TRENTON, N.J., April 8 – The state Insurance Department is hoping that it can finally adopt a new rating territory map for car insurance this summer now that ISO is reviewing new information on how that new map will look.

The Territorial Rate Commission expects to review the data next month in finalizing a common map for approval by the department.

In the meantime, the public comment has been closed on the proposed creation of a special insurance exchange to keep car insurance rates from skyrocketing in the urban enterprise zones once the new map is approved.

The proposed exchange, known as TREE (Territorial Rating Equalization Exchange), would subsidize companies writing policies in the high-risk areas so the rates would not be disproportionately higher than in the rest of the state. The creation of the exchange is to be adopted along with the map so the two can go into effect this year.

The state expects a new map to replace the 60 year-old territorial map that has been termed out of date and no longer practical because of the dynamic changes in traffic patterns, accident and theft exposure, and major demographics.

Controlling Costs in Urban Areas

The new map cannot go into effect without state controls to keep rates from soaring to three to four times higher in the cities and urban areas than in suburban and rural areas.

Currently, the average yearly cost of a policy with liability, PIP, comprehensive and collision coverage is about $1,200. In the high-risk areas those costs double, and without a plan to equalize or subsidize the rates, the costs could increase further.

Thus the department has concluded there is need for a system to comply with the law that rates are not significantly disproportionate when the new territories are created in the new map.

The high rates exist in Newark, Jersey City, Paterson, Elizabeth, Trenton, Camden, and other cities where rates had been capped at 35 percent above the average statewide rate.

Through a subsidy payment system to keep rates down, and at the same time reward companies for writing in high-risk areas, the department feels the new exchange would handle the problem and mesh with the new rating territories once enacted.

The department said the exchange would operate in a manner similar to the New Jersey Automobile Insurance Risk Exchange that redistributes the additional premium collected by companies from individuals who choose the no limitation on lawsuit threshold to the companies that incur costs for the additional lawsuits permitted by no limitation threshold policies.

All companies now writing car insurance would be members of the exchange, and each would be pay into it based on size and business volume. Those funds would be used to pay subsidies to companies to offset the costs of writing in the high-risk areas.

The equalization charge will be set by the exchanges governing body of 11 members to be named by the insurance commissioner.