Q: When will rates go down?

A: The Automobile Cost Reduction Act was enacted May 19, 1998. The Act mandates a reduction in rates on new policies issued on or after March 22, 1999 and renewals issued on or after April 21st. For the most part, we will start to see changes in April. Rates should decrease for those insureds already rated by the 6/97 law that mandated tier rating. However, the premiums for insureds not yet affected by tier rating may see no decrease or may even see an increase.

Q: Will my rate reduction be 15%?

A: Not necessarily. In some situations consumers will see savings over 15% and in other situations less. The percentage of your reduction will depend on many factors such as:

    >The coverages you have chosen
    > Whether you have chosen the no threshold limit to lawsuit option
    > Whether your policy has already been tier rated.

Q: Is the rate reduction a percentage of my entire premium or 15% of a certain portion of my policy?

A: The combined PIP, bodily injury liability coverage and collision coverage sections of your policy are to be reduced in varying percentages to give a total rate reduction of an average of 15%. Remember, depending on the coverages you select, the rate reduction could be more or less.

Q: How do I get my rate reduction?

A: Each insurance company will have its own procedures for implementing rate reductions. Some companies may make changes by using a simplified endorsement form along with a coverage selection form that you must review and sign. Other companies may prefer to re-issue your policy using an entirely new auto insurance application that you will have to complete. The procedures will vary with each company. Your insurance carrier is responsible for informing you of their procedures.

Q: Do I have to wait for my policy renewal to come up before I can get my rate reduction?

A: No. By Order of the Department of Banking & Insurance issued January 4, 1998, insurance carriers must provide rate changes to those insureds who have policies with termination dates of April 21" and thereafter when requested by the insured. Although you are seeking the rate reduction, you may not, however, see a rate decrease. (see #1).

Q: If I cancel mid-term what will my cancellation penalty be?

A: The Department of Banking & Insurance mandated Order A99-102 states that any re-issue of a policy must be without penalty. If you move to another insurance company you will receive a short rate penalty cancellation from your former insurer since the Order only applies to re-written coverage with the same carrier.

Q: Will tier rating affect rate reduction?

A: If you have not yet had tier rating applied to your policy, it could have a considerable effect, either positively or negatively. Keep in mind that tier rating is NOT a part of the Automobile Cost Reduction Act of 1998. Tier rating came in effect as a result of legislation that was passed in July of 1997. The purpose of tiered rating is to replace the previous surcharge system. Companies are required to classify drivers according to risk characteristics. Factors such as your driving record, age, claim history, etc. will affect the particular tier in which you will be placed. Each tier reflects higher and lower premium amounts. Although separate, tier rating could affect your rate reduction in certain circumstances. For example, if your policy has not yet been tier rated and you cancel your existing policy in order to request the rate reduction, you could actually see your rates increase. Your policy will now be tier rated, and your premium will reflect your tier placement. It will include your cost reduction also. The premium reflected by your tier placement could very well cancel out any rate reduction you anticipated. If your policy is already tier rated, you may want to consider your individual situation before requesting rate reduction. For example, suppose you are in a lower tier due to an accident on your record that occurred several years ago but is due to come off your policy in the Fall. If you choose to have your policy canceled and renewed in April in order to get your rate reduction, keep in mind you are renewing your policy before the accident has come off your record. This could result in keeping you in a lower tier longer than you need to. For these reasons you may not want to request your rate rollback immediately.

Q: Will I get a check back for my rate reduction?

A:Your rate reduction will be reflected in your automobile insurance policy premium. If premium is still due it will be applied to your outstanding premium or if no premium is due, it may be returned.

Q: What are the coverage changes in PIP?

A: You now have a choice between a standard policy and a basic policy. The basic policy will provide only $15,000 of PIP medical expense benefits. The standard policy will provide $250,000 of medical expense benefits and offer options of choosing lower medical expense limits of $15,000, $50,000, $75,000, and $150,000. If no lower option is chosen, the $250,000 limit will apply. The limit you choose will be reflected in your automobile insurance premium. However, the premium differences between most of these levels could be negligible; any selection other than the $250,000 PIP coverage may not be a cost effective choice.

Q: Will my medical bills be handled differently?

A: Yes. Generally there will be more controls over the medical treatment an injured person receives. You need to be aware that standards have been established for determining what diagnostic tests, treatments, and services should be provided to injured persons under PIP medical expense coverage. Generally, only medical expenses that are medically necessary will be covered. Medically necessary is defined as treatment that (1) is not primarily for the convenience of the injured person or medical provider, (2) is the most appropriate standard or level of service which is in the standards of good practice and standard professional protocols, and (3) does not involve unnecessary diagnostic testing. The Department of Banking & Insurance have listed several tests that will likely not be covered. In addition, certain diagnostic tests and protocols for the treatment of common injuries have been set. The purpose here is to eliminate inappropriate medical treatments and unnecessary expenses that contribute to the high cost of automobile insurance.

You will still be allowed to select your own physician. Your doctor may be required to notify your carrier no later than 21 days following the commencement of treatment to comply with the regulation. You or your doctor may also be required by your automobile insurance carrier to notify your insurer of the need for continuing treatment or specific diagnostic tests for purposes of pre-certification. You could also be required to have a physical examination by an independent medical provider at some point during the course of your treatment. There will be no pre-certification requirements within 10 days of the accident. However, this does not mean that tests rendered in this time period that are NOT medically necessary will be reimbursed. Be aware that the Dept has listed six care paths that deal mostly with soft tissue, neck and back injuries. These care paths set out the standard course of medically necessary treatment for these injuries where there will be close supervision of medical tests and treatment. Care paths will not, however, apply when treatment is given during emergency care - or when medical care is initiated within 120 hours of the accident.

Q: How will I know if there is a pre-certification requirement to my treatment?

A: Each insurer is required to file policy forms with the Department of Banking & Insurance that sets forth the benefits provided under the policy, including eligible medical treatments, diagnostic tests, and services. Also included will be a plan for the procedures that an injured person or his/her provider will need to follow regarding prior notice of treatment or pre-certification. The insurer will be responsible for providing information about its pre-certification plan to each insured.

Q: What if my physician does not get pre-certification or I refuse to attend an independent examination?

A:You or your physician may incur co-payment penalties for non-compliance with the pre-certification procedures your insurance carrier sets out up to a maximum of 50%. You will be able to choose, however, you will then incur the costs for treatment personally.

Q: What if I disagree with the medical treatment authorized by my insurer? What if my doctor disagrees?

A: Disputes regarding medical expense benefits provided under PIP may be submitted to dispute resolution where a dispute resolution professional will make determinations with the help of a medical review organization. The medical review organization will include physicians in the same practice area as your treating physician. These physicians will review your medical records and if necessary request a independent medical examination.

Q: What are the changes regarding my right to sue for pain and suffering?

A: The Automobile Cost Reduction Act created a new threshold that must be met in order to be able to pursue pain and suffering. The purpose is to reduce the number of lawsuits for non-serious injuries. Under the old system we called such a threshold the "verbal threshold". In place of the verbal threshold is the Limitation on Lawsuit Option. Under this limitation an insured may not sue a person for pain and suffering caused by an automobile accident unless they have suffered one of the following:

    > Death
    > Dismemberment
    > Significant disfigurement or significant scarring
    > A displaced fracture
    > Loss of a fetus
    > Permanent injury within a reasonable degree of medical probability - i.e. when the body part of organ or both has not healed to function normally and will not heal to function normally with further medical treatment.

Choosing the limitation on lawsuit option serves to reduce your automobile insurance premium.

Q: What is the Named Driver Exclusion? What does it mean?

A: You may now choose to specifically name a driver who will be excluded from coverage for physical damage for specified automobiles on your policy. This is done by naming the excluded driver on the "named excluded driver endorsement" form that will be provided by your insurance carrier. The named driver exclusion does affect loss payees/lienholders.

The premium charged for physical damage coverage on the specified automobile will not reflect the claim experience, driving record, or rate classification of the named excluded driver. So, if you name Joan as an excluded driver of your 1998 Dodge Caravan, Joan's driving record will not be reflected in your premium. However, if Joan is involved in an accident while driving your Caravan and is at fault, neither Joan, your lienholder or yourself will be permitted to recover the damage to your vehicle from the insurer. [Case law may need to clarify under and uninsured motorist coverage in situations where the named excluded driver is not at fault.]

Q: Under the Automobile Cost Reduction Act, will I still be allowed to choose my own repair shop?

A: Yes. The Act preserves your right to choose the auto body shop or repair facility of your choice. However, if the body shop you choose does not have a prior financial arrangement or if not a member of your insurance carrier's network of shops, your insurance carrier may require the shop to accept those terms that it imposes on other shops in its network. In this case the shop you have chosen would likely be required to have you sign a notification that your manufacturer, dealer warranty, or lease agreement may be jeopardized.

Q: What is the Basic Policy?

A: The Basic Policy is a "bare bones" automobile insurance policy. It provides coverage for:

    > $15,000 PIP medical expenses (but increases to $250,000 for emergency care for certain catastrophic injuries)
    > No Bodily Injury Liability coverage unless the insured chooses to purchase $10,000 Bodily Injury Coverage at an additional cost.
    > $5,000 property damage liability
    > There is no underinsured or uninsured motorist coverage in the basic policy.
    > The limitation on lawsuit is mandatory
    > An insurer may have the option to offer comprehensive and collision coverage but a minimum $500 deductible applies.
    > Catastrophic injury - Medically necessary treatment of permanent or significant brain injury, spinal cord injury or disfigurement or medically necessary treatment of other permanent or significant injuries rendered at a trauma center or acute care hospital immediately following the accident and until the patient is stable shall be covered up to $250,000.

Q: What are the risks of choosing the basic policy over the standard policy?

A: It is a choice heavy with risks. The basic policy is not for everybody. The basic policy offers only $15,000 of medical expense benefits which can be used up by just one week in the hospital. The basic policy offers no protection for bodily injury liability unless a very minimal $10,000 is chosen as an option. The basic policy also falls short in property damage liability. With only $5,000 of property damage liability coverage, a basic policyholder must pay any damages over the $5,000 out of pocket. A basic policy holder risks their future earnings, personal property and personal savings. The intention of the basic policy is to provide an absolute minimum for those presently driving uninsured. The intent is not to replace the standard policy with the basic policy.

Q: Could the limited coverage under the basic policy affect my personal umbrella requirements?

A: Yes. You could have a serious gap in coverage. Most umbrella polices require a minimum of $250,000 to $500,000 of bodily injury coverage in the underlying policies before coverage is triggered. The most a basic policy provides is $ 10,000 of bodily injury coverage. The insured has a $240,000 "self- insured" gap. This means that $240,000 would have to come out of the insured's pocket before the umbrella policy responds for damages above the $250,000.

Q: If I have a basic policy but a family member has a standard policy and I incur medical expenses over the $15,000, can I submit a claim under my family members PIP?

A: No. According to N.J.A.C. 11:3-3.3 (c) "If a named insured has elected basic automobile insurance coverage and other immediate family members or resident relatives of the named insured have higher policy limits under a standard policy, the provision of N.J.S.A. 39:6A-4.2 shall apply and the named insured shall only be entitled to the coverages provided under his or her basic policy." 39:6A-4.2 Primacy of coverages provides: "Except as provided in subsection d. of section 13 of P.L. 1983, c.362 (C.39:6A-4.3), the personal injury protection coverage of the named insured shall be the primary coverage for the named insured and any resident relative in the named insured's household who is not a named insured under an automobile insurance policy of his own. No person shall recover personal injury protection benefits under more than one automobile insurance policy for injuries sustained in any one accident."

Q: What happens if I am hit by a driver with a basic automobile insurance policy and they do not have enough property damage liability coverage to pay for my damages?

A: The Basic Policyholder is not considered uninsured because he has $5,000 of property damage liability coverage. However, if your damages exceed $5,000 you can make an underinsured motorist claim under your policy for the difference between your damages and those covered by the $5,000 on the other driver's Basic policy. What if I'm injured? A: Your policy will pay for medically necessary treatment under your PIP medical expense benefits. If you have an injury that meets the limitation on lawsuit threshold, you could pursue damages for pain and suffering against the basic policyholder. If he has no BI coverage or his option of $10,000 is not enough to cover your damages for pain and suffering, you will have to seek recovery under your underinsured motorist coverage Be aware - depending upon the tier classifications of your insurance carrier, making an underinsured or uninsured motorist claim could affect your tier placement and ultimately your premium.