Allstate Asks N.J. for 15.4% Average Auto Rate Increase

Allstate Asks N.J. for 15.4% Average Auto Rate Increase Chad Hemenway
Allstate New Jersey Insurance Co., the largest private passenger automobile insurer in the state, has applied for a 15.4% average statewide increase on automobile insurance rates to cover rising expenses in car repair and medical costs.

Allstate spokeswoman Sheila Breeding said the insurer is currently "paying out more in claims than it is collecting in premiums."

The filing was made in late January. The New Jersey Department of Banking and Insurance has 90 days to review the request.

Breeding said letters will be sent to about 300,000 households to reach customers who are potentially affected by the requested rate increase. The rate increase, if approved, will affect Allstate New Jersey Insurance Co. auto policies written before September 2006. Policyholders with Allstate New Jersey Property and Casualty Co. will not be affected by the proposed rate increase, Breeding said.

The issue of rising medical costs is currently being addressed in New Jersey's courts.

The New Jersey Superior Court's Appellate Division heard oral arguments Jan. 26 on what automobile insurers should pay doctors and hospitals for treating people injured in car accidents. DOBI has been trying to implement a new Personal Injury Protection medical fee schedule. PIP is the medical coverage included in an auto insurance policy, and is intended to pay for medically necessary expenses related to injuries caused by a covered car accident. The schedule, which has the support of insurance industry groups including the Property Casualty Insurers Association of America, has been challenged by the New Jersey Medical Society (BestWire, Jan. 27, 2009).

On Jan. 1, the "take-all-comers" temporary provision was eliminated from the books. The measure, which the industry said had constrained them, required auto insurers to provide insurance to just about any New Jersey resident but those with the worst driving records. Now insurers can deny coverage based on its own criteria, so long as it does not illegally discriminate (BestWire, Jan. 12, 2009).

DOBI spokesman Marshall McKnight said rate requests more than 7% are additionally referred to the public advocate's office for review. Eight rate requests are now pending, ranging from virtually no increase to Allstate's 15.4% increase, McKnight said.

Allstate subsidiary Encompass Insurance Company of New Jersey requested a 9% average rate increase. American International Insurance Co. of Delaware filed for a 7% increase, followed by rate increase filings of 6.9% and 6.8% for Liberty Mutual Mid-Atlantic Insurance Co. and New Jersey Re-Insurance Co., respectively.

Allstate New Jersey Insurance Group currently has a Best's Financial Strength Rating of A- (Excellent). Allstate Insurance Group currently has a Best's Financial Strength Rating of A+ (Superior).

In 2007, the top writers of private passenger auto insurance in New Jersey, were: Allstate Insurance Group, with 15.2% of market share; Berkshire Hathaway Insurance Group, 13.5%; NJM Insurance Group, 13.4%; Palisades Group, 8.9%; and State Farm Group, 8.7%, according to the A.M. Best Co. state/line data based on direct premiums written.

(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)

Copyright © 2009 A.M. Best Company, Inc. Allstate New Jersey Insurance Co., the largest private passenger automobile insurer in the state, has applied for a 15.4% average statewide increase on automobile insurance rates to cover rising expenses in car repair and medical costs.