In his recent State of the State address, Gov. Phil Murphy reaffirmed his commitment to his economic development strategic plan, with the goal to “Make New Jersey the state of innovation.” As a lifelong New Jersey resident, I am heartened by his commitment to bring our state back to its innovative roots. But, for this to work, New Jersey must create a business-friendly environment that is designed to attract and retain cutting-edge companies; ensuring they have the tools they need to be successful in their business.
Companies consider a range of different criteria when deciding where to locate, including the availability of affordable insurance. This is especially true for startups that are introducing new and exciting technology into the marketplace. Traditional insurance companies typically avoid providing insurance to these startups, since these nascent companies present unknown and at times unquantifiable risk. To help solve this dilemma, wholesale and specialty insurance companies provide a proactive approach to risk through customized insurance policies tailored to fit the unique needs of emerging sectors. This niche industry recognizes that the only way to create the next game-changing innovative product is to simply give someone a chance to succeed.
To date, New Jersey has had a burgeoning specialty insurance market, able to meet the needs of innovators and startups by providing coverage at reasonable rates. However, a bill recently introduced in the Assembly could disrupt the state’s business climate and increase the cost of insurance across the board; making insurance prohibitively expensive or nonexistent especially for startups looking for a new home.
This bill would make it easier for claimants to sue insurance companies. While this sounds great, it will actually raise the stakes so high (insurance companies would have to pay triple damages) that insurance companies will have no choice but to settle — even when the lawsuits are patently ridiculous. To cover these increased costs, insurance companies will have to raise their premiums. In fact, a recent study by Milliman Research Associates shows premiums for all New Jersey insurance policyholders could increase by a total of $2.5 billion if this bill becomes law.
We have seen this happen in states across the country that have enacted similar legislation. In Florida we saw commercial auto premiums rise 16.6 percent. Our future depends on the innovation economy; we have seen it work. We should be seeking new ways to make states more attractive for these businesses, not less. Please don’t turn back the clock on New Jersey — say “No” to A-4293.
Wendy Certo is the president of the New Jersey Surplus Lines Association and has worked in the excess & surplus lines market for 30 years. She is also the underwriter manager of Gremesco of New Jersey LLC.
