New Jersey Tier Rating Plans Approved
Tier rating plans for auto insurance, which eliminate surcharges for motor vehicle violations, accidents and inexperienced drivers, have been approved by the Department of Banking and Insurance for 54 companies selling auto insurance in New Jersey, according to Commissioner Elizabeth Randall. In place of surcharges, the companies created tiers, which group drivers according to their driving history and other risk characteristics.
In the new rating system, the number of tiers offered varies by company, but the tiers generally fall into three categories: preferred driver, with the least expensive rates; standard driver, with mid-priced rates; and sub-standard driver with higher priced rates. Drivers in the preferred tier typically have clean driving records; are experienced drivers; have been customers of the current company for at least three years; and have a history of paying insurance premiums promptly. Drivers in the standard tier typically are experienced drivers who may have up to six motor vehicle points, but no accidents where they were at fault. Drivers in the sub-standard tier typically have allowed their coverage to lapse for non-payment; or have had at-fault accidents; or are inexperienced drivers; or have more than six motor vehicle points; or have had numerous claims.
"Companies are offering a wide range of tiers. That means they will be competing for the best customers and drivers will have more choices than ever to find the price that is right for them," Randall says.
To date, seven companies have been approved for only one tier, and will rate all drivers using the same factors.
To assist consumers, the department offers a list of all auto insurance companies doing business in New Jersey, tips for shopping for insurance and information on consumers' rights.
"Now more than ever, it is important for consumers to be informed and shop carefully for auto insurance," says Randall. "We all can save money, sometimes hundreds of dollars, by carefully choosing the right type and amount of insurance we need to buy, and the deductibles we can afford.
"And many companies offer discounts for insuring more than one car or for buying homeowners or life insurance policies in addition to auto insurance. Smart consumers will explore every money-saving option available before selecting the company of their choice," Randall says.
The next major step in reforming auto insurance rates in New Jersey will begin in January 1999, when a mandated 15 percent reduction in rates goes into effect.
According to department requirements, once a company's plans are approved, it will begin implementation of its new tiers within 60 days for new policies and within 90 days for policy renewals. At a driver's next policy renewal after November 1, 1998, they will see that surcharges have been removed and that they are rated according to their company's tiers.