The Insurance Information Institute announced that social inflation is contributing to high auto insurance premiums in New Jersey.
Social inflation refers to rising insurance claim costs driven by factors beyond standard inflation, including increased litigation, larger jury awards, and expanded definitions of liability. The Insurance Information Institute said these pressures are more pronounced in states like New Jersey due to dense populations, active legal environments, and regulatory frameworks that can increase claim severity. These trends make it more difficult for insurers to predict losses, contributing to higher premiums, according to the organization.
Auto insurance premiums in New Jersey are among the highest in the country, with average annual costs exceeding $1,700 for full coverage, well above the national average. The institute said litigation-related expenses, including legal fees and large jury verdicts, can significantly increase claim costs, which are passed on to policyholders according to the Insurance Information Institute.
Nationally, auto insurers have reported loss ratios above 100% in recent years, meaning they pay out more in claims than they collect in premiums. Industry data show claim severity has outpaced general inflation, with bodily injury claim costs rising more than 20% over five years. These trends have contributed to rate increases, particularly in states like New Jersey according to industry data.
The Insurance Information Institute, founded in 1960 and based in New York City, is an industry organization focused on improving public understanding of insurance and risk management. According to its website, it provides data-driven research, analysis, and educational resources on the property, casualty, and auto insurance markets for consumers, media, and policymakers in both English and Spanish. The institute represents more than 50 member companies, including regional, national, and global insurers.
