The Star-Ledger

N.J. Insurance Rates Tap Brakes

The Star-Ledger — Thursday, November 13, 2008

Star-Ledger Staff

This is one time when being second is a good thing.

For only the fourth time since 1992, New Jersey is No. 2 on the list of most-expensive automobile insurance markets in the nation.

Garden State drivers paid an average premium of $1,152 a year in 2006, the most recent year analyzed by the National Association of Insurance Commissioners in a report made public last week. That's a dip of 2.8 percent compared with the previous year, and enough to drop New Jersey behind the District of Columbia, which has the highest average premium — $1,164.

"The auto insurance reforms the department put into place a few years ago have stimulated competition, brought down prices and continue to provide access to coverage for New Jersey drivers," said Paul Penna, spokesman for the N.J. Department of Banking and Insurance.

As it now turns out, New Jersey has been No. 2 for two years in a row.

Last year's NAIC report listed New Jersey as No. 1, just $2 per vehicle ahead of Washington, D.C. But those numbers changed in the new report.

"If you look, every year when they release this report, they go back and clean up the numbers for the previous year," said Brian Sullivan, editor of the insurance industry newsletter Risk Information. "They've re-stated 2005 for D.C. and New Jersey, and D.C. is higher. New Jersey has been number two for two years."

The report said 2006 was the second year in a row the average premium fell compared with the prior year; in 2005, the average New Jersey premium dropped to $1,185, from $1,221 in 2004.

New Jersey's average premium is 41 percent higher than the national average, but the two-year downward move here mirrors a national trend. The national average was $817 in 2006, $831 in 2005 and $842 in 2004.

Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, said working families and senior citizens who have to buy auto insurance probably haven't noticed much difference in their bills.

"I don't know how being one or two makes a whole lot of difference to the people we see," she said. "They still see their rates very high. Given all other costs and everything else in economy, it's little solace to the people we talk to every day."

John Dyke, chairman of the New Jersey Auto Agents Alliance, noted the one market that is more expensive than New Jersey is "just a very urban city."

"We're still the No. 1 state," Dyke said. He said reforms enacted in 2003 have made insurance more available, but "on the negative side, we send about $1 billion out of state to insurance companies in other states."

Sullivan said New Jersey's improved performance is "a natural part of the increased competition and the lower cost claims because of regulatory changes." He said the report shows premiums going down in virtually every state, but New Jersey's decrease is larger than the national average.

Sullivan also tracked the numbers going back a full decade, and found New Jersey's average premium increased just 2.3 percent over that time.

"Only two states have seen their rates move more favorably than New Jersey," he said. "Only Colorado and Hawaii rose more slowly than New Jersey. This is all good news."

Not good enough, however, to negate the reality auto insurance in New Jersey will always be expensive.

Sullivan said New Jersey residents have, on average, higher incomes, nicer cars, more assets to protect, purchase higher levels of coverage and drive in the most densely populated state in the nation.

Before hitting No. 2 in 2005 and 2006, New Jersey had only twice before dropped out of first place: In 2000, after Gov. Christie Whitman ordered a 15 percent temporary reduction in rates and the District of Columbia grabbed the top spot, and in 1992, when Hawaii slipped ahead after Gov. Jim Florio enacted a rollback.

Patrick Breslin of N.J. Manufacturers Insurance said the NAIC's report does not factor in the effect of dividends insurers such as NJM pay to policyholders. NJM announced this week the payment of $61 million in special dividends.

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