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Driving Us All to Distraction

Apr 2, 2007

By Kathleen Hopkins, Asbury Park Press, N.J.

Apr. 3--Billboards scream out savings to passing vehicles. Mailings beckon motorists to switch.

Even New Jersey's most selective auto insurer is asking policyholders to beware of talking reptiles offering better rates.

What is going on?

Just five years ago, auto insurers were fleeing New Jersey, and even some of the best drivers had a hard time getting policies.

Now insurance companies are actively courting New Jersey motorists in lively competition for their business.

"Advertising for auto insurance in New Jersey was unheard of before 2003," said Patrick Breslin, spokesman for New Jersey Manufacturers, the state's largest and perhaps most selective auto insurer.

But now, the market is different.

"You see the billboards everywhere," said Rachel Moore, spokeswoman for the Insurance Council of New Jersey. "You see the commercials. . . . It's a new era in auto insurance where companies are actively competing."

Five years ago, two of the largest auto insurance companies in New Jersey, State Farm and AIG, filed for permission to leave the state, following a trend that saw more than 40 auto insurance carriers depart New Jersey in the preceding decade.

Since then, State Farm and AIG have abandoned their plans to leave, and some of the nation's largest insurance carriers, such as Geico -- the company that uses a gecko as its spokesman -- have begun writing auto policies in the state.

The change in atmosphere was spurred by a package of reforms signed into law in 2003 by then-Gov. James E. McGreevey. Among the goals of the auto-insurance reform package was to attract new insurance companies and promote competition.

The package lifted some burdensome regulations that made it difficult for insurance companies to apply their national business models to New Jersey, according to Jim Gardner, a spokesman for the New Jersey Department of Banking and Insurance. Among the reforms were an expedited process to implement rate changes lower than 7 percent, and to calculate over seven years rather than three years, whether a company earned excess profits that have to be paid back to policyholders.

"Companies now have motivation to look at New Jersey as a healthier market to do business in," said Breslin, the New Jersey Manufacturers spokesman.

New Jersey is a relatively wealthy state, and its residents drive newer, more expensive cars, compared to the rest of the country, he said.

"It's a good demographic for insurance companies to look at, but they had long shunned New Jersey because of the regulatory environment," Breslin said.

As a result of the more favorable regulations, the number of auto insurers doing business in the state has grown from 62 to 70 and now includes some of the nation's top insurance companies, Gardner said. With the increased competition, $1 billion in rate reductions and dividends have been returned to New Jersey policyholders, he said. In fact, three-quarters of New Jersey's motorists have seen lower auto insurance rates since the reforms took effect, he said.

"It's a healthy market," said Moore of the Insurance Council of New Jersey. "People are shopping around.

"It's great for consumers," she said. ". . . It's a really great opportunity for consumers to get the insurance product they want for the best price."

Among the direct mailings making the rounds in New Jersey is Geico's, informing motorists that switching to that company could save them $500 a year.

Another company, Progressive, offers in its direct mailings quick insurance quotes that "could save you hundreds of dollars!"

Allstate has doubled its advertising budget in New Jersey since the reforms went into effect, said company spokesman Walter Tomasheski. To help capture its share of the market, the company offers customized choices to customers who may be looking for something other than the just the cheapest rates, he said.

And New Jersey Manufacturers, which offers new policies only to motorists with no accidents, violations or license suspensions for three years, has been sending letters to its customers warning them to, "be careful about all that auto insurance advertising out there."

New Jersey Manufacturers' letter reminds its policyholders that its rates are for 12 months, and some of the companies vying for their business may be quoting six-month rates.

"If you are comparing, don't forget to multiply six-month premiums by two and remember -- NJM does not raise your rates because of an occasional accident or traffic violation," the letter says.

Breslin, the company's spokesman, said New Jersey Manufacturers does not advertise, which is one of the reasons it is able to offer low rates and dividends to policy holders.


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