Alliance Again Characterizes NAIC Report on N.J. Auto Costs as ‘Misleading’

July 30, 2003

The National Association of Insurance Commissioners’ (NAIC) state rankings of auto insurance premiums is “at best a misleading barometer of who pays how much for car insurance in New Jersey,” according to the Alliance of Americans Insurers.

“As we pointed out last year, the debate over whether New Jersey drivers spend more for their car insurance is a non-productive debate that ignores the realities of insurance economics and wastes valuable time and interest that could be put to better purposes,” said Richard Stokes, manager and legislative counsel for the Alliance’ Northeast Region.

“The NAIC report simply takes premium and divides it by the number of insured cars to come up with a so-called average,” he said. “The fact of the matter is that drivers do not pay average premiums, and there are no ‘average drivers.’ Drivers pay a premium for car insurance based on accident frequency of the rating territory, where the person garages the car, age, driving record, type of vehicle driven and use of the car insured. The NAIC method, in effect, presupposes a one-territory state where everybody pays the same price regardless of accident involvement or driving history.
“Auto insurance premiums vary throughout New Jersey. The suburbs generally pay less than the city, rural areas less than suburban, and so on.”

Stokes also noted that the NAIC rankings do not take into account differences in coverage throughout the United States. New Jersey has a very generous no-fault law with generous coverage, both mandatory and optional. So by comparing New Jersey with rural and less industrialized states having different and less comprehensive coverage also produces no reliable cost comparisons.

He added that the NAIC data also ignore New Jersey’s 1998 auto insurance reforms and the recent reforms signed by Gov. James McGreevey (D) on June 9, 2003. “While many of the recent reforms have yet to be implemented, including the much heralded ‘dollar-a-day’ policy, they already are starting to have an impact on the marketplace,” Stokes said, noting that Mercury General Insurance has indicated an interest in doing business in the state. “This is exciting news and something other insurers must be watching very closely.”

Stokes went on to say that many of the proposed regulations implementing the reform legislation have recently been published in the State Register and that the Alliance “continues to work for adoption of sound reform on behalf of the hundreds of thousands of auto insurance policyholders its member companies serve.”

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