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[ericpoe]

Mandatory Coverage, Missing Clarity - Rethinking Insurance Rules

New Jersey drivers are legally required to purchase car insurance. Anyone who owns a vehicle in New Jersey must carry coverage, regardless of income, occupation, or personal circumstances. While this requirement is rooted in public safety, it conceals an imbalance and lack of disclosure regarding how insurance companies determine premiums.

Driving records alone do not determine premiums. Insurers rely on various data, including credit history, job title, education level, and homeownership status. Although these factors may reflect financial risk models, their connection to driving behavior remains unclear. Insurers do not explain most of these inputs to consumers during price quotes or renewals.

This disconnect between obligation and transparency weakens consumer protection. Without insight into decision-making, individuals cannot assess fairness or whether rates represent relevant information.

Many assume premiums are shaped by clean driving records, consistent coverage, and vehicle type. In practice, those factors may carry less weight than opaque demographic criteria. Even the most careful driver may face higher costs without knowing why.

The consequences go beyond confusion. Drivers who lack visibility into premium calculations cannot take steps to improve their standing or reduce their rates. Nor can they challenge the use of characteristics unrelated to road risk. Without accessible information, consumers lose agency in a market where they cannot opt out.

This lack of clarity can also affect coverage decisions. Without understanding the factors that drive costs, some drivers may reduce liability limits or drop optional protections to manage premiums. These trade-offs may leave individuals underinsured, increasing financial vulnerability in the event of a serious accident. Transparency not only supports fairness but also encourages smarter risk management.

Mandatory products carry an implicit expectation of accountability. In regulated sectors, such as electricity, water, and pharmaceuticals, pricing and access face public scrutiny and require basic transparency. Auto insurance, despite its legal status, remains exempt from similar oversight. That exception erodes trust in a system meant to protect rather than penalize.

Some states have taken steps to close this gap. California requires insurers to justify rating factors and limit those unrelated to driving performance. Massachusetts prohibits using credit scores when setting auto insurance rates, reinforcing the idea that pricing should correspond to conduct behind the wheel, not financial background.

New Jersey’s framework includes regulatory review and rate filings, but it lacks a mandate to inform consumers directly about rating practices. Most data submitted to regulators stays buried in technical filings and inaccessible to policyholders. As a result, many drivers are left unaware of how or why their premiums shift.

Basic transparency standards would help restore fairness to the process. Disclosing rating factors would not compromise proprietary models or pricing - it would help consumers understand how decisions are made and how to respond accordingly.

Every driver deserves to understand the basis of a legally required financial obligation. When a product is compulsory, clarity becomes a matter of equity, not convenience. Trust in the insurance system depends not only on access but on openness.

Bringing auto insurance transparency in line with other essential services would benefit the public and the market. Better communication, clearer rating criteria, and more accessible disclosures can improve system performance and public confidence. When rate-setting matches risk and transparency replaces assumption, trust has room to grow.