As automobile insurance companies or firms in New Jersey battled for customers, their effort proved to be unfruitful in 2008. Due to this circumstance, drivers are placed in a spot where they have to pay for higher premiums to compensate for decline in profits.
New Jersey State and the Auto Insurance Report indicated that insurance companies have “flatlined” after five years of profits in double-digits until 2008. In 2007, companies reported a 10.1% profit.
Since state reforms in 2003, more companies have been drawn to the state despite a poor showing of profits and significant increases in rate.
Brian Sullivan, of Risk Information said that state reforms have really helped in compensating for losses in the insurance industry. At the moment, since insurers are not making much profit, they are becoming more competition-driven to the extent that little internal reforms are being done. Sullivan says that necessary changes in the state’s insurance market would be essential to keep and draw in more clients.
Camden Democratic Assemblyman Louis Greenwald initiated reforms. His policies have given insurers the opportunity to gain more revenue and also to reduce the time that state regulators are provided for in order to deliberate on rate change requests from companies. Such changes have made the state more lucrative for auto insurers, as several big players have entered the market and stimulated the atmosphere of competition.
In 2008, increases in rates were largely affected by higher medical costs. The Department of Banking and Insurance of the state, in charge of approving rate hikes, reported average hikes in 2009 at 6.86% and 2.14% in 2008.
Vice president of the Insurance Council of New Jersey, Chuck Leitgeb, said that the intense competition among insurance companies played a large part in the premium rate hike increase.
The vice president said that increasing prices are necessary because companies have no choice, but to make up for low revenue showings.
John Dyke, a trustee of the trade group New Jersey Auto Agents Alliance and owner of the Perth Amboy-based Dyke Company, explained that a car or vehicle owner will inevitably have to face even more rate hikes.
Dyke said that there will be some companies that will be forced to increase some of their prices while others “waited a little bit too long.”
Meanwhile, the state Supreme Court this summer ruled in favor of insurance companies to cover less of the medical expenses for personal injury costs. The vice president expressed that this would act as a buffer for the already ailing state insurance industry.