Corzine's plan would subsidize auto insurers to lower urban rates

Thursday, February 15, 2007
By JOE DONOHUE
NEWHOUSE NEWS SERVICE

The Corzine administration has proposed a plan to prevent big auto insurance rate increases for residents of Jersey City and other urban areas as New Jersey completes an effort to ease regulations and spur competition among insurers.

The plan would set aside a pool of money to subsidize auto insurers that write policies in cities, where risk is greater because of vandalism, theft and a higher rate of accidents.

It was drawn up because regulators feared urban rates would skyrocket now that they've abolished a 1983 law that set price caps for urban drivers at 35 percent above the state average, which prevented insurers from charging city drivers far more.

For example, a 35-year-old male living in Jersey City pays $1,118 for Allstate coverage - about 72 percent more than if he lived in rural Sussex County. In Pennsylvania, a similar driver in Philadelphia can pay as much as 350 percent more than if he lived in rural York County.

The question of how much urban drivers should pay - and whether suburban and rural drivers should pay higher rates to keep city rates lower - has been a political problem for decades in a state with the nation's highest average auto insurance rates.

Bayonne Mayor and state Sen. Joseph V. Doria Jr. said the 2003 reforms to deregulate auto insurance helped reduce the number of uninsured drivers by bringing more insurers into the state. He said those gains could be lost with higher urban rates.

"If the rates go through the ceiling and people can't afford to pay, you are just going to increase the number of uninsured motorists," Doria said.

Richard Stokes, lobbyist for the Property Casualty Insurers Association of America, said some insurance companies do support the proposal but far more have reservations.

"The less restrictions you have, the more you let the marketplace work," Stokes said.