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New Jersey Automobile Insurance Risk Exchange.
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The New Jersey Automobile Insurance Risk Exchange (NJAIRE) was created by statute more than 20 years ago. Its creation resulted from New Jersey’s dual liability threshold, which caused potential premium inequity to a carrier. This occurs when a limited threshold insured becomes involved in a loss with an unlimited threshold insured. It results in the limited threshold carrier essentially paying an unlimited threshold claim, usually with a higher payout, when they only received premium for less expensive coverage.
Therefore, the purpose of NJAIRE is to restore premium equity to New Jersey carriers when their limited lawsuit threshold policyholders incur losses with claimants who carry unlimited lawsuit threshold liability coverage.
NJAIRE is governed by a 12 member Board of Directors and the New Jersey Department of Banking and Insurance. All members must be residents of New Jersey. Nine members are nominated by the Governor, including eight members who are affiliated with New Jersey insurers. They must submit to legislative disclosure, comply with senatorial courtesy and be confirmed by the New Jersey Senate. Three additional members are directly appointed by the Governor, the Senate President, and the Assembly Speaker.
The NJAIRE Board represents many phases of public and insurer perspectives. Board members come from actuarial, claim, legal, operations, regulatory, statistical and underwriting backgrounds, allowing for a diverse group of individuals. The current Board of Directors consists of two attorneys from prestigious New Jersey law firms, members from AAA-Mid-Atlantic, Allstate, American International Group, Chubb Group, Highpoint, New Jersey Manufacturers, State Farm, and public member Donald Foth. The New Jersey Department of Banking and Insurance is an ex-officio member of the Board.
It’s important to note that Board members from insurance companies do not represent their company. They represent all member companies of their trade association. New Jersey carriers belong to either 2 trade groups; the Property Casualty Insurers Association (PCI) or the American Insurance Association (AIA) or they may not belong to a trade group, and are considered Non-affiliated. Non-affiliated members represent all New Jersey non-affiliated insurers.
NJAIRE Board of Directors • Frank Coscia, Esq. (Gallo, Geffner, Fenster) • Thomas DeFalco, (New Jersey Manufacturers) • Stephen Doyle (American International Group) • Peter Eckhardt (Chubb Group) • Donald Foth, Vice Chairperson (Public Member)) • Richard Hubschman, Esq. (Hubschman and Roman) • Mark Keenan (Allstate) • Thomas Myers, Chairperson (High Point) • Sam Sackey, Ex-Officio (New Jersey Department of Banking & Insurance) • Russell Shaner (AAA/Mid-Atlantic) • David Ziemer (State Farm)
NJAIRE also has several standing committees, chaired by Board members who bring personal and business related expertise to their committee. The Actuarial Committee is chaired by Tom DeFalco, who is an Actuary and Officer with New Jersey Manufacturers Insurance Company. This committee oversees assessment percentages for each accident year, as well as establishing annual interest, closeout years and addressing other actuarial issues.
The Audit committee is chaired by Larry Weiss from Palisades Safety and Insurance management Corporation. This committee works closely with our external auditors to assure that audit guidelines are proper and current, and audit compliance is achieved by carriers.The Finance and Investment Committee is chaired by attorney Frank Coscia, assuring that NJAIRE funds receive safe and optimum yield through several financial institutions.The Insurance and Contracts Committee is chaired by Mark Keenan from Allstate Insurance Company. This committee oversees vendor and policy contracts.
The NJAIRE office is located in Hamilton and is well run by General Manager Bill Clarke. Bill is a former long term Board member and officer, now retired from AAA/Mid-Atlantic.M. Paige Berry is NJAIRE General Counsel. Ms. Berry is an exceptional attorney associated with the law firm of Reed Smith, located in Princeton.
New Jersey statutes mandate NJAIRE compliance by every auto insurer licensed to conduct business in New Jersey, and it’s been our experience that some carriers do not meet NJAIRE standards. This issue became sufficiently evident to the New Jersey Department of Banking and Insurance, and resulted in the issuance of a compliance reminder from Commissioner Bakke on July 26, 2004.
The NJAIRE Plan of Operations and Procedure Manual contain specific reporting requirements that are not present in any other state. This can result in a lack of understanding about NJAIRE requirements, possibly as a result of staff turnover, or multi-state responsibilities.The current NJAIRE Plan of Operations and the separate Procedure Manual are written in an understandable format, and are available in both paper and on the NJAIRE website.
ISO serves as the Central processor for NJAIRE. ISO handles the complexities of : • Reported data from each carrier • Assessments collected from applicable carriers • Reimbursements paid to appropriate carriers • Annual cash settlement to all carriers • Website creation and maintenance • NJAIRE Budget and expenses . . . and a myriad of other tasks that keeps an ISO team busy 100% of the time.
NJAIRE maintains contracts with two external auditors. Annually, the financial records of NJAIRE are reviewed by Withum, Smith and Brown, a CPA firm that conducts financial audits. Through its statutory authority NJAIRE requires compliance audits of every applicably licensed New Jersey insurance company. Compliance audits are conducted by AIPSO, the parent organization of most residual market mechanisms in the United States. AIPSO’s Residual Markets Audit Services (RMAS) has an exceptional history of conducting compliance audits within the industry, using many industry retirees who are very competent in their audit specialty.
NJAIRE audits encompass much more than the residual market, and AIPSO has tailored NJAIRE audits to fit NJAIRE requisites. Each year, the NJAIRE Board of Directors selects 10 carriers to receive NJAIRE audits to ascertain compliance. Each audit is conducted in a formal atmosphere. It requires advance data be provided to enable the auditors to select specific claim records for review. Audits are conducted at the carrier’s office, with five auditors present, usually for one week. Subsequent to the audit, there is communication between AIPSO and the carrier before a final report is submitted to the Board.
. The Board reviews every audit, in detail, taking action as appropriate, including penalty assessment when carriers fail to achieve NJAIRE compliance. Feedback from AIPSO and ISO has prompted educational seminars that focus toward the actuarial, claim, statistical, or other areas in your companies that are responsible for maintaining and reporting NJAIRE information. Two seminars were conducted in 2005 and single seminars were presented in 2006 and 2007. The next seminar is scheduled for Thursday, November 13, 2008.
. NJAIRE recommends that carriers maintain an understanding of NJAIRE requirements, especially in areas where staff turnover occurs. Self-audits are also recommended to assure ongoing compliance.Contact information is available on this website for anyone who needs additional information. The Board of Directors meets four times annually, and carriers are welcome to attend Board meetings as well as the annual meeting which is held at the conclusion of the November meeting.
