Joseph Alfano, who works for an office supply company in Clifton, N.J., got a pleasant surprise when he renewed his car insurance this summer. The premium on his 1997 Mercury Mountaineer dropped nearly 30 percent, to $1,273 a year.
Aaron Houston for The New York Times
Joseph Alfano, left, consulted his agent, Scott Stanford, in Roselle Park, N.J., and got a lower premium.
“It went down almost $500,” Mr. Alfano said. “That’s significant money.”
Mr. Alfano’s good fortune is common these days in New Jersey. For the first time in decades, prices for coverage are falling in the state and insurance companies are fighting for drivers’ business. Roadside billboards cry out with special deals; radio and television are peppered with car insurance advertisements.
It is a mammoth change in a state where auto insurance has been a long-running nightmare and it puts New Jersey in line with auto insurance practices in most of the country.
More tellingly, it provides a case study in what happens when competitive forces are unleashed and markets are allowed to operate more freely. And while some drivers are worse off, the vast majority of consumers have gained from the changes.
Throughout the country, New Jersey and Massachusetts stood out for their heavy regulation. Some of the biggest insurers shunned the states. But that started changing in New Jersey when state officials, worried that even more insurers would leave, finally decided to give the industry much more flexibility with prices and driver ratings.
The changes began to go into effect nearly three years ago, but the full impact is just now being felt. “Lots of rate changes and new rating plans are starting to hit the market,” said John Tiene, a vice president at the New Jersey Skylands Insurance Company. “They might have been approved in ’04 and ’05. But they’re just happening now.”
Insurance regulators say more than 75 percent of New Jersey’s drivers are now paying less for auto insurance and that further reductions are expected.
Auto insurance prices have been declining around the country, as fewer accidents have been reported and big inroads have been made against fraudulent auto insurance claims. But nowhere are prices falling as sharply as in New Jersey. And insurance experts say that the easing of regulation in New Jersey has been by far the most important factor.
Some of New Jersey’s worst drivers are paying more than before and some drivers have experienced little, if any, change in their premium costs. But agents around the state say costs have fallen for most of their customers and many are paying as much as 30 percent to 40 percent less.
Even some drivers with poor records are saving money. Over all, state regulators say, drivers have saved more than $500 million since the regulatory controls were relaxed.
With nearly 20 new companies doing business in New Jersey — introducing much more variation in price and service levels among insurers — nearly a third of the state’s three million drivers have switched carriers. Geico, the most successful of the new companies, said that it had signed up the drivers of more than 500,000 cars and trucks since it began operating in New Jersey two years ago.
Under the new rules, auto insurers are free to develop their own rating methods, as they are in most states. As a result, certain individuals will do better at one company while others could be worse off.
The savings have been enormous for some customers, particularly those who make the effort to compare prices and shop for the best deal.
Scott Stanford, at the Britton-Selg-Stanford Agency in Roselle Park, had a client in Cranford who had been paying $13,900 for insurance on four cars, driven by himself, his wife and two children. In early August, Mr. Stanford wrote the same coverage for $4,800 less.
In Brick, on the Jersey Shore, Jeanne Heisler at the Ronan Agency shifted Joseph C. Tauro, an orthopedic surgeon, into a policy that St. Paul Travelers had been selling nationally but previously had been barred from offering in New Jersey. His premiums on four cars fell to $3,821 from $6,629.
Elizabeth Morel, 26, and recently married, was more typical. Her premium dropped to $2,000 from $2,500 when she renewed at the Otterstedt Insurance Agency in Englewood Cliffs.
Elizabeth Young, 32, a manager at a condominium hotel in Atlantic City, heard the Geico advertisements promising to save her money and picked up the phone. She signed up for a Geico policy for $1,100, a drop of $300.
Since the mid-70’s, auto insurance prices in New Jersey had been higher than anywhere else in the country. But even so, insurers contended that they could not turn a profit.
Trying to keep insurance affordable and available, officials layered on regulations. With competition limited, lower-cost insurers simply avoided the state
