Auto Insurance Rate Changes in New Jersey for Farmers and State Farm Companies in 2017-2018

Four large auto insurance companies have filed for rate changes in New Jersey. These were Mid-Century Insurance Company and Farmers Insurance Exchange, both owned by the Farmers Insurance Group of Companies, and State Farm Guaranty Company and State Farm Indemnity Company. These companies are among the largest companies for auto insurance in New Jersey, based on direct premiums written in the state.

Summary of Mid-Century Insurance Company's Approved Changes

Mid-Century Insurance Company filed a rate change for select car insurance policies in September 2017, which will significantly impact the cost of the average insurance rate in New Jersey. It is approved to increase the premiums for 39,279 policyholders of its Farmers Auto 2.0 product, with increases averaging 6.9%. However, the rate changes will be spread unevenly. Some policyholders will see a decrease of 0.3%, while others will face increases of 15.1%.

In order to spread the losses from Hurricane Sandy, Mid-Century has adjusted its comprehensive loss model by 15.1%, which indirectly affects the costs paid by drivers. This adjustment includes a Catastrophe Load, which will spread their losses over the years. Mid-Century also provided the following estimated breakdown of their rate changes by type of coverage.

CoveragePercentage Change
Bodily Injury7.5%
Property Damage10.0%
Personal Injury Protection10.0%
Uninsured Motorists7.5%
Total Liability8.9%
Comprehensive10.0%
Collision0.0%
All Other10.0%
Total Physical Damage1.6%
Total6.9%

Mid-Century has also signed a contract with a new vendor to process towing claims for its policyholders. The new vendor is expected to be 30% more expensive than the previous one, Mid-Century says, which will translate into a proposed premium increase of 10% for those policyholders who have towing coverage.

Approved Farmers Insurance Exchange Premium & Discount Changes

Farmers Insurance Exchange has been approved for a range of rate changes for its policyholders, with some policyholders seeing decreases of 8.0% in their premiums while others are expected to be hit with increases of 27.4%. New Jersey residents face some of the highest auto insurance rates in the county. These changes are slated to take effect for new policies on or after February 9, 2018, and for renewed policies beginning on February 27, 2018. Farmers identified the policies that are most affected to be:

  • A policy for a driver over 89 who has a liability only policy with a PIP limit of $75,000 and a deductible of $1,000 will see the largest increase.
  • A policy that covers no drivers over 64 and that offers full coverage, with a $15,000 PIP limit and a $2,500 deductible, will see the smallest changes.

Currently, when a policyholder advances in age from 64 to 65, their household is reclassified as a Senior household, meaning that their premiums increase due to a higher perceived risk. Because these increases could be drastic, Farmers is changing its definition of households so that some Senior households are treated the same as some Married households. Such policyholders should see smaller changes in their rates for that year once the filing is in effect. Overall, this would mean an average decrease of 2.5% for some policyholders and an average increase of 2.7% for others.

Like its sister company, Mid-Century, Farmers policyholders with towing coverage are also facing increases. The 10% premium hikes mirror those of Mid-Century's, and reflect the overall increase of 30% in cost that Farmers estimates it will incur under the new towing vendor.

Young drivers on Farmers Insurance Exchange policies are eligible for a series of three discounts that can now be combined. In order to combine the discounts, the student must meet the criteria listed below:

Distant Student Discount: A single, licensed driver under the age of 23, and who is a child of a Primary Need Insured driver, is eligible for this discount. There are other factors required, such as the child needing to have access to a covered vehicle and being at least 100 miles away from the primary zip code for the policy.

Good Student Discount: Applies for single, licensed drivers under 25 who are a part of a policy, have a valid driver's license, and meet at least one standard for academic achievement. Those are that the the student's combined GPA must be above 3.0 on a 4.0 system, or they must have a B in all their classes. They must also be named on the Dean's List or Honor Roll and ranked in the top 20% of their class's academic standings. They;re also eligible if they fell within the top 20% of a nationally recognized standardized achievement test within the past year. This discount can also be combined.

Youthful Driving Discount: In order for this discount to apply, the student must be a single, licensed driver under the age of 25 who is either a child or a grandchild of the primary policyholder. The discount will be applied after adding the minor to the policy. This discount can be applied to the previously listed student discounts.

Proposed Rate Changes from State Farm Guaranty & State Farm Indemnity

State Farm Guaranty Company, a State Farm Company, has proposed rate increases for 32,571 policyholders with an average increase of 6.7%, or $135, per affected policy. The minimum impact would be a decrease of 17.3% to those policies in scope. The biggest change would be a 58.7% increase for two policyholders with comprehensive coverage.

State Farm Indemnity Company has also proposed rate changes averaging 2.0% for 479,862 policyholders. These changes range more widely from a decrease of 40.2% to an increase of 51.8% for an average increase of $25 across the policies. While the percentage increase looks big on paper, the filing states that the average increase per policyholder will not exceed $25.

Range of change% of policies for Guaranty Co.% of policies for Indemnity Co.
Less than -15%0.0%1.4%
-15% to -10%0.2%5.0%
-10% to -5%2.0%14.5%
-5% to 0%10.6%25.7%
0% to 5%24.4%26.1%
5% to 10%32.6%17.0%
10% to 15%23.8%7.3%
15% to 20%6.2%2.3%
20% to 25%0.3%0.6%
25% to 30%0.0%0.1%
Greater than 30%0.0%0.0%

State Farm Indemnity Company also provided information on how its proposed rate changes would differ depending on the age group in which its policyholders fall. For example, it's proposing a 3.6% increase for its average 16- to 20-year-old male driver, and a 3.3% increase for its average 16- to 20-year-old female driver. However, one of the most surprising changes is for the 65+ age group. The company is looking to decrease premiums for those drivers by an average of 0.8%. The 65+ age group generally faces higher costs the older they get, since companies tend to treat them as risky drivers. Below you can find the rate changes for age groups 25 and up.

Age groupBodily Injury/PIPComprehensiveCollisionAll Coverage
25-495.1%2.2%2.0%3.9%
50-642.6%3.5%-0.7%1.8%
65+-0.4%2.0%-3.4%-0.8%

2016-2017 Rate Changes for the Largest New Jersey Auto Insurance Companies

In order to understand the rate changes discussed above, it helps to compare these companies and their rate proposals to the top 11 auto insurance companies in New Jersey and the rate changes that have been approved in the past two years. The following table breaks down the amount of premiums written and the rate changes year over year in the past two years.

Company

Direct written premiums in millionsApproved rate change 2016Approved rate change 2017
Berkshire Hathaway Group$1,4413.4%3.1%
New Jersey Manufacturers Group921.84.8%5.4%
Allstate Insurance Group881.78.4%1.5%
Progressive Group796.55.0%1.5%
State Farm Group619.64.8%0.0%*
Palisades Group576.85.1%3.6%
Liberty Mutual Group518.46.2%-0.1%
United Services Automobile Association Group275.90.1%3.5%
Travelers Group263.14.5%6.2%
Farmers Insurance Group241.88.3%8.7%
Nationwide Corporation Group12.83.3%3.2%
  • As of publication, the rate change proposed above has not been approved, and is therefore not reflected in the premium changes table above.

Comments and Questions