State Farm Back To Writing N.J. Auto Biz

In a statement, Vince Trosino, president, vice chairman and chief operating officer of State Farm Mutual, Indemnity's parent company, said, "A competitive marketplace provides an environment in which companies can conduct business in a manner that benefits consumers, earns a reasonable return, and provides competitive prices and services. Competition is alive and growing in the New Jersey auto insurance market."

"When I became commissioner, the withdrawal of State Farm Indemnity exemplified the reality of New Jersey's dysfunctional auto insurance marketplace?a marketplace that was hurting drivers," said New Jersey Banking and Insurance Commissioner Holly C. Bakke. "We worked with State Farm and we learned from that experience, and today, State Farm's re-entry and rate reduction marks the dawn of a new age of competition for New Jersey drivers."

State Farm Indemnity marked its re-entry into the New Jersey marketplace by signaling that it is ready to compete. The company announced its fourth voluntary rate reduction. Effective Jan. 1, 2005, State Farm Indemnity will reduce its rates by an average of 3.8 percent for private passenger auto insurance customers, which will result in $26.3 million for more than 330,000 policyholders.

Brian Boyden, president of State Farm Indemnity, said that the company had until the end of 2005 to make a decision on withdrawing from the state, but decided to make its decision ahead of schedule, "In light of positive changes we've seen in New Jersey." He cautioned that the company would write new business on a limited basis, for now, as it reinvests in the market.

When State Farm made its decision to leave the state, the New Jersey company, owned by the Bloomington, Ill.-based carrier, insured 20 percent of New Jersey's drivers and was losing money. The company was allowed to non-renew 4,000 vehicles beginning in June of 2002, dropping up to 96,000 vehicles over two years. State Farm said that today it insures 569,673 autos.

"A marketplace in which competition is the primary regulator of insurance rates best serves consumers, regulators and insurers," said Richard Stokes, regional manager and counsel for the Property Casualty Insurers Association of America.

Mr. Stokes said, "State Farm's decision to continue doing business in New Jersey is a testament to the legislature's effort to pass landmark auto insurance regulatory reform legislation in June 2003. Because of this legislation, insurers are now able to operate more efficiently and write more policies. It's a ?win-win' situation for companies and consumers."

Since the reforms were implemented, Mercury General and GEICO have entered the state to write business. American International Group, which was scheduled to leave the state's auto market in December of 2003, has postponed a final decision for at least two more years.