N.J. Tries to Deflate Nation's Highest Car Insurance Rates

When Jeff Maurer moved from Colorado to New Jersey last year, he and his second-hand Volvo watched their Allstate auto insurance bill leap from $780 per year to more than $1,200.

"It's just not right. I've never had an accident. No tickets. Still, I'm paying.... For what? Why does it have to be so much?" he asks.

The question has nagged New Jerseyans for a decade. Since the mid-1980s, in every year except 1992, New Jersey has shouldered the highest auto insurance rates in the nation.

But, as other reform-minded states have found, reining in insurance rates is as complicated as it is politically risky, because it requires politicians to spurn groups that happen to be among their biggest financial supporters: trial lawyers, insurance companies, and doctors.

New Jersey Gov. Christine Todd Whitman (R), in a closely watched reelection bid this year (one of just two gubernatorial races in the nation), is finding out just how tricky it can be.

Polls earlier this year showed that voters like Mr. Maurer consider high car insurance rates - which average $1,013 a year for Garden State drivers - among their biggest gripes about New Jersey, and about Mrs. Whitman. So Whitman is vowing to overhaul the insurance system and cut rates by 25 percent.

No-fault New Jersey?

The cornerstone of Whitman's plan is to put New Jersey in league with a dozen other states that restrict frivolous lawsuits via a "no-fault" insurance policy option for motorists. Such options restrict drivers' right to sue but yield lower insurance rates.

No-fault systems have been in place for 20 years in some states, but have seen renewed interest of late. Bob Dole touted the benefits of a national no-fault plan during his run for the presidency last year. And Congress will soon consider a bill that would enact a national no-fault insurance system.

New Jersey isn't the only state where politics and insurance reform conflict.

Hawaii has grappled with a number of no-fault bills over the past year. And, like Whitman, Hawaii Gov. Ben Cayetano (D) in January called auto insurance his top legislative priority. But bickering among the state Assembly, Senate, and the governor has so far deadlocked the issue.

At least eight states are now considering no-fault insurance options, including Maryland, where a state legislator recently said a no-fault insurance plan - more than even a tax cut - could stem middle-class flight out of Baltimore.

But despite such no-fault fervor, Whitman's proposal - vehemently opposed by the state's trial lawyers - has stalled in a legislature unwilling to dirty its hands in an election year: Senators and Assembly members are elected this year as well.

Whitman has since acknowledged that her insurance reform plan may not get off the ground this year - which means the state may again have the nation's highest rates.

The biggest culprit in the insurance-rate rise is lawsuits. While the number of accidents has dropped sharply nationwide over the past decade, the number of bodily injury claims has soared. So have minor car-crash cases making their way to court.

Terrie Troxel of the Insurance Research Council in Wheaton, Ill., says the number of Americans filing auto insurance claims for hard-to-verify injuries has risen about 5 percent a year since 1980. Half those claimants now use lawyers to settle their claims, which has caused insurance claim costs to quadruple over the past 15 years.

And insurance companies are passing on the higher costs to their customers.

Overall, car accidents and their related medical and insurance costs total $150 billion a year, the National Highway Traffic Safety Administration says. And a 1995 study by the Insurance Research Council found that the country could save $40 billion a year with an optional no-fault plan - a $221 auto insurance reduction per family.

No lawyers, no court

No-fault auto insurance policies essentially prevent motorists in an accident from suing one another. Instead, motorists submit claims to their own insurance companies for injuries and repair costs. No lawyers. No court.

"With a true no-fault system, there's a tendency to keep litigiousness down," says Loretta Wortens of the Insurance Information Institute in New York. "The only trade-off is the driver forfeits the right to sue, except in cases of permanent injury. But that's what keeps the rates lower."

Alfonso Mastrostefano, Rhode Island's insurance commissioner, says he has been trying for years to cut his state's insurance rates by persuading the state legislature to adopt a no-fault option. But with no success.

"We're having a problem with liability claims. That's why auto insurance rates are going up, and that's what no-fault will help. It won't eliminate the problem, but it will take some costs out of the system," he says. "But [the proposal] didn't go anywhere. It's not an easy task."