Opinion: NJ auto insurance increase a necessary pain

Residents who choose minimum coverage pay the fifth highest average rate in the nation - $855 a year - for the basic policy to meet state requirements, according to bankrate.com. New York's minimum coverage is the highest at $1,339.

Rates are higher in New York even though much of that state isn't urbanized. One reason is that the minimum coverage required by New York and nearly all other states is more than here. New Jersey is one of just four states requiring only $15,000 of personal injury coverage (and Florida mandates only $10,000). The vast majority of states require $25,000 and three require $50,000 worth.

The appeal of lesser and cheaper insurance coverage is obvious, and it has some advantages. New Jersey has the fewest uninsured drivers in the nation.

Too little coverage, though, is only next best to no coverage. Average injury claims are $18,000, leaving most accident victims short on compensation. Many claims far exceed that average, and for those victims being hit by a minimally covered driver is barely better than by a driver with no insurance.

This year legislative leaders decided to finally address New Jersey's inadequate minimum auto insurance. The coverage requirement hadn't been increased in 50 years - ridiculous in view of inflation and especially soaring medical costs.

The proposed fix was equally ridiculous minimum personal injury coverage of $250,000 for basic and standard auto policies. That would have made New Jersey's minimum five times higher than any other state and 16 times higher than the existing requirement.

Needless to say, this would have brought big insurance cost increases to almost half the drivers in the state, with more than a million of them paying as much as $350 a year more. Tough on the family budget when gasoline is already way above $4 a gallon.

After a firestorm of opposition singed supporters of the bill, the minimum coverage requirement was revised sharply downward and the bill quickly passed without discussion as last month ended.

Another bill was abandoned. It would have prohibited drivers from using their private health insurance coverage as the primary payer for their injuries, getting a small discount on their auto policies. This was standard consumer advice until health insurers started refusing to cover auto accident injuries, often without the awareness of policyholders. This choice is still possible for now, but people must make sure their health insurance covers their auto accident injuries or they'll be left with a surprise coverage gap.

The Legislature sent Gov. Phil Murphy a bill increasing the minimum amount of liability insurance from the current $15,000 coverage to $25,000 starting next year. Automatic increases would take the minimum to$35,000 starting in 2026. Insurance industry officials say 1.1 million drivers would pay about $125 more each year.

The increase next year is probably too little, but appropriate given the current economic stress on lower income families and individuals. The additional increase by 2026 looks reasonable, given New Jersey's risky roadways, but might be stalled if the feared recession occurs before then.

There's never a good time to increase auto insurance rates, but the Legislature didn't need to wait 50 years for the worst time to do it. That left only choices that are politically painful.