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Insurance Association Opposes “Bad Faith” Auto Insurance Reform

Posted on June 2, 2009

New Jersey lawmakers are reviewing a proposal to bulk up consumer protection for state drivers involved in “bad faith” situations, including those where a driver is hit by an uninsured party and needs to recover costs from his or own insurer.

However, the response from the National Association of Mutual Insurance Companies (NAMICS), a major trade association for the insurance industry, is anything but positive. NAMICS spokespeople claim that new laws would only serve to drive up costs for those securing New Jersey auto insurance coverage. Representatives of NAMICS cite past efforts on the part of the state to make automobile coverage affordable for citizens. They also paint the new laws against the backdrop of a worsening economy.

News reports identify the bill as S-132, An Act Concerning Unfair Claim Practices in the Settlement of Certain Uninsured and Underinsured Motorist Coverage Claims. The provisions of the bill in general would assist in getting compensation for drivers whose insurers are found to be acting with “malice” in either delaying or omitting necessary aid for those involved in accidents with uninsured or unidentified drivers.

The controversial New Jersey bill underscores a deeper problem: if insurers are not willing to pick up the tab for the uninsured, some alternative system has to be devised. The status quo, as referred to by NAMICs representatives, is in an ever growing system of litigation that ultimately drives up costs. It seems that the national auto insurance field is in need of a straightforward system for covering claims incurred at the hands of uninsured drivers. This may include increasing penalties for driving without insurance or some kind of federal government oversight.