predictability to the system," said Eric Stenson, spokesman for New Jersey Manufacturers Insurance. "The arbitration portions of it will be helpful too … with more procedures on the fee schedule, there would be fewer billing disputes, as well."
The proposed regulation amendment said the ADR is "more expensive and takes longer than other dispute resolution mechanisms." The new regulations would create a system wherein future treatment is not at issue and the demand is less than $1,000; in such cases, the dispute would be decided based solely on the paper materials provided, with no in-person hearing.
"It seems like a very reasonable approach," Stenson said of the arbitration reform. "I think it will wind up streamlining the process, and it will control council fees, as well, and I think it is something that will ultimately benefit policy holders."
The new regulations also would change the way attorneys' fees would be decided in dispute resolution. According to DOBI, in 2010, in 31 percent of disputes where attorneys' fees were awarded, the attorneys' fees were greater than the PIP benefits awarded. The proposal suggests tracking the fees more closely, then creating a fee-shifting schedule to end disproportionate awards.
"We spend millions of dollars a year in arbitration, and it's such a waste," said Eric Poe, chief operating officer of Cure Auto Insurance. "In a normal litigation world, you would never have a lawyer take a case for $40, $99, because it's not worth their time."
Rogan said insurers in the state are losing money, because for every dollar they take in, they pay $1.23 in PIP claims.
The Property Casualty Insurers Association of America issued a statement supporting DOBI's new regulations, stating the 2003 changes to the state's automobile insurance laws did not address PIP. The association contends that New Jersey policyholders pay the second-highest PIP premiums in the nation, paying 59 percent more than drivers in other no-fault states.
In 2007, DOBI increased the number of procedures on the fee schedule, but the increase was delayed in the courts until 2009. Poe said the appellate court's decision to uphold the schedule increases then strengthens DOBI's case for this round of schedule increases.
"The department has done a tremendous job of preparing themselves for opposition to this from the same people," Poe said, referring to those who held up the 2007 increases. "They have gone through the painstaking procedures to ensure that the enactment of this after due process will, most likely in its entirety, go through."