South Bergenite

ZIP Codes Can Make Or Break Your Car Insurance Rate

South Bergenite — Thursday, April 11, 2013

BY MATTHEW MALYSA
STAFF WRITER
South Bergenite

Your ZIP code is more than just a status symbol; it can also save - or cost- you money when it comes to car insurance.

A newly released analysis of New Jersey auto insurance data examines the impact a driver's ZIP code has on his or her car insurance.

Live in a rural, wealthier and less-diverse area? Your auto insurance will probably be lower. If you live in an urban, less affluent and racially diverse setting you're going to get hit with higher premiums. What the study revealed, however, is that the difference in ZIP codes can also mean a major difference in costs between neighboring towns.

The analysis conducted by OnlineAutoInsurance.com looked at a total of 28,665 quotes from a total of 65 insurers that was compiled by the New Jersey Department of Banking and Insurance (DOBI). The study revealed that drivers in urban areas such as Newark, East Orange, Passaic, Atlantic City and Camden pay the most for coverage in the state, while drivers in areas like Morristown, Whippany and Caldwell pay the least.

So where does this all leave southern Bergen County? According to the study, the suburbs here in the Meadowlands are right in the middle - not the most expensive and not the least, when compared to the rest of the state.

The state is divided up into 49 groups of ZIP codes known as "rating territories" by the DOBI. All towns in the South Bergenite coverage area belong to what is called the East Rutherford territory, which includes: Carlstadt, East Rutherford, Rutherford, Lyndhurst, North Arlington, Wood Ridge, Hasbrouck Heights, Teterboro, Secaucus and Nutley.

Using samplings of driver profiles that ranged from a single 23-year-old male driving a 2005 Buick Century to a married couple with a policy covering two cars, a 2011 Ford Escape and a 2009 Chrysler Town and Country - the study compares what the average resident pays for insurance across the various territories in the state.

Residents in the East Rutherford territory pay an average of $2,110.74, 0.9 percent less than the state average of $2,130. While a resident in Wallington, which is part of the Clifton territory, pays an average of $2,432.94, 14.2 percent more than the state average. Meaning that just for living on the other side of Paterson Avenue, residents in Wallington pay an average of $320 more than their neighbors in East Rutherford.

Kearny residents, who belong to the Bloomfield territory, pay an average of $2,282.03, 7.1 percent more than the state average and about $170 more than their neighbors in North Arlington.

The local territories that average lower quotes than the East Rutherford territory are the Saddle Brook territory with an average of $2,087.40, 2 percent less than the state average, the Montclair territory with an average of $1,987.17, 6.7 percent less than the state average, and the Paramus territory with an average of $1,873.63, 12 percent less than the state average. The study ranked the East Rutherford territory as the 23rd most expensive in the state.

Out of the 49 territories that cover the entire state, the Newark territory had the highest average annual rate, coming in at $2,778. This is 30 percent higher than the average for all territories in the state, and is also 80 percent higher than the average premium for the least-expensive territory, which is Hillsborough - this territory has an average rate was $1,548 a year.

According to the National Association of Insurance Commissioners (NAIC), New Jersey is the most expensive state in the country to insure your vehicle, with an average cost of $1,157.30 - the NAIC does not assume liability, collision and comprehensive expenditures because not all policyholders purchase all three coverage packages, unlike the onlineautoinsurance.com study which based most of its driver profiles on drivers with full coverage on their vehicles.

Insurance prices reflect the anticipated costs of providing auto insurance and that the goal is to match price to risk as accurately as possible, said Daniel P. Jovic, spokesman for Allstate New Jersey.

"Many factors and careful calculation go into determining insurance rates. Some of the factors we use in determining auto insurance rates are age and driving experience, vehicle type and value, credit history, where you garage your car, and the distance you drive," said Jovic.

Population and MV Theft

According to the OnlineAutoInsurance.com study, there are many factors that contribute to whether one area will have higher auto insurance prices than the next. Ultimately, the determining factor will be how much drivers in a particular area end up costing their insurers.

However, due to the fact that the public does not have access to insurers' claim data, the researchers from OnlineAutoInsurance.com examined factors such as population density and theft rates to see how they correlate with higher prices.

The study looks at population density as a variable, citing that drivers who live in crowded, urban areas tend to be plagued by heavier traffic congestion and, consequently, have higher accident rates.

The thought process is that a resident in a crowded city like Newark or Union City shares the road with hundreds or thousands of people every day and is more likely to end up in an accident than someone living in a rural part of the state. According to Allstate America's Best Drivers Report, the average driver in Newark, the state's least safe city, will experience an auto collision every six years, which is almost 60 percent more likely than the national average of 10 years. Only seven cities in America were more dangerous, including Washington, D.C., which had the highest frequency of car collisions.

The study finds that the top 10 most expensive New Jersey territories had a combined population density that was about 18.5 times as high as the 10 least expensive territories. The population density for the 10 most-expensive territories was about 12,600 people per square mile. For the 10 least-expensive, it was 680 per square mile.

Southern Bergen County's East Rutherford territory, taking into account all 10 towns, comes to approximately 4,125 people per square mile. While this is roughly one third of the most expensive territories like Newark, the population in the South Bergen area greatly overshadows the Cape May and Princeton areas, which have insurance quote averages that are among the lowest in the state.

In examining car theft statistics, the analysis found that areas with the highest premiums also ended up having some of the highest theft rates. Citing 2010 FBI crime data, the study found that Newark is the vehicle-theft capital of the state - with 3,620 vehicle thefts in 2010, which put the theft rate at 1 car stolen for every 77 residents. The statewide average, meanwhile, was 1 theft for every 557 residents.

Other cities in the northeastern part of the state were found to be right up there with Newark. Irvington, Elizabeth, and Orange trailed Newark with a combined theft rate of 1 theft for every 103 residents. Camden, which had the 7th-highest average premium, also had the 5th-highest theft rate, at 1 theft for every 152 residents.

Hillsborough Township and Morristown — cities in the two cheapest rating territories - had a combined rate of 1 theft for every 2,955 residents. There were only 20 thefts total between the two cities in 2010.

In the South Bergen area, there were 143 motor vehicle thefts reported in 2011; comparing that to the total population of 92,244 in all five towns, South Bergenite coverage area had 1 theft for every 645 residents, meaning that while below the state average, crime is nowhere near as low as in some of the more rural towns that receive the lower rates.

Socioeconomic Factors

When the study looked at the socioeconomic factors for the areas in New Jersey that had the highest and lowest average auto insurance quotes, some intriguing relationships began to appear.

Using data from the U.S. Census Bureau's American Community Survey, the analysis determined the relationship between each territory's racial demographics, income, poverty levels, education levels and their ranking for average auto insurance quotes.

The highest average quotes tended to be in territories with smaller white populations, lower median household incomes, higher levels of poverty, and lower education levels when compared with areas with the cheapest average quotes.

The average median household income of the areas located in the 10 most-expensive territories was $37,770. In the 10 least-expensive territories, it was $98,160. Racial breakdowns for the top 10 most-expensive territories were found to be: 38 percent White, 36 percent Black or African-American, 3 percent Asian, 23 percent Other/Two or more races. In the 10 least-expensive territories: 85 percent White, 4 percent Black or African-American, 8 percent Asian, 3 percent Other/Two or more races. Though this may seem startling, the producers of the study caution that this is likely a case of correlation rather than causation.

The driver profiles used for the sample ratings that the study is based on do not have a specified race, education level, or income - even if they had specified those characteristics, education level would be the only factor that could legally affect the quote size, being that insurers in New Jersey aren't allowed to incorporate factors like race or income into their pricing models.

As far as education, the study found that 28 percent of residents in the 10 most-expensive territories had less than a high school diploma.

In the 10 least-expensive territories, only 6 percent had less than a high school diploma.

When it comes to higher-education degrees, only 15 percent of residents in the 10 most-expensive territories had a bachelor's degree or higher, while 47 percent of residents in the least-expensive territories had a bachelor's degree or higher.

Many consumer groups have used similar results in other studies to advocate for regulatory reforms that would level the playing field to make auto insurance more affordable in financially strapped areas. They argue that the fact that auto insurance tends to cost more for the drivers who can least afford it is wrong.

Phyllis Salowe-Kaye, executive director for the consumer watchdog group New Jersey Citizen Action said that the current system used by insurance companies is designed to make auto insurance unaffordable for lower income drivers.

"With the 49 territorial divisions and the ability to use education and occupation as rating factors, the insurance industry is placing an unfair burden on the shoulders of working families, seniors and low and moderate income drivers," said Salowe-Kaye.

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