New Jersey Proposes Reverse Rate Evasion Law

Posted & filed under Car Insurance News.

The New Jersey state Assembly recently passed a “reverse rate evasion” measure making the practice of registering a vehicle or obtaining auto insurance in another state a form of insurance fraud in New Jersey.

Owners who have engaged in the practices are seeking cheaper auto insurance premiums regardless of their primary residency in New Jersey or the fact that the vehicle will be primarily used and stored within that state.

Critics maintain that the tactic results in the loss of considerable revenue for the state and actually inflates premiums for drivers who properly register and insure their cars and trucks.

Additionally, because many of the out-of-state policies provide a lesser degree of coverage, drivers that cause or are involved in accidents will not receive maximum benefits.

Wayne P. DeAngelo, D-Hamilton, a primary sponsor of the bill, which passed 80-0 on June 21, said, “Insurance fraud is not only wrong, but it costs honest drivers money through higher premiums. We’ve made a lot of progress in controlling auto insurance rates, but we still have a long way to go and cracking down on fraud needs to be a big part of that continuing effort.”

If the bill becomes law, it will make reverse rate evasion a fourth-degree fine, carrying a jail sentence of up to 18 months.