First Major Insurer Enters Market

(TRENTON)— Keeping his promise to change the way New Jersey regulates the auto insurance industry, Governor James E. McGreevey today welcomed the first new auto insurer to enter the New Jersey market since 1996.  The Governor was joined by Banking and Insurance Commissioner Holly C. Bakke.

The announcement comes just two months after the Governor signed an auto insurance reform package that overhauls the State’s auto insurance system.  Beginning today, the new insurer--Mercury General--will be hiring as many as 50 agents and plans to offer policies to drivers not renewed by State Farm Indemnity.

“There is no doubt that our reforms are making New Jersey an attractive place to do business again,” said Governor McGreevey,  “and the result means more choices for New Jersey drivers.”

Commissioner Bakke credits Mercury’s entrance into the New Jersey marketplace to the Governor’s auto insurance reform package, which was signed in June.  The reforms have been endorsed by consumer and anti-fraud groups, as well as the insurance industry and AAA Mid-Atlantic.  It now imposes some of the Nation’s toughest penalties for auto insurance fraud, while strengthening consumer protections and cutting down on the number of uninsured drivers on the road.  Innovations include stricter categorization of high-risk drivers, a dollar-a-day insurance plan for low-income drivers and phases out the “Take All Comers” law that forces companies to insure drivers with bad records. 

“We are on the right road toward a healthier, more stable auto insurance market,” Commissioner Bakke said. “Mercury is a sure sign that the market is improving, and that we are getting closer to our goal of giving consumers the choices they deserve.”

“This is a huge first step in welcoming the insurers that for so long used the disclaimer not available in New Jersey,” said McGreevey.  “Insurance is now available in New Jersey. The word is getting out that New Jersey has established a new playing field.”

Mercury General is a Los Angeles based company with a reputation for low cost and careful assessment of driver risk.  The company presently has $2 billion in assets and offers auto insurance in eight other states including California, Texas and Florida.

"We are excited about joining the market. We're here not only because of the reform legislation itself, but also because of the clear commitment that Governor McGreevey and Commissioner Bakke have made to making auto insurance work in New Jersey," said Jack Dougherty, Vice President, Mercury General.

"The Professional Insurance Agents of New Jersey is excited to have Mercury Insurance Group enter New Jersey's auto insurance market.  We welcome efforts to restore competition to the market for the ultimate benefit of consumers and hope this will encourage further regulatory reform, stabilization and competition in the industry," said PIANJ President John D'Agostino Jr., CIC, whose agency is based in Hammonton.

Mercury General is the leading independent broker and agency writer of automobile insurance in California and has been one of the fastest-growing automobile insurers in the Nation. It is ranked as the sixth-largest among all insurers in California, with total assets more than $2 billion.

Since its formation in 1961, Mercury has focused on careful underwriting, strict cost control and efficient claims management that support affordable, competitive automobile insurance rates. Its most recent rating by A.M. Best is A-plus, putting the company in the ranks of the most financially stable insurers.

Mercury will offer auto insurance policies to 4,000 drivers that State Farm Indemnity is not renewing each month under a June 2002 Market Stabilization Order. Through a revamped Department’s Market Assistance Procedure, which was established to help State Farm Indemnity motorists find auto insurance coverage, policyholders who are non-renewed by State Farm will get an offer from Mercury within 30 days. These motorists have the right to opt out of receiving a Mercury quote, and, as before, they have the right to look elsewhere for coverage.  Over the next 14 months 50,000 State Farm Policy holders will have the option to go to Mercury General.

Eligible drivers will be placed into one of seven tiers, depending on a number of factors, including driving history, the levels of coverage they choose, and a variety of discounts that may apply, including good student, driver education, senior citizen and good credit discounts, which will be offered in New Jersey for the first time. Good credit discounts are used in most states to evaluate driver risk and will be assessed by the Department of Banking and Insurance with Mercury’s entry into the State.

New Jersey has had more than 20 insurers leave the State in the last 10 years.  With enactment of the regulatory reforms laid out in the Governor’s reform plan, New Jersey drivers can expect more companies and more competition over time.  The law is specifically designed to reward companies that operate efficiently and increase their investment in the State.  Those companies that provide additional coverage or increase their capital beyond what is mandated for the level of risk that they carry would receive economic incentives.

Companies also benefit from the commonsense approach taken in re-writing the “excess-profit rule.”  In years past, levels of profitability were determined over a three-year period.  Excess profit will now be evaluated over seven years in an attempt to even out the effects of good and bad years.  In 1998 the excess-profit rule forced State Farm Indemnity to return $38 million to its customers only to find itself in dire straits in the years to follow. 

Bringing in new carriers has been a primary goal of the McGreevey Administration’s efforts to reform the State’s auto insurance system to operate with minimum red tape and maximum market competition.  It requires redressing more than 30 years of damage to the way New Jersey’s auto insurance industry operates.

“Whether it is auto insurance, EZPass or DMV reform, we are delivering real change for New Jersey drivers,” said McGreevey.

Photos and audio and video clips from Governor McGreevey’s press conferences are available on the Governor’s web page at http://www.state.nj.us/governor/.

Links are located in the Governor’s Newsroom section of the page.