TRENTON, N.J., January 8 – The Insurance Department is proposing the creation of a special insurance exchange to keep car insurance rates from skyrocketing in the urban enterprise zones when a new rating territory map is approved later this year.

The proposed exchange, the Territorial Rating Equalization Exchange, would subsidize companies writing policies in the high-risk areas so that the rates would not be disproportionately higher than in the rest of the state.

The creation of the exchange is outlined in PRN 2007-10, and is open for public comment until March 3. It could conceivably be in operation by June " the same time a new territory map is ready.

The state expects a new map to replace the 60-year-old territorial map that has been termed out of date and no longer practical because of the dynamic changes in traffic patterns, accident and theft exposure, and major demographics.

Regulators said a 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.

Now, 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 are doubled, and without a plan to equalize or subsidize the rates, the costs could go much higher.

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

The caps were removed under new laws because of complaints that drivers with clean records were subsidizing costs in high-risk areas. The caps also sparked bitter debates between city and urban legislators, and suburban and rural legislators.

The department explained that if a new territorial map is enacted without any restraints, companies could refuse to write polices in the high-risk areas.

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 could handle the problem. The department said in its statement that the new exchange would ensure that insurance coverage is available in all areas of the state, and that there would be no significant disproportionate rate application.

All companies now writing car insurance would be members of the exchange, and each would pay into the exchange 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 exchange would single out the high rate districts with zip codes eligible for subsidies. The methodology for determining the amounts of the equalization charge is to be worked out by the exchanges governing body of 11 members to be named by the commissioner. Those members would include two licensed producers of private passenger automobile insurance, a public member with no ties to a private passenger automobile insurance company, and eight salaried employees of companies writing private passenger automobile insurance in the state.

The proposal also allows the appointed members to come from the Property Casualty Insurers Association of America, the American Insurance Association, and two from New Jersey based car insurance companies.