State Farm Halts New Jersey Non Renewals

State Farm Halts New Jersey Non Renewals

NU Online News Service, Oct. 9, 5:05 p.m. EDT?New Jersey Gov. James E. McGreevey announced today that State Farm Insurance is once again renewing policies for New Jersey drivers.

The company, as part of a plan to correct its financial condition had been non-renewing 4,000 policies a month.

The governor attributed the change in renewal policy by the company's New Jersey branch, State Farm Indemnity, to the adoption three months ago of an omnibus package of reforms to the auto insurance statutes.

"In just a few months, we've seen historic changes for New Jersey drivers," said Mr. McGreevey, "There are real results and tangible signs that progress is being achieved."

Besides the State Farm action, Mr. McGreevey noted the fact that Mercury Insurance had decided to move to New Jersey, becoming the first new auto insurance company to do so in seven years.

He also cited plans by Allstate to add 15 to 20 new agents, and a voluntary rate reduction by State Farm, which he said will save 500,000 drivers an average of $70.

The governor said State Farm's decision to suspend its practice of dropping coverage for New Jersey drivers each month will prevent thousands of drivers from being forced to look for new coverage. He also noted that the company is taking this action a full year ahead of schedule.

Since September 2002, State Farm Indemnity had been non-renewing policies. Regulators in Illinois and New Jersey required this action to bring financial stability to the company. The suspension of non-renewals, approved by Illinois regulators, helps drivers of 94,000 cars who were notified a year ago that they might be non-renewed under the orders.

On June 25, 2002, State Farm Indemnity was placed under a corrective order by regulators in Illinois, its home state. This order required the company to shrink in size to reflect capital levels. The same day, New Jersey issued a market stabilization order that specified the non-renewal schedule of approximately 4,000 cars per month. New Jersey's order also granted the company the right to leave after December 2005 and outlined financial benchmarks the department would use to gauge progress.

If State Farm Indemnity meets the benchmarks in 2005, New Jersey has the right to make a case about why the company should stay in New Jersey. "State Farm remains on track to meet these targets," New Jersey Insurance Commissioner Holly Bakke said.

The market stabilization order also called for New Jersey to take steps to change its regulatory environment. Mr. McGreevey signed the auto insurance reform legislation June 9.

"Today's action by State Farm Indemnity does not alter its right to leave after 2005, but it does show, beyond a doubt, that the market stabilization order was the right step for consumers," Ms. Bakke said.

State Farm Indemnity at its peak insured 20 percent of the New Jersey market but asked to leave due to its poor financial returns in the state. Over the past 10 years 20 auto insurance companies have left the state.