STATE FARM’S EXIT SLOWED

New Jersey’s Department of Banking and Insurance is seeking to prolong the state’s largest automobile insurer’s presence in order to give State Farm’s 800,000-plus customers time to find alternative insurance before the company stops renewing policies. The company’s request, filed last June, to withdraw from doing business in New Jersey, could be delayed for as long as five years. State Farm has released figures showing that the losses it continues to experience in New Jersey’s auto insurance market are threatening its reserves, which have dropped from $445 million at the end of 1998 to $235 million at the end of June. It currently retains only 28.6 cents in surplus for every $1.00 in premium, and wants out as soon as possible. Ironically, State Farm Indemnity, which was established as an independent company by its parent State Farm Mutual Auto Insurance Co. in 1992, does business only in New Jersey, but is based in Illinois. It therefore falls under the supervision of that State’s insurance regulators, who are now closely monitoring the situation, and could step in to order State Farm to cease renewing policies, or even take over the company, if the company’s reserve position continues to deteriorate.

Topics New Jersey