By Cuqui Rivera
On Jan. 1, 2023, a new state law took effect that will force New Jersey drivers, who have historically bought only the minimum insurance required by state law to buy additional coverage and pay much higher rates.
This decision came easily to the politicians in our state capitol.
Lawmakers failed to pass consumer-oriented reforms to reduce the cost for financially vulnerable drivers by banning insurers from using factors that have nothing to do with driving, including credit information, education level, and job titles when setting policyholder premiums.
I am personally a victim of the current practice, as a clear example. My 2019 premium totaled $2,976 with Liberty Mutual. I was shopping for a more affordable policy and found that through CURE insurance, my cost for the same kind of full coverage totaled $1,188.
Now realize, as a single mom with six kids, that I have been significantly overcharged by nearly $2,000 for more than 20 years, for a total of approximately $40,000. Pause for a moment and let that sink in…
My insurance carrier was punishing me because of my level of education, even though I have been a great customer, have excellent credit scores, and have a clear and safe driving record with no points.
I didn’t know this was something to look out for and I never imagined that how my insurance rates are determined has absolutely nothing to do with my driving record. This horrendously impacts Black and brown communities who struggle every day to make ends meet. And now it has become so much worse.
Rising interest rates and inflation are deeply affecting New Jersey consumers. Now, they are also dealing with the rising costs of their auto insurance premiums. Residents living in mostly Latino zip codes pay 49.9% higher premiums. People living in predominantly Black zip codes pay 49.5% more for auto insurance than New Jersey residents living in mostly white zip codes. And residents of low-income zip codes pay 51.5% higher premiums than residents of high-income zip codes.
The auto insurance industry protects its long history of unfair discrimination and exploitation and lobbies hard to avoid accountability.
Why is this happening? In late 2022, the legislature, egged on by Senate President Nicholas Scutari, passed S481, which increases the state’s minimum required auto insurance from $15,000 per person $30,000 per accident, and $5,000 in property damage to $25,000 per person $50,000 per accident and $25,000 in property damage starting this year.
One estimate found that this bill will increase auto insurance premiums by $125 annually, and documents indicate consumers will see a 9% premium increase.
Insurance companies reserve their best prices for wealthier customers on the backs of those least able to afford coverage in the first place.
Recently, the Consumer Federation of America found that New Jersey drivers with a perfect driving record and excellent credit pay $842 on average annually for auto insurance. But if these same safe drivers have fair credit, their premium climbs sharply to $1,384. And if the drivers have poor credit, their average premium skyrockets to $2,153, despite having an unblemished driving safety record. Drivers are paying 156% more for auto insurance just based on their credit.
What they won’t acknowledge is that in California and Massachusetts, where these unfair pricing practices cannot be used, drivers pay considerably less for auto insurance than those in New Jersey.
This must change.
Cuqui Rivera is a nationally recognized social justice advocate based in New Jersey.
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