AIA Commends N.J. Lawmakers in Efforts to Combat Factors Leading to Higher Auto Premium Costs

September 16, 2005

The American Insurance Association (AIA) is praising New Jersey legislators, regulators and the administration for continuing to actively combat the factors, under its control, which have resulted in the state ranking number one on the National Association of Insurance Commissioners’ (NAIC) annual auto insurance premium survey.

The NAIC’s 2002/2003 Auto Insurance Database Report provides the average costs associated with personal automobile insurance nationwide using data obtained from 1999-2003. The report’s findings illustrate the problems that plagued New Jersey for years prior to the enactment of the state’s historic auto insurance reform bill in 2003, and the implementation of important regulations to effectuate and support that legislative package.

“After decades of New Jersey being at the top of the list of least affordable states for auto insurance, the governor, the legislature and the Department of Banking and Insurance have made great strides in enacting measures that will allow the state’s drivers to see lower costs,” explained David Snyder, AIA vice president and assistant general counsel.

Since the auto reform bill was passed in June 2003, many drivers who once had trouble getting a policy can now reportedly be insured in one day. Approximately 33,000 previously uninsured drivers have some level of coverage now and efforts to combat fraud have intensified. Additionally, four major insurers, GEICO, AMEX Assurance Company, Mercury General, and Esurance are now selling auto insurance in New Jersey, which increases the choices available to consumers.

In the two years since the reforms were enacted, 29 rate decreases or special dividends by 17 auto insurers have brought more than $343 million in savings to policyholders. So far this year, 10 auto insurance companies have made 11 rate reduction filings to save policyholders more than $33 million and more than 1,500 new auto insurance agents are doing business in New Jersey.

“It is apparent that this increased competition should help drive auto insurance rates to their lowest feasible level,” said Snyder. “The addition of major players in the auto insurance market greatly benefits New Jersey consumers, and also demonstrates the success the state is having in fostering a truly competitive auto insurance market for the first time in more than 20 years,” continued Snyder.

According to the NAIC, many factors affect the state-to state differences in average expenditures and premiums for automobile insurance including driving locations, traffic density, vehicle theft rates, auto repair costs and medical and legal costs. This report underlines the importance of constant vigilance with respect to cost drivers such as lawsuits and medical costs. AIA strongly supports continuing efforts to address both issues, including the implementation of effective medical fee schedules and legislation to prevent erosion of the savings provided to drivers by the choice no-fault system.

“Due to the costs associated with the heavily congested driving conditions in New Jersey, it will never have the lowest auto insurance premiums in the country,” explained Snyder. “However, with the state continuing to battle over-regulation and actively promoting competition in the insurance marketplace, New Jersey drivers have a much better chance to pay lower rates in the future.”

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