The Territorial Rating Equalization Exchange (TREE) was included along with the map as part of the state's adherence to the Automobile Insurance Cost Reduction Act of 1998, according to measures approved in late December by New Jersey Department of Banking and Insurance Commissioner Steven M. Goldman.
"No other state has this type of system," said Richard Stokes, regional manager and counsel for the Property Casualty Insurers Association of America. "How is it going to be implemented? We don't know."
TREE "redistributes additional premium collected by insurers from insureds who choose the no-limitation-on-lawsuit threshold to the insurers that incur the costs for the additional lawsuits permitted by no-limitation-threshold policies" in order to maintain neutral revenues for companies that write in more populated areas with greater risk, according to the department.
A TREE governing committee, made up of insurer representatives and a public member, will determine where companies are eligible to receive the reimbursement.
"It sounds like the creation of a new bureaucracy," said Stokes. "We were moving toward open and fair competition and this appears to flow in the opposite direction."
Stokes said he thinks insurers in the state are, as a group, "very pleased" with the new territorial rating map if not simply for the fact companies have been using a map severely outdated and the landscape of the state has changed significantly.
There are now 49 territories instead of 27. Every insurer must have an approved territorial rating plan. Three territorial maps can be used: the department's common map, a map filed by an industry rating organization and a map developed by the individual insurer. Companies have 180 days to file their own maps, according to the department.
In 2006, the top writers of private-passenger auto in New Jersey, according to the A.M. Best Co. state/line report based on direct premiums written, were: Allstate Insurance Group, with a 15.1% market share; NJM Insurance Group, with 13.4%; Berkshire Hathaway Insurance Group, with 12.7%; Palisades Group, with 8.9%; and State Farm Group, with 8.8%.