Insurance regulators in New Jersey are preparing to give the rules for auto insurance as the struggle continues with expenses relating to the personal injury protection (PIP) system within that state.
Governor Chris Christie released a proposal on August 1, 2011, which suggested changes that are intended to decrease internal system use and claim settlement arbitration legal fees, and lower the overall costs for alternative providers. There will be approximately three thousand new treatment codes to be included into the system.
For every dollar collected in premiums relating to PIP, carriers are currently paying $1.23 in benefits. Coverage for PIP makes up 97 percent of the rationale behind requests for rate increases, making the need for changes in the system quite high.
According to a statement following the proposal released by the New Jersey Department of Banking and Insurance, the reason for the medical fee schedules is that they set limits for the costs that insurance companies are required to pay for residents of the state who have been injured in a vehicle accident, therefore “lowering the cost of automobile personal injury protection coverage and motor bus medical expense coverage.”
From 2005 through 2008, the auto insurance system was deregulated in New Jersey after former Governor James McGreevey signed bills to accomplish this goal. However, McGreevey’s plan did not include PIP coverage. As a result, the costs did drop, but by 2009, rates began to rise.
According to the Property Casualty Insurers Association of America, the average claim for PIP in the state is approximately $16,400. When compared to ten years ago, this number is 65 percent higher, though comparable states have seen an average increase of only 36 percent.