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Underwriting Freedom Necessary for Insurance Markets to Work Properly, NAMIC Tells New Jersey Senate Panel

INDIANAPOLIS (June 14, 2006)— Insurers need to be free to engage in the fundamental function of underwriting in order for insurance markets to work properly, which ultimately benefits consumers and society in general, a NAMIC representative told New Jersey lawmakers this week.

In testimony delivered to the New Jersey Senate’s Commerce Committee on June 12, Paul Tetrault, NAMIC state affairs manager for the Northeast region, expressed NAMIC’s support for underwriting freedom and opposition to limitations and restrictions on insurers’ ability to underwrite freely. The committee was holding an informational hearing on the issue of insurers’ use of factors such as occupation and education in the underwriting and rating of private-passenger auto insurance.

“NAMIC believes underwriting restrictions are cause for concern wherever they are proposed, but such concern should be particularly high when underwriting restrictions are proposed where there is a history of marketplace troubles,” Tetrault told the committee.

“Prior to passage of the 2003 reform law, New Jersey offered a case study in the kinds of problems that can befall an insurance marketplace when insurers are not allowed to underwrite freely and compete effectively,” he pointed out. “Coverage was more expensive, it was harder to obtain, and insurers were trying to leave the market. The reform law has been successful in enhancing competition precisely because insurers have been given the freedom to underwrite that they need in order to innovate and compete. Placing restrictions on insurers’ ability to underwrite would threaten to reverse the substantial gains achieved and would therefore constitute a misguided step backward for New Jersey.”

Limitations and restrictions on underwriting freedom stifle innovation, thereby hampering competition, ultimately harming consumers, Tetrault pointed out.

Along with its comments, NAMIC submitted to the committee its public policy paper, “The Case for Underwriting Freedom: How Competitive Risk Analysis Promotes Fairness and Efficiency in Property/Casualty Insurance Markets,” authored by NAMIC Director of Public Policy Robert Detlefsen, Ph.D., which comprehensively discusses the role of underwriting freedom in the context of the insurance underwriting process, the benefits of underwriting freedom, and the detrimental effects of restricting that freedom.

For further information, contact
Paul Tetrault
Tel (978) 969-1046

Posted: Wednesday, June 14, 2006 12:00:00 AM. Modified: Thursday, June 29, 2006 10:11:18 AM.

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