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New Jersey Tier Rating

New Jersey Auto Insurance — A 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 previous car insurance NJ 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 3-year period. The inequity in the surcharge system was that drivers with good, long-term driving records were subject to heavy penalties. After the law was passed, NJ auto insurance companies began implementing the new system in October 1998.

The new legislation provided that insurers use a tier system to determine New Jersey Auto insurance rates. The tier rating system looks 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 car insurance NJ tier placement. Other factors, such as age, gender and marital status may also impact a New Jersey driver’s rate within a specific tier.

Additionally, the new legislation included two very important provisions designed to protect the NJ insured driver:

  • First: Under New Jersey’s new tiered rating system, in the absence of all other applicable risk characteristics, drivers with 6 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

TThe result of the new legislation is a return to healthy car insurance NJ 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 industry. New Jersey drivers now find that NJ auto insurance premiums may vary widely between insurance underwriters depending on his or her driving characteristics.

Now more than ever consumers have an incentive to shop for better New Jersey auto insurance rates. The bottom line is that auto insurance premiums more accurately reflect the risk that each driver represents under the tiered system. Hence, good drivers get the best rates. Tiered rating is a step towards restoring a robust and competitive New Jersey auto insurance marketplace.

Additional Legislation

The Automobile Insurance Cost Reduction Act (AICRA) was implemented in the spring of 1999. This legislation included dramatic changes to the New Jersey auto insurance system as well. These changes included allowing consumers more choice in the type and amount of car insurance NJ coverage they can select. The legislation also provided significant measures to reduce the cost of providing auto insurance.

The above 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% that was implemented in early 2000.

Tier rating and supportive legislation serves as significant steps 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 1 year receive a 15% discount from our standard rate. New Jersey drivers who qualify and have been with IFA for 2 years receive a 20% discount. New Jersey drivers who qualify and have been with IFA for at least 3 years receive a 25% discount. New Jersey drivers who qualify and have been with IFA for at least 4 years receive a 30% discount from our standard rate. All preferred tiers require that the vehicle maintain comprehensive and collision coverage.