One of New Jersey’s top five auto insurers is considering its options as a result of an announcement last week by State Farm Indemnity Co. which indicated it was withdrawing from selling auto insurance in the Garden State. State Farm Indemnity is leaving the market as a result of what it feels are government-mandated rate cuts that have chipped away at profits.
Two Liberty Mutual Group subsidiaries are among 11 carriers awaiting a ruling from state regulators on requests for increases in rates, according to a report in the Record in Bergen County. Back in November, Liberty Mutual Fire asked for a 20 percent increase. One month later, Liberty Mutual Insurance applied for a 25.2 percent rate increase.
The Record reported that a spokesperson for Boston-based Liberty Mutual Group said the company is weighing its options, noting it agrees with State Farm’s opinions on the state’s auto insurance marketplace. State Farm Indemnity indicated it would allow policyholders one year to locate a new carrier.
State Farm Indemnity’s departure from New Jersey’s auto market is dependent upon approval from state regulators, which could take years to complete. The company, which leads the state in auto insurance with 850,000 vehicles covered, applied last October for a 16.8 percent jump in rates.
State Farm Indemnity, which keeps separate books from its parent company, reported losses of $6 to $9 million a month, noting it mainly ran into trouble because it was among the companies with the lowest rates and was not able to turn away risky drivers.
Another company, New Jersey Manufacturers Insurance Co., which ranks as the state’s second-largest auto insurer and underwrites only to employees of member companies, insures some 575,000 vehicles and has not asked for a rate increase.
A small subsidiary for high-risk drivers, New Jersey Re-Insurance, has not done well with mandatory rate reductions and did not pay any dividends in 2000. New Jersey Re-Insurance got the go-ahead for an 8.9 percent rate increase back in 1999.
One other company, Prudential Financial, which represents 354,000 vehicles across New Jersey, indicated it is not thinking of leaving the state at this time.
Topics Auto New Jersey
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