N.J. Drivers to Pay More for Insurance ; Blame High Cost of Personal-Injury Claims

Many New Jersey drivers will pay more for auto insurance when they renew this year as insurers try to offset the rising cost of health-care claims.

Since Allstate New Jersey Insurance Co. announced in February it was seeking state approval for a 15.4 percent increase, nine more carriers -- including Geico Group, Progressive Garden State Insurance Co., and Travelers Auto Insurance Co. of New Jersey -- have received permission to raise premiums by 2.9 percent to 7 percent.

The surge in rate increases by companies that cover 1.9 million of the 5.3 million privately insured vehicles in the state reverses a downward trend. The last time Geico submitted a rate change filing it was for a 4 percent decrease in 2007. Geico, which raised its rates last month by 6.9 percent, insures more than 700,000 vehicles in New Jersey.

The last time Palisades Safety and Insurance Association made a change, in 2006, it dropped rates by 4.4 percent. The carrier, which insures 145,000 vehicles, will lift its premiums by 2.9 percent on July 1.

"We've been in a soft market for years, and inevitably the market starts to harden up again," said Steven Goldman, commissioner of the state Department of Banking and Insurance. "We're seeing that around the country."

Higher costs of medical claims resulting from car crashes are driving the increases, Goldman said.

New Jersey -- with its congested roads, pricey cars and high medical costs -- was the most expensive state in the country for auto insurance in 2006, according to the most recent rankings by the National Association of Insurance Commissioners.

However, state officials say rates have declined in recent years amid more competition. The average premium for all private policyholders last year was $1,050, they say, down from $1,167 in 2004.

The state Department of Banking gave Allstate, which asked for a 15.4 percent increase, permission last month for an 8.9 percent addition, which goes into effect July 16. Allstate New Jersey covers more than 530,000 vehicles.

Progressive's 6.5 percent boost and Travelers Auto Insurance Co. of New Jersey's 6 percent increase went into effect June 5. Mercury Indemnity Co. of America, which insures about 63,000 vehicles, raised rates by 7 percent last week, on top of a 5 percent increase in January.

Magdalena Padilla, president of the Insurance Council of New Jersey, which represents 28 property and casualty insurance companies in the state, agrees with Goldman that personal-injury protection claims are the main reason insurers are raising rates.

She said New Jersey auto insurers were paying $1.18 in claims for every dollar in personal-injury protection premiums received when the state tried two years ago to place limits on what doctors could charge, and many carriers continue to lose money on personal-injury coverage.

"The high cost of [personal-injury protection] is something that needs to be addressed," she said.

Proposed state caps on the prices insurers pay for more than 1,000 medical procedures were scheduled to take effect in 2007 but have been contested by health care providers and are held up in state appeals court.

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E-mail: newman@northjersey.com

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(SIDEBAR)

Private passenger auto rate hikes

CompanyIncrease Effective

Drive New Jersey Insurance Co.6.8% May 8

Geico Group6.9% May 28

Travelers Auto Insurance Co. of New Jersey 6.0% June 5

Progressive Garden State Insurance Co.6.5% June 5

Mercury Indemnity Co. of America7.0% June 10

IFA Insurance Co.4.7% July 1

Palisades Safety and Insurance Association 2.9% July 1

Palisades Insurance Co.6.9% July 1

Allstate New Jersey Insurance Co.8.9% July 16

AAA Mid-Atlantic Insurance Co. of New Jersey 7.0% Sept. 1

Source: State Department of Banking and Insurance