DEPARTMENT OF BANKING AND INSURANCE
DIVISION OF INSURANCE
Commercial Lines Insurance
Proposed Amendment: N.J.A.C. 11:13-1.2
Authorized By: Donald Bryan, Acting Commissioner
Department of Banking and Insurance.
Authority: N.J.S.A. 17:1-8.1, 17:1-15(e), 17:29AA-3(a)(9) and 17:29AA-29.
Calendar Reference: See Summary below for explanation of exception to calendar requirement.
Proposal Number: PRN 2001-457
Submit comments by February 1, 2002 to:
Karen L. Garfing, Assistant Commissioner
Department of Banking and Insurance
20 West State Street
PO Box 325
Trenton, New Jersey 08625-0325
Fax: (609) 292-0896
The agency proposal follows:
The Department of Banking and Insurance ("Department") is proposing an amendment that would reclassify farmowners insurance from a personal lines insurance to a commercial lines insurance. Upon adoption, farmowners insurance will no longer be subject to the provisions governing personal lines insurance, particularly the requirements of N.J.S.A. 17:29A-1 et seq. concerning prior approval of forms and rates. Instead, farmowners insurance would be subject to the provisions of the Commercial Insurance Deregulation Act, N.J.S.A.17:29AA-1 et seq.
Farmowners insurance contains coverages generally found in commercial lines, such as business property and liability coverages, and in personal lines, such as homeowners and personal liability coverages. When the Commercial Insurance Deregulation Act was implemented, farmowners insurance was originally allocated to commercial lines.
The Department notes that most states classify farmowners insurance as commercial insurance. Rating organizations also consider farmowners insurance as a commercial line. In order to be consistent with other states' treatment of this type of coverage as well as allowing rating organizations to make one consistent national filing for this type of coverage, the Department believes that it is necessary to reclassify farmowners insurance as a commercial line.
The proposed amendment deletes farmowners insurance from the list of personal lines insurance and adds it to the examples of commercial lines insurance.
A 60 day comment period is provided for this proposal and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, the proposal is not subject to the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.
The proposed amendment would impact insurance companies that offer farmowners insurance. The reclassification of farmowners insurance as a commercial line will have a positive impact on insurers and rating organizations because filing
requirements will be simplified. Insurers should also experience a benefit in that the Department is treating this line of coverage in a manner that is consistent with other states. The Department does not anticipate that the proposed amendment will have any impact on farmers.
Insurers that offer farmowners insurance may experience some minor positive economic impact as their rates and forms will no longer be subject to the Department's approval prior to the implementation of any changes. The Department does not anticipate any economic impact on farmers purchasing such insurance as a result of the proposed amendment. The proposed amendment is intended to make New Jersey’s rules consistent with other states’ treatment of this type of coverage as well as allowing rating organizations to make one consistent national filing for this type of coverage.
Federal Standards Statement
A Federal standards analysis is not required because the proposed amendment is not subject to any Federal requirements or standards.
The Department does not believe that the proposed amendment will cause any jobs to be generated or lost. However, to the extent that this amendment helps promote a healthy insurance marketplace in New Jersey, the climate for business and job growth is improved.
The Department invites interested parties to submit any data or studies concerning the job impact of the proposed amendment.
Agricultural Industry Impact
Pursuant to N.J.S.A. 4:1C-1 et seq., the Right to Farm Act, and N.J.S.A. 52:14B-4(a)(2), the Administrative Procedure Act, the Department does not expect any changes in the availability, coverage or rates of farmowners insurance as a result of the proposed amendment. The Department does not anticipate any other agricultural industry impact from the proposed amendment. The proposed amendment is intended to make these rules consistent with other states' treatment of this type of coverage as well as allowing rating organizations to make one consistent national filing for this type of coverage.
Regulatory Flexibility Statement
A regulatory flexibility analysis is not required because the proposed amendments do not impose reporting or recordkeeping or other compliance requirements on "small businesses," as defined in the Regulatory Flexibility Act, N.J.S.A. 52:14B-16 et seq. No insurance companies offering farmowners insurance qualify as "small businesses" as that term is defined.
Full text of the proposal follows (additions indicated in boldface thus; deletions indicated in brackets [thus]):
(a) This chapter applies to all policies or contracts of insurance issued by a licensed insurer pursuant to Title 17 of the Revised Statutes except:
1. (No change.)
2. Insurance issued for personal, family or household purposes;
i. Examples of policies of insurance issued for personal, family or household purposes are:
(1) (No change.)
(2) Policies principally used to provide primary insurance on private passenger automobiles [which] that are individually owned and used for personal or family needs;
(3) Policies of personal inland marine, personal theft, residence glass, personal liability insurance and personal excess; and
[(4) Policies of farmowners insurance; and]
[(5)] (4) Policies of self-storage personal property insurance as defined at N.J.A.C. 11:17-1.2.
ii. Insurance issued for personal, family or household purposes does not
include insurance used to cover business, professional or other commercial risks, such as farmowners, businessowners and commercial multi-peril policies.