CURE In the News

The Philadelphia Inquirer - January 28, 2002

Nonprofit insurer seeks to gain as others depart NJ CURE members pool auto premiums and share risk for reduce costs. Business is up.

By Linda A. Johnson
ASSOCIATED PRESS

Dateline: WEST WINDSOR, N.J.
With New Jersey’s biggest auto insurer, State Farm, announcing it will leave the state, a small nonprofit is aggressively luring customers as it tries to live up to its name.

For many drivers with good but not necessarily perfect records, NJ CURE may well be an antidote to New Jersey’s highest-in-the-nation auto-insurance rates.

New Jersey’s auto-insurance regulations result in what observers say is the nation’s widest disparity in rates from company to company and driver to driver,even after 1999 reforms made the insurers slash rates 15 percent. Low-risk drivers often get discounts, with insurers making up the difference by charging much higher rates to drivers with multiple traffic tickets or accidents.

The system can put drivers in a more expensive tier just for having an elderly parent move in or making a late premium payment. Many drivers hit with higher rates have found coverage elsewhere, cutting insurers’ revenues and prompting them to seek rate increases or threaten to pull out of the state.

NJ CURE, an acronym for New Jersey Citizens United Reciprocal Exchange, comprises a group of people with similar backgrounds — mainly drivers with good records — who pool premiums and share the combined risk as a strategy to reduce costs.

Besides being selective, NJ CURE tries to hold down claims and premiums by aggressively prosecuting fraud. The exchange also saves on agent commissions, writing all its policies directly.

NJ CURE insures just more than 24,000 vehicles, up 29 percent since 1999 after years of much slower growth. While the company’s average premium in 2000 of $928 was 5 percent less than the state average of $976, members each year must pay an additional 10 percent of the premium into a surplus fund. The surplus, which has grown from the founders’ original $750,000 to about $5.6 million, provides a cushion against unusually high losses and sudden rate increases.

Eric Poe, director of operations, said he hoped the surplus eventually would allow NJ CURE to begin giving members annual dividend payments, like such mutual insurers as New Jersey Manufacturers, the No. 2 insurer in the state.

John Tiene, president of the Insurance Council of New Jersey, a trade group for property and casualty insurers, said NJ CURE had picked a good time, with State Farm planning to gradually pull out.

Since June, when State Farm announced its plans, NJ CURE has been getting about 1,000 telephone calls from potential customers each Monday alone, Poe said.

State Farm insures about 780,000 New Jersey drivers. Since 20 other insurers have stopped doing business in New Jersey since 1990, Tiene said, only 52 are left, about one-third fewer than in New York or Pennsylvania.

Meanwhile, 13 other companies had rate increases approved last year, and one major insurer, American International Group, agreed to stay for at least two years when an 8.9 percent rate increase was approved last month, said Bill Heine, spokesman for the state Department of Banking and Insurance.

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