New Jersey Department
|For Immediate Release: Mar ch 1, 2004||
For Further Information:: Mary Cozzolino - (609) 292-5064
TRENTON - Banking and Insurance Commissioner Holly C. Bakke announced today that the competitive auto insurance marketplace that is emerging in New Jersey as a result of Governor McGreevey's reforms is once again yielding positive results for consumers and putting downward pressure on rates for good drivers.
On January 30, State Farm Indemnity filed for a second voluntary rate reduction for its policyholders - the first voluntary rate reduction by Indemnity went into effect in 2003. This latest change includes an overall 5.1 percent statewide average rate decrease. The reduction applies an average 4.2 percent accident-free discount to qualified policies and a .9 percent decrease for comprehensive coverage. These new reductions, which become effective on May 1, will result in an average savings of about $70 for 544,613 eligible vehicles, or about 96 percent of State Farm Indemnity's covered vehicles.
State Farm Indemnity's action comes on the heels of an earlier voluntary rate reduction in October that slashed rates for some 500,000 vehicles, a savings of about $70 per eligible vehicle.
"Today's announcement is more good news for New Jersey drivers," Commissioner Bakke said. "State Farm Indemnity's action is yet another signal that the Governor's auto insurance reforms are producing premium savings for many good drivers."
In a few short years, State Farm Indemnity has moved from being a casualty of a New Jersey's failing auto insurance system, to a symbol of the Administration's fresh approach to a troubled auto insurance marketplace. The Governor's reforms, enacted in June 2003, combined aggressive consumer protections with marketplace changes in order to address auto insurance availability.
At its peak, State Farm Indemnity insured 20 percent of the New Jersey auto insurance market, but after sustaining considerable financial losses, the company sought to leave New Jersey. In an effort to avoid a rapid departure that would have flooded an already fragile auto insurance market and left 800,000 drivers without coverage, Commissioner Bakke took action to stabilize State Farm Indemnity to protect New Jersey policyholders.
Due to Indemnity's precarious financial condition, the Illinois Department of Insurance - Indemnity's home state - ordered the company on June 25, 2002 to shrink in size to reflect capital levels, specifying the nonrenewal of 4,000 vehicles per month, or up to 96,000 vehicles over two years. The same day, the New Jersey Department of Banking and Insurance issued a Market Stabilization Order that addressed safeguards for consumers impacted by the nonrenewal and comprehensively addressed Indemnity's condition.
Last October, just four months after Gov. McGreevey signed
the new auto insurance bill into law, State Farm Indemnity voluntarily reduced
its rates by 4.1 percent, resulting in approximately $70 in savings each for
some 500,000 eligible vehicles. That same month, the plan to drop 4,000 vehicles
per month was suspended, well before reaching its 96,000-vehicle target.
The Market Stabilization Order gave State Farm Indemnity, working with the Department of Banking and Insurance, the ability to manage its book of business and improve its financial condition to protect policyholders.
"State Farm Indemnity's financial situation deteriorated drastically in the New Jersey marketplace that existed prior to Gov. McGreevey taking office," Commissioner Bakke said. "Now that the Governor created real incentives for competition, the company is able to manage its business and consumers are benefiting."
Today, State Farm Indemnity reported that its financial condition continues to improve. The filed annual financial report shows the company's surplus, or net worth, increased to $662 million. "This improvement positions the company to stay and grow in New Jersey, if it ultimately decides to do so," Commissioner Bakke said. "The success of the Governor's reforms and the Market Stabilization Order are going to give Indemnity something to think about next year."
Since the auto insurance reform law was signed, policyholders have experienced the changing marketplace in beneficial ways: