Numerous states, including North Carolina and Massachusetts, have recently begun mandating decreases in auto insurance premiums.
North Carolina’s Insurance Commissioner, Jim Long, issued an order in December 2005 requiring the state’s auto insurance
providers to reduce rates by 2.5% effective May 15. This is after the
Department of Insurance negotiated a zero percent change in rates for
2004 after the North Carolina Rate Bureau initially requested a 12.3
percent increase. In 2003, a 15 percent decrease was agreed upon after
an initial request of a 10 percent decrease.
"The
commissioner's latest rate reduction announcement continues to make
North Carolina a tough state for auto insurers to manage their risks
and get any return on their investment," said National Association of
Mutual Insurance Companies Senior State Affairs Manager David Reddick.
"It is unfortunate that one individual is keeping companies from
operating in a more competitive marketplace." State Farm spokesman Dick
Luedke agreed saying, “We believe that the marketplace should determine
rates based on claims experience and not be determined by a departments
of insurance.”
The reductions occurring across the United
States are largely in response to reduced accident rates and increased
competition, according to industry insiders. The Ohio Department of
Insurance reported decreased auto rates of 1.6 % in 2005. Ohio’s
largest insurer, State Farm, had average reductions of 4.3%.
American Family Insurance also has announced an 18% decrease in auto
rates for 2006 on its Ohio business. “We did it to some degree because
of decreasing claim costs and to remain competitive with the rest of
the market,” according to Steve Witmer, American Family spokesman.
In
joining North Carolina and Ohio, Massachusetts Insurance Commissioner
Julianne Bowler has instituted an 8.7% statewide cut of auto insurance
rates for 2006. The reduction is much more than the 0.1 percent
cut recommended by insurers, but falls short of the 18 percent decrease
advocated by Attorney General Tom Reilly.
Even the volatile car insurance market in New Jersey has seen rate decreases.
"New Jersey was once the poster child for how not to regulate a healthy
auto insurance market," said Richard Stokes, regional vice president
for Property Casualty Insurers Association of America. "As a
result, consumers had very few companies to choose from and paid more
than they had to for their coverage. Today, just two years after
the 2003 reforms took effect, there are more companies writing more
policies for more drivers than ever before,” Stokes said.
For
its New Jersey business State Farm instituted a 3.7% auto insurance
rate decrease effective January 1, 2006, and following that up with a
7.4% reduction planned for August 1. “The decreases are due to improved
claims experience,” according to spokesman Luedke.
The
reforms and rate reductions "translate to more heated competition. That
hasn’t been the case in New Jersey for decades and it’s a direct result
of the reforms enacted in 2003,” said Stokes.
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