State Farm Says It Wont Race FromGarden State In A Blinding Flash

Reports that State Farm Indemnity is planning to leave the New Jersey automobile market within a six-month period are wrong, according to the company, but a spokesperson for the state insurance department disputes the claim.

Recent press reports, including one in the New Jersey Star-Ledger, say that State Farm Indemnity is planning to drop all of its auto insurance policyholders at once, within a six-month period in 2003.

“There is nothing new since we filed our intent to withdraw [from New Jersey] on June 12,” said Sophie Harbert, State Farms public affairs manager, Northeast Regional Office, in Wayne, N.J. “The story is not accurate, nothing has changed since we filed.”

State Farm plans call for customers to be informed of non-renewals one year prior to the date, Ms. Harbert said.

The company renews policies on a six-month basis.

A spokesperson for the New Jersey Department of Banking and Insurance, however, said State Farm “is backpedaling” on the story.

Because of objections raised by State Farm concerning release of the withdrawal plan by the department, Peter Hartt, a department spokesperson, said he could not discuss the full contents of the plan.

“This is somewhat interesting since State Farm had told the media to get the information from us” after it was first released, noted Mr. Hartt.

From information that has already been publicly released, Mr. Hartt was able to say that the Bloomington, Ill., subsidiary is seeking to complete withdrawal from New Jerseys personal and commercial automobile insurance market by 2003.

Under state law, Mr. Hartt said, a companys withdrawal must be done in the best interest of consumers. The process would be done over an extended time period so customers seeking new policies would not flood the market all at once.

State Farm said it is leaving the state because it is losing too much money in the automobile insurance market.

The problem State Farm is having typifies what is happening throughout the industry in New Jersey, said John Tiene, chief administrative officer and vice president of public relations for the Insurance Council of New Jersey in Ewing, N.J.

“New Jersey has a reputation for being a difficult place to do business,” Mr. Tiene said. “Those who have left do not want to come back and have no desire to come back. State Farm is a good example where you have a clear and serious problem, yet the regulatory commissioner rules by fiat and says that there is not a problem.”

In the past decade, Mr. Tiene said 20 companies have left the state for a variety of reasons. Four of the nations six largest auto insurers, Farmers, Progressive, GEICO, and Nationwide, do not write auto insurance in the state, he said.

Even if State Farm were to win an appeal for a 16.8 percent rate increase that is awaiting a hearing before a state administrative law judge, it would not be enough to keep the company in the state, said Ms. Harbert. The company, which is the states largest insurer covering more than 800,000 personal lines vehicles and 50,000 commercial lines vehicles held by more than 500,000 policyholders, would still have to see an extensive overhaul of the regulatory environment in order to remain, she said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 3, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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State Farm Says It Won't Race From Garden State In A Blinding Flash

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