New Jersey Nixes Subsidy-Based Auto Insurance Plan

White four door vehicleA proposed auto insurance plan, which would have had urban drivers’ high auto insurance rates subsidized by a fee levied on policyholders throughout the state, has been withdrawn after being subject to litigation by trade groups and a large insurance carrier.

The legislation, submitted in 2007 by then-state insurance commissioner Stevn M. Goldman, was originally crafted to combat the highly fluctuating premium prices throughout the state.

Through the subsidization program, the Territorial Rating Equalization Exchange would have theoretically lowered the cost for motorists in areas with higher premiums.

New Jersey insurers, like those in all other states, use geography as a factor in calculating rates; drivers in areas with high accident frequencies are more likely to get into accidents, and insurers adjust their prices accordingly. This usually results in higher premiums for drivers in urban areas and lower premiums for drivers in rural and suburban territories.

New Jersey Banking and Insurance Commissioner Tom Considine, who was sworn into office earlier this year, didn’t stand behind the the Territorial Rating Equalization Exchange.

“It’s no secret that I viewed the TREE regulation as what I’ve described as regulatory socialism,” Considine told BestWire. “Because we’re in the official comment period there’s very little I’m allowed to say about it, but I’ll stand by what the transition report said.”

New Jersey Manufacturers and a number of insurance groups in the state had filed to challenge the insurance commissioner’s authority to implement such a subsidy program.

New Jersey drivers had the second-highest average auto insurance expenditures nationwide in 2007, according to the National Association of Insurance Commissioners. The average expenditure was estimated to be $1,104.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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