New Jersey urban residents may see their car insurance premiums rise under a state proposal that would give insurance companies more freedom to hike rates.
The state Department of Banking and Insurance is considering a plan that would permit the companies to raise rates for urban drivers above caps that have been in place for more than two decades.
Under the plan, the companies also would be allowed to redraw maps they use to determine rates by updating their population densities.
“Some consumers will see a rate decrease, but others are going to get whacked,” John Dyke, president of the New Jersey Auto Agents Alliance, told The Star-Ledger of Newark.
Dyke said drivers in suburbs that have grown in the last 50 years could see rate increases while those in rural areas could see rates lowered.
For the past 21 years, the state has prevented city drivers from being charged more than 35 percent above what other drivers in the same territory pay.
The proposal, which requires approval from the governor, would lift that cap. While drivers from the most densely populated locales already pay the highest rates in New Jersey, insurance companies contend that suburban and rural drivers still pay too much because urban rates have been kept low.
Under the proposal, insurance companies would also be allowed to use their own data to develop rating maps. The plan would permit up to 50 rating territories across the state, compared to the 27 territories New Jersey now has.
Officials in the administration of Gov. James E. McGreevey said they hope the plan will bring more insurers to the state.
“We’ve done a lot in the past two years as far as auto reforms, but as more companies hopefully will come in, the competition will benefit drivers,” said Vincent Funelas, a spokesman for the Banking and Insurance Department.
The department, which could veto very steep rate hike proposals, is accepting feedback on the new plans until Nov. 6.
Industry experts said rate increases may need to be imposed incrementally so drivers aren’t too burdened.
Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Topics Auto Pricing Trends New Jersey
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