New Jersey’s Department of Banking and Insurance reached a compromise agreement with State Farm Indemnity, the State’s largest automobile insurer, which will permit it to raise premiums by 7 percent overall; however, there were no indications that State Farm intends to shelve its request to withdraw from New Jersey’s automobile insurance market.
State Farm, which lost around $128 million on NJ auto policies last year, had been seeking a 16.8 percent increase. It announced that it intended to pull out of the market last June, and has been negotiating the conditions with the Department.
The compromise reached last Friday was characterized by both parties as a step in the withdrawal process. AIG’s American International Insurance Company of New Jersey and several smaller companies have also announced plans to stop writing auto coverage in the State. The insurers site heavy losses and the inability to raise premiums to the necessary levels to reach profitability due to New Jersey’s “highly politicized and over regulated” automobile insurance market.
The recent gubernatorial election campaign, in contrast to prior years, didn’t feature much discussion of auto insurance rates, but newly elected governor, Democrat Jim McGreevy, will eventually have to face the deteriorating situation, if New Jersey’s drivers are going to continue to be insured. Hopefully the compromise with State Farm signals a new willingness on the part of the State’s regulators to renew the dialogue with the automobile insurers in order to find a solution to the problem.