New Jersey insurance payout question

[FishyFish]

My daughter had an at fault accident yesterday. The damage to the other car is $1240. Does anyone know how much an insurance company in NJ will pay out before they raise your rates? She called her insurance company but they won't give her an answer without a claim number.

 

[adjusterjack]

My experience in the insurance industry tells me that there will be a rate increase for an at-fault accident no matter how much or how little is paid.

I was with GEICO about 10 years ago and backed into a car. GEICO paid about $1300 to the other driver. My truck wasn't damaged. Next renewal my premium was raised 70%. GEICO would have collected that $1300 back from me in 3 years had I stayed with GEICO.

I can't say how much your rate increase might be but you can probably count on one and your rates will be higher for the next 3 years.

 

[FishyFish]

Thanks, I know in New Jersey, there used to be a minimum payout before they could raise your rated. In the early 90s, it was $500. In the late 90s, they raised it to I think it was $1000. I have no idea what it is now or if it even exists. If the amount is still $1000, she's just going to pay for it and avoid getting into the whole New Jersey car insurance mess.

 

[fed up]

For the estimated repair cost do not pay out of pocket. This opens you to an endless escalation of costs and possible suits. Let your carrier handle it and adjust your deductible if the rate is increased

 

[FishyFish]

Ugh, I did even think of that

 

[adjusterjack]

I did a search and found nothing to answer the question for New Jersey.

You can call the NJ Division of Insurance and see if anybody there can tell you.

NJDOBI | Division of Insurance (state.nj.us)

 

[MichaelRS]

My daughter had an at fault accident yesterday. The damage to the other car is $1240. Does anyone know how much an insurance company in NJ will pay out before they raise your rates? She called her insurance company but they won't give her an answer without a claim number.

Here's how personal auto insurance works. It will help you and potentially others with the question.

Carriers use tiering to quantify your risk type and premium. This is necessary of standard carriers - that is carriers that submit their rates to the state they operate in for approval.

I won't go into all the tiering but here's how it works. There is the best tier - think accident free, no violations, long driving history, always had insurance, etc. Let's set that your policy qualified for that tier. As soon as your daughter had an accident, they aren't going to charge for that per se, you are going to see a premium increase because you no longer qualify for the tier you were in. Now you qualify for a tier that is one accident, no violations, etc. Conversely, there would be a worst tier - think no prior coverage, low limits, accidents, violations, etc - at some point they won't have a tier and that would just be a decline as they can't properly rate for the risk/exposure.

So, to answer your question, it's nearly impossible for your premium not to go up if you only consider inflation (carrier pays more to vendors and has to pass those costs off on policyholders), but when you consider the change in tier, that is where the real increase will be. How much it is depends on what rates the carrier is filed for in the state.

Secondly, even if you changed carriers right away, it will catch up with you. Carriers use a third party to provide data on their clients - this includes claim and motor vehicle report activity. It will be considered eventually. All you can do is quote out your coverage to see who is offer the best value overall considering the accident.

Lastly, there are two other important notes. One, don't just leave your carrier because you had a claim and they increased your premium. If you had a good claim experience and they don't ream you at renewal, consider renewing. There is value in having a "longer" relationship with a company. Some will say it doesn't matter, I will tell you that working with an independent agent is most important and carrier loyalty is up there as well. The other note is, look into accident and/or violation forgiveness. It's a newer coverage, but will help you hedge against potential issues in the future that could cause your tier to change. IE with accident forgiveness, your tier may not change (though you may lose an accident free discount). A good independent agent would be able to do most of this legwork for you. You don't want to become an insurance agent only to handle your personal auto policy - you need to rely on another that has expertise. They'll help give you direction.

 

[adjusterjack]

ne, don't just leave your carrier because you had a claim and they increased your premium. If you had a good claim experience and they don't ream you at renewal, consider renewing. There is value in having a "longer" relationship with a company. Some will say it doesn't matter, I will tell you that working with an independent agent is most important and carrier loyalty is up there as well.

Gotta disagree with you there. Insurance companies don't care if you were with them for 20 years or 20 minutes. Have an accident or ticket and, boom, up go the rates. Heck, you can even get big rate increases with a clean insurance record.

I was with GEICO for two years when I had the aforementioned accident that resulted in a 70% increase. There was no way GEICO was getting any more of my money. I went with the Hartford for a slightly lower premium. The following year SAFECO for another slight reduction. After three years I was back with preferred rates with Pekin. I was with Pekin for 8 years when my premium went from $1200 to $1800. No accidents, no tickets, no claims, 800 credit score. I bailed.

I'm with Progressive now at $600 for 6 months. We'll see how that goes at the February renewal.

While independent agents are useful (that's how I got Hartford, SAFECO, Pekin) they can't do anything about rate increases except shop for an insurance company with lower rates. That's something anybody can also do on the internet.

 

[MichaelRS]

Gotta disagree with you there. That's something anybody can also do on the internet.

You can disagree, however it didn't sound like you are an insurance agent and therefore your response is only what you think/believe. I have substantial personal experience. I've personally seen many claims paid that would not have been if it was a first year customer with the carrier. I've also seen many claims paid due to the efforts of agents that would never have been paid if the customer worked directly with the carrier.

While I agree that there are folks that buy insurance online and shop to save $100 a year, the majority still utilize agents and there are reasons for that. If you choose to go at it alone, that's totally fine, however I have first hand knowledge that extends to many thousands of clients versus your singular knowledge of your situation (and perhaps that of some of your family & friends/hearsay). Many of the policies I see, from the companies who advertise on TV to sell directly to customers, sell poor limits for liability and medical and do not ask the necessary questions that leads to rounded coverage. That's a shame because it's only after a claim that you prove how good your coverage was and, it's at that point, that the coverage is memorialized (it cannot be changed to coverage an incident that already occurred).

If you believe what you are doing is the best path for you, fantastic, but it's in no way indicative of the whole. The information I provided was not subjective, it was objective to the industry. There are definitely changes that go on, both from an underwriting appetite perspective (what carriers are willing to write/not write) and regarding rate changes. It's an insurance agents' business to be cognizant of those changes and provide the best value overall, not necessarily the cheapest rate.

There are situations where some of the direct writers (Geico, State Farm, etc) may have an upper hand. Geico tends to do well with very young drivers and State Farm will write almost any value car like a McClaren P570 or Bentley Continental GT. Those are tougher to write outside of a program designed for affluent individuals. Aside from specific needs, where the overall value may skew away from an agent, if the agent doesn't bring value, then yes, change agents. If you don't value what the agent brings to the table, the agent is doing something wrong and that merely reinforces your decision that price is the only metric.

Sales 101. There are three primary types of customers/clients: 1) Price only motivated, 2) price motivated, but open to other considerations, and lastly 3) obtaining the best is the only motivation.

The wise insurance agents work with clients #2 or #3. It's very difficult to develop a solid relationship with a #1 client. Not saying there is anything wrong with #1s, there's simply less room for coverage recommendations and the development of a true relationship that considers the whole financial picture as opposed to [only] the cost. If you are selling a widget, client #1 may be fine as long as you sell low and in volume.

There is a reason that those who have financial resources tend not to be stingy on insurance. The vast majority of folks with [reasonable] means are normal people that live normal lives (not flashy, think Ford F150 or Honda Accord). They are not afraid to be insured correctly as they want to hedge what they have built over many years/or even decades from those circumstances that could otherwise cause financial ruin. As many financial whizzes would say, "You can chase saving $100 or you can go make $500 - it's all about perspective." I tend to be on the more frugal side of things, likely similar to you, though I also have a breadth of insurance knowledge that allows me to be so when it comes to my own insurance purchases. I wouldn't be stingy on a real estate agent, lawyer, or doctor when I need to rely upon them as experts. Would you go to three doctors and choose the cheapest one? (rhetorical). All things being equal, maybe, but more reasonably, you'd ask, "How many of these procedures have you completed [successfully] ?" It's questions like that that positions you closer to the expert and has the best probability of a successful outcome. Oh, and they also will likely not be the least expensive.

While buying [personal] insurance online has been normalized over the last decade or so, that most certainly doesn't mean it's the best path or that most folks should be doing it because "it's so easy a caveman can do it" or "15 minutes could save you 15% or more." Most folks are not equipped to understand the potential repercussions of insurance decisions until it may be too late.

I'll leave you with this. If all a person cares about is the cheapest insurance, then there's nothing wrong with the company paying the least amount they can, in this case, for the claim. It's the same logic, just from different perspectives, and ultimately is a race to the bottom.

 

[adjusterjack]

it didn't sound like you are an insurance agent

Au contraire. I spent 35 years in the insurance industry. I was a personal lines underwriter back in the 1970s. Much of my career after that was as a P&C agent. The final 9 years of my career was in claims.

I actually agree with a lot of what you wrote but you made some statements that I view as dangerous if you are making those statements to gullible consumers.

I've personally seen many claims paid that would not have been if it was a first year customer with the carrier.

There is nothing in an P&C insurance policy that says you have to be with the company more than a year to get a claim paid. Any carrier not paying a claim that occurred in the first year is breaking the law and breaching the contract.

I've also seen many claims paid due to the efforts of agents that would never have been paid if the customer worked directly with the carrier.

"Never"? Any carrier not paying a claim because there was no involvement by an agent is also breaking the law and breaching the contract.

Claims people have a contractual and statutory duty to pay claims that are properly filed and documented. Failing to do so subjects a carrier to costly lawsuits and punitive damages.

Yes, there are companies that screw their customers. And when they do it long enough they pay big for it.

Many of the policies I see, from the companies who advertise on TV to sell directly to customers, sell poor limits for liability and medical and do not ask the necessary questions that leads to rounded coverage.

True. Those companies are catering to people with low incomes and little or no assets to protect. I don't blame agents for not wanting to deal with them.