New Jersey Legislature Seeks to Crack Down on Auto Insurance Fraud

The New Jersey Legislature is seeking to crack down on residents who fraudulently obtain automobile insurance from other states where the premiums are lower, yet keep the vehicle in New Jersey or live in New Jersey.  The bill, A-2204, is sponsored by New Jersey Assembly Democrat, Wayne P. DeAngelo from Mercer/Middlesex County.

According to the Office of the Insurance Fraud Prosecutor, there is an escalating trend of New Jersey residents obtaining automobile insurance from states, such as North Carolina and Pennsylvania, where the rates are lower than New Jersey.  This practice affects New Jersey drivers who obtain insurance in New Jersey because it costs them more through higher premiums.  It also results in a loss of revenue to the state and reduced revenue for New Jersey insurers.  Another reason DeAngelo and other members of the Legislature are supporting this bill is that most out-of-state insurance policies provide less coverage than what New Jersey Law requires, and this could reduce the amount of damages a victim involved in an accident may recover.

The Office of the Insurance Fraud Prosecutor is unable to do anything to address this situation because state law does not currently include this so-called “reverse rate evasion” as a form of recognized insurance fraud.  The bill would solve this problem by making this practice a violation of the New Jersey Insurance Fraud Prevention Act and a crime of the fourth degree.  A violation would also carry with it various civil penalties.

The Office of the Insurance Fraud Prosecutor has suggested this proposed change to the law for over four years and many are eager for it to benefit the residents of New Jersey who have rightfully obtained New Jersey insurance policies.