|JUDGE DECIDES IN AIG’S FAVOR IN DISPUTE OVER AUTO INSURANCE RATES|
|New York, NY, July 23, 2001 - An administrative law judge found in favor of American International Group, Inc. (AIG) subsidiary American International Insurance Company of New Jersey (AIIC), on eight of ten issues in a dispute with the New Jersey Department of Banking and Insurance. AIIC estimates that the decision corresponds to a 17.6% increase to its automobile insurance rates. However, this ruling can be modified or rejected by the Commissioner of Banking and Insurance.|
Commenting on the ruling, Robert Sandler, AIG, Executive Vice President, noted that “We are gratified that the Administrative Law Judge, the only independent party to our dispute with the New Jersey Department of Banking and Insurance, made it completely clear that the company’s current rates are inadequate and that a significant rate increase is necessary. Unfortunately, now the process returns to the political arena where a decision will be made by the same people who took the position that no increase was warranted.”
Judge Louis McAfoos issued his ruling on July 2, 2001 nearly four months after hearings held in March. This was preceded by a six month process including review of AIIC’s rate filing by the Department of Banking and Insurance and preparations for the contested rate hearing. Should the Commissioner modify or reject Judge McAfoos’ ruling, AIIC could appeal. Final resolution could take another year or more through the appellate courts.
Commenting further, Mr. Sandler said “The Judge’s decision, validating the need for a rate increase, even if upheld, does not address the overall climate which makes doing business in New Jersey untenable. Two years or more to resolve a legitimate need for a rate increase is not an environment in which a company can continue to be in business. A complete overhaul of the regulatory process is required allowing economic reality rather than political expediency to prevail. Today New Jersey consumers do not benefit from competition and product innovation, and the insurance industry has no fair chance at profit. This is a real lose-lose situation.
“It is ironic that while the United States recommends the virtues of a free market economy to other countries as the reason for our high standard of living we have a New Jersey regulatory process that is such a contradiction—you can’t change rates, you have to continue to write business at a loss and you can’t freely leave the state.”
AIG is the leading U.S.-based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in the United States. Its member companies write a wide range of commercial, personal and life insurance products through a variety of distribution channels in approximately 130 countries and jurisdictions throughout the world. AIG’s global businesses also include financial services and asset management, including aircraft leasing, financial products, trading and market making, consumer finance, institutional, retail and direct investment fund asset management, real estate investment management, and retirement savings products. American International Group, Inc.’s common stock is listed on the New York Stock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo.