Rutherford's auto insurance rates soar above neighbors'

Residents may soon see an increase in their automobile insurance due to changes in rate territory maps used to determine the cost of an individual's policy.

The factors that give a certain town a rate change are determined on the loss potential to the company and must be approved by the state. Factors include everything from crime and population to the number of filed claims, accidents and litigation. Some local drivers are finding that companies are starting to see the area as more of a liability for loss and the company needs more compensation when insuring area drivers.

One Rutherford resident said she actually had her AAA Mid-Atlantic insurance premium rise by $220 on a recent renewal on two people and two cars. She didn't move, however, from a different part of the state in that time. Instead, she was told Rutherford moved to another territory bracket that assessed a higher rate when she questioned the increase to AAA Mid-Atlantic. The company gave her little explanation.

"The best thing for her to do is she ought to shop around if she doesn't like her current rate; if she shopped around, she would almost certainly find a better rate," said Marshall McKnight, a spokesman for the New Jersey Division of Banking and Insurance, who highlighted the discontinuity in how insurance companies use territories to value how they assess drivers that live in them.

More than 60 insurance companies statewide use insurance territory rate maps, which they can either formulate themselves and the state then approves them or abide by a state-mandated one. If the company does use its own, it must be approved initially and changes must be approved by the New Jersey Division of Banking and Insurance, who a little over a year ago updated its own map for the first time in over 50 years, which clusters together all of the South Bergenite coverage area towns into one of its 27 geographic territories. A prior map, developed in 1947, had the South Bergenite towns grouped with less dense middle-Bergen County towns such as Saddle Brook and Rochelle Park, but the new map, which was part of an extensive auto insurance reform act in 1998, has separated those towns and grouped the southern portion of the county with towns like Nutley and Secaucus in bordering Essex and Hudson counties.

"Maps hadn't caught up to those demographic changes, but each case is different and each company may justify their loss figures for approval," said McKnight.

The problem however, according to McKnight, is the map. Although it was relied on heavily years ago, the map has merely become one of several factors, and sometimes for some insurance companies, it is not the most important factor in gauging an individual's car insurance rates. So, if one company deems the South Bergen territory needs a rate hike due to loss or demographic and crime shifts, it doesn't mean another will follow suit. The state's map gives formulas on numbers to use on writing insurance for each territory; the more urbanized the territory, usually, the higher the numbers, but even of those companies that use the state map, only 11 out of the state's 64 can ask for a rate increase in a specific territory if they can prove a loss.

Philip Bogle, president of Bogle Agency Insurance in Lyndhurst, said that although the state's rating territory update was an admirable move, it's not nearly the only factor that determines an insurance rate. More needs to be done about the criteria that insurance companies use to determine an individual's rate, he said.

"It's a tiger by the tail, we really don't know where this thing's going," said Bogle. "The state had good intentions when they redid the map based on updated populations, but what the insurance companies are doing now is they are just adding a list of other factors. Progressive for instance, I want a quote; there are 141 different factors to put in."

Bogle said shopping around is the best bet for a consumer if he or she sees his or her rates go up unexpectedly, whether it be because of territorial factors or individual factors.

"You can have someone in Rutherford paying $1,000 more than someone in Hudson County," said Bogle. "My mom's insurance, the company that she was with raised her to $1,600 from $1,000 because she went over 65. I found a new company and she's back down to $1,000."

As an example of a company that does not use the state's territory map, but instead uses its own, an estimated quote given on the Allstate Web site for the same individual, a male renter with good credit driving a small compact sedan, differed greatly amongst local towns. The quotes showed that in Carlstadt, that individual would pay $1,440 for a basic standard auto policy. In neighboring East Rutherford, however, the policy holder would pay a slightly higher annual fee of $1,540. In Rutherford, the individual would pay nearly $800 more than Carlstadt, having to fork over $2,210 a year for a basic standard policy. However, in Lyndhurst and North Arlington, the two other most populous South Bergenite coverage area towns, the basic coverage would be the same as the smallest town, Carlstadt.

Allstate was able to prove to the state earlier this month, after seeking a 15.4-percent increase on all New Jersey territories, that its financial status was dire enough to get granted an 8.9-percent increase, the largest any insurer doing business in the state has been granted in six years.

GMAC Insurance said it should not be a baffling notion to think many insurance companies are in need of raising rates because safety doesn't seem to be a top priority in the state. It attributed an annual study it conducts to see if drivers could pass a standardized written driving test. Overall findings from the study, conducted in 2008, showed that over 16 percent or 33 million licensed U.S. drivers would fail a written driver's exam if it were given today. GMAC ranked New Jersey drivers as the worst, even though results were better than previous years.

"It's encouraging to see that the scores are beginning to get better, but there is still a lot of room for improvement," said Wade Bontrager, vice president of marketing for GMAC.

For some residents, they chalk it up to just being a resident of New Jersey and know along with high property taxes, high home values and the high cost of living that seems to never stop escalating, high insurance is just something they have to live with.

"I have New Jersey Manufacturers, which luckily hasn't raised our rate, but it's probably a moment in time," said Lyndhurst resident Jean Simmon about her and her husband's two vehicles. "As long as we are as packed into this state like sardines, we will always have to pay more to drive."