New Jersey is taking aim at residents who fraudulently register their vehicles or obtain auto insurance in other states.
The Assembly recently passed a measure that makes so-called “reverse rate evasion” a form of insurance fraud under state law.
Under the practice, vehicle owners register and insure their vehicles in other states to get cheaper premiums, even though the Garden State is their principal residence or the insured vehicle is mostly kept in New Jersey.
Critics say this results in the state losing substantial revenues, causes higher premiums for those who properly register their vehicles and reduces insurers and stockholder profits. They also note that many out-of-state policies provide lesser coverage than what’s mandated under New Jersey law.
But since the state doesn’t include reverse rate evasion as a form of insurance fraud, such matters can’t be prosecuted by the state’s Insurance Fraud Prosecutor’s Office, which has called for changes in the law.
“Insurance fraud is not only wrong, but it costs honest drivers money through higher premiums,” said Wayne P. DeAngelo, D-Hamilton, one of the bill’s primary sponsors in the Assembly. “We’ve made a lot of progress in controlling auto insurance rates, but we still have a long way to go and cracking down on fraud needs to be a big part of that continuing effort.”
The Assembly passed the measure (A-2052) by an 80-0 vote on June 21. It now moves to the Senate, where it will be considered by the Commerce Committee. But that panel has not yet scheduled a hearing on the proposal.
If the bill becomes law, it would make reverse rate evasion a fourth-degree crime, which means violators can be jailed for up to 18 months. Specific fines would be determined by a judge under the state’s Insurance Fraud Prevention Act, according to the text of the bill.
Paul Loriquet, a spokesman for the state Attorney General’s office _ which the Insurance Fraud Prosecutor’s office is part of _ said it would support such legislation.
“It is something we’ve looked for in recent years,” Loriquet said.
Besides DeAngelo, the bill’s primary sponsors in the Assembly were Democrats Nelson Albano and Matthew W. Milam, both of Cape May Court House; Linda Greenstein of Hamilton (Mercer County); Annette Quijano of Union and Paul Moriarty of Turnersville.
Sen. James Whelan, D-Atlantic, is sponsoring the measure in that chamber.
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