TRENTON, N.J., July 31 – The proposed Insurance Department rule change of offering basic policies through a Personal Automobile Insurance Plan (PAIP) servicing carrier has come under fire from PIANJ.

As reported in the July 3 issue of Insurance Advocate, the cheap, bare-boned basic policies, designed to be a practical insurance alternative for the states low-income drivers, has been largely ignored by both buyer and seller. In light of this, the department has proposed that a service carrier handle the sale of such policies, relieving companies of the responsibility, with PAIP establishing the procedures for using and selecting a service carrier.

PIANJ president Andrew Anderson, CIC, said that while the association understood the departments rationale for proposing the rule change, the department lacks statutory authority to initiate the change, since neither the statute authorizing PAIP nor the statute authorizing basic insurance policies contain any provision for PAIP administering basic auto insurance policies. If the Legislature had intended for the PAIP to administer the basic automobile policy, it would have specifically provided for this in the law, said Anderson. Therefore, PIANJ believes that a statutory change is required to allow basic policies to be written through the PAIP.

PIANJ suggested that if the department is concerned about the low number of basic policies being purchased by automobile insurance consumers, a better approach to the problem may be to simply allow the basic policy option to expire, rather than trying to make it more appealing by allowing companies to offer it through PAIP.

The association also noted the unfair burden that this rule change would place upon insurance producers. While PIANJ appreciates that the rule change would make it easier for insurance companies to provide basic policies, we are concerned that it would increase the burden placed upon PAIP-certified insurance producers who now would be the sole outlet for consumers to obtain basic policies, noted Anderson.

According to PIANJ, by allowing only PAIP-certified producers to offer these policies, PAIP producers will be deprived of the opportunity afforded to other, non-PAIP producers to pursue sales of other types of insurance. It is certainly not unfair to continue asking insurers to provide the product in the manner originally authorized, Anderson said. On the other hand, it is unfair to ask PAIP producers to pick up the administrative burden of offering these polices on behalf of all insurers, including direct writers, something that was not contemplated when the basic policy was originally authorized.