New Jersey Tier Rating

Tier Rating - History

In June 1997, New Jersey State Legislators approved, and Governor Christie Whitman signed into law, legislation that eliminated State mandated eligibility surcharges on New Jersey Auto Insurance.  Under the surcharge system it was not uncommon for drivers with minor violations to pay hundreds or even thousands of dollars a year in surcharges on their New Jersey Auto Insurance for a three-year period. The inequity in the surcharge system was that drivers with good, long-term driving records were subject to heavy penalties.

The new legislation provided that insurers use a tier system to determine New Jersey Auto Insurance rates. Tier rating systems look at much more than DMV violations. New Jersey Auto Insurers now consider a number of risk characteristics, including driving record, claims history, years of driving experience, number of years with the same employer, vehicle type and coverage limits when determining a New Jersey driver's tier placement. Other factors, like age, gender, and marital status may also impact a New Jersey drivers’ rate within a specific tier.  New Jersey Auto Insurance companies began implementing their tier systems in October 1998.

The new legislation included two very important provisions designed to protect the New Jersey insured driver. First, under New Jersey's new tiered rating system, in the absence of all other applicable risk characteristics, drivers with six or fewer motor vehicle points must be placed in a New Jersey Auto Insurance company's standard tier. Second, each company's tiered rating plan must be revenue neutral. This means that New Jersey Insurance companies collect the same total premium that they did under the old system.

Tier Rating - The Result

The result of the new legislation is a return to competition.  New Jersey Insurance companies can now position themselves to compete for customers with the risk characteristics that they believe are the most favorable.  Creativity and innovation have been reintroduced to the New Jersey Auto Insurance system. New Jersey drivers now find that New Jersey Auto Insurance price premiums may vary widely between insurance underwriters depending on his or her driving characteristics.  Consumers now more than ever have an incentive to shop for better New Jersey Auto Insurance rates.  The bottom line is that Auto Insurance premiums will now more accurately reflect the risk that each driver represents. Good drivers get the best rates. Tiered rating is a step towards restoring a healthy and competitive New Jersey Auto Insurance marketplace.

The Automobile Insurance Cost Reduction Act (AICRA) was implemented in the spring of 1999.  The legislation included dramatic changes to the New Jersey Auto Insurance system. These changes included allowing consumers more choice in the type and amount of New Jersey Auto Insurance coverage they select. The legislation also provided significant measures to reduce the cost of providing New Jersey Auto Insurance.  These cost reduction measures were aimed at controlling the medical costs and fraud that New Jersey Auto Insurance companies pay for each year. These changes, in part, support the mandatory automobile insurance rate reduction of approximately 15 percent that was implemented in early 2000.

The tier rating is a significant step in helping both New Jersey drivers and New Jersey Auto Insurance Companies.

The IFA Insurance Company Tier Rating System

The IFA insurance Company tier rating system is designed to reward good New Jersey drivers who have been loyal to our company. Drivers who qualify for our lowest tier and have been with IFA for at least one year receive a 15% discount. New Jersey drivers who qualify and have been with IFA for two years receive a 20% discount. New Jersey drivers who qualify and have been with IFA for at least three years receive a 25% discount from our standard rate. New Jersey drivers who qualify and have been with IFA for at least four years receive a 30% discount from our standard rate. All preferred tiers require that the vehicle maintain comprehensive and collision coverage.