If you were seeking auto insurance in New Jersey in 2002-2003, it was an expensive and or fruitless effort.  An overregulated insurance market had created a detrimental environment, causing major insurers to flee the marketplace, leaving consumers defenseless without the car insurance they needed.

But in June 2003, state legislators affiliated with both political parties enacted reform legislation to overhaul the entire NJ car insurance marketplace. As a result, insurance companies are now reinvesting in the state and growing their businesses. Consumers, meanwhile, have the tools they need to make informed choices and obtain affordable car insurance--putting them in the driver's seat.

Some measures included in reforms consisted of legislation allowing NJ car insurance companies to set individual claims risk rates, upon which premiums could then be determined. This removed state government from the mix and gave state insurers the ability to compete for consumers' business.

The "excess profit" law requiring insurance companies to issue refunds if they earned more than 6 percent profit was also challenged, enabling insurance companies to remain financially lucrative—and causing them to revisit to the NJ car insurance marketplace.

Efforts to curb abuse and fraud were instituted, and consumers were given the freedom to help determine insurance company products according to their individual needs.

These 2003 reforms escorted competitive pricing into the New Jersey car insurance marketplace and placed downward pressure on car insurance rates. Millions of dollars have been placed back in New Jersey consumers' pockets as a result.

"The difference between the auto insurance market three years ago and the market today is that a new auto insurance company coming to New Jersey is no longer big news," said former New Jersey Department of Banking and Insurance Commissioner Holly C. Bakke. "In 2005, New Jersey drivers have found even more choices in companies, coverage and cost."

The majority of the New Jersey auto insurance marketplace reflects deflating prices, further evidencing the economic impact these changes have brought, according to Jaimee Gilmartin, New Jersey Department of Banking and Insurance spokeswoman.  "334 million dollars have been returned to policyholders in the form of rate reductions and dividends from insurance companies," Gilmartin said.

State Farm Indemnity Company re-entered the New Jersey auto insurance market effective Jan. 1, 2005.  State Farm was the state’s largest auto insurer with over $770 million in direct written premium at the time of the company’s withdrawal. 

State Farm also implemented a voluntary 3.8 percent average rate reduction for private passenger auto insurance customers. Indemnity – State Farm's auto-only New Jersey subsidiary – committed to the Department to review its withdrawal decision by the end of 2005, but did so ahead of schedule.

"In light of the positive changes we've seen in the New Jersey insurance regulatory environment, we made our decision earlier than planned," said Brian Boyden, President of State Farm Indemnity.

Financial gain is only the beginning of consumer benefits brought about by state auto insurance reform. The Department of Banking and Insurance's goals of attracting new insurance carriers to the state, increasing marketplace competition and thereby offering consumers lower NJ car insurance rates has been accomplished, as increasing numbers of carriers have either reentered the market or come on board for the first time.

Agents are now more accessible, service is timelier and choices are more plentiful, affording all New Jersey residents their choice in auto insurance coverage. Consumers now even have a hand in the way their policies are written.

"New Jersey consumers are in the driver's seat. The state's auto insurance marketplace offers more choices for consumers, and that means lower costs. New Jersey has become the kind of marketplace where companies want to do business and grow," said Acting Governor Richard J. Codey.

New Jersey is the most densely populated state in the nation-which means a lot of cars on the road and a correspondingly increased number of accidents. In the past this translated into large consumer expenditure, but this is not necessarily the case anymore.

More than 1,500 new NJ car insurance agents have been appointed in the state since 2003, making auto insurance more accessible to all New Jersey consumers. After years of shunning drivers, state insurers are now competing for new policyholders.

Even previously uninsurable drivers are contributing to the New Jersey auto insurance system for the first time. The state's new "Basic Policy," titled for both the minimal coverage and minimal cost it affords, provides Medicaid recipients with low-cost car insurance for a miniscule $365 a year. More than 10,000 New Jersey drivers have now enrolled, and are no longer draining the system of its valuable financial resources.