The Star-Ledger

Geico Latest To Drop Its Rates

Insurer plans to offer cuts averaging 4.1%

The Star-Ledger — Thursday, August 9, 2007

BY JOE DONOHUE
Star-Ledger Staff

In a move that could further grow its business in a state it once shunned, Geico plans to reduce its New Jersey auto insurance rates an average of 4.1 percent, or about $81 per policyholder, company officials confirmed yesterday.

State officials say other insurance companies also have reduced auto rates in recent months – evidence, they say, of the success of four-year-old legislation that sought to end the state's decades-old reputation as a regulatory quagmire for auto insurers. The changes drastically reduced red tape, allowed companies to keep more profits and made it easier for them to enter and exit the market.

Geico returned to the state three years ago after a 28-year absence, and now covers about 606,000 vehicles through three subsidiaries, ranking third in the market behind New Jersey Manufacturers and Allstate.

While the firm's initial profits were stunted by start-up costs, the outlook has improved. Steve Cunningham, assistance vice president and general manager of Geico's Northeast operations, said it is seeing fewer accidents and smaller losses among drivers here.

Geico's rate changes take effect today for new policyholders and Sept. 24 for renewal policies, Cunningham said.

"We're glad we can provide our policyholders with even more savings, and we hope to attract new customers with our lower rates," he said.

Marshall McKnight, a spokesman for the N.J. Department of Banking and Insurance, said State Farm Indemnity cut rates 2.9 percent in April, Founds Insurance adopted a 2.1 percent reduction in May and Hanover Insurance plans to chop rates 5 percent starting Sept. 1. Department officials, he said, estimate average rates statewide peaked at $1,167 in 2004 and had dropped to $1,099 last year.

For its part, New Jersey Manufacturers returned $70 million in dividends to its customers last December, company spokesman Pat Breslin said.

Assemblyman Louis Greenwald (D-Camden), a co-sponsor of the auto insurance legislation, credited the 2003 reforms for the wave of reductions.

"That is a direct example of what competition will breed," he said. "In the last four years, we have seen this go from one of the most polarizing issues next to property taxes to something that doesn't even register."

However, Eve Weissman, an analyst with New Jersey Citizen Action, said consumer advocates are not happy with some changes, including the use of credit histories, occupation and education as rate-setting factors. Her group believes those socioeconomic factors lead to illegal overcharging of minorities and blue-collar workers – a claim state regulators and insurance companies dispute.

"The real question is, 'Who are rates being lowered for?' " Weissman said.

Greenwald said with today's healthier market, consumers can seek coverage from other companies that don't use those factors, including NJM, which said it has been selling insurance to many Geico defectors in recent months.

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