According to the NJ Department of Banking and Insurance (NJDOBI) the state allows each auto insurance company to set up underwriting guidelines to determine what type and how many accidents and violations during a specific period constitute a high-risk driver. So it will depend upon the auto insurance carrier's guidelines to determine what accidents, violations, etc they determine will cause a person's rates to rise and how long.

As you may know the Automobile Insurance Cost Reduction Act of 1998 (AICRA) changed the way insurance companies do business in New Jersey by creating a tier system to determine rates. Under the tier rating system, insurers assign drivers to different tiers, or rating levels, based on a number of risk characteristics. Tier rating systems are supposed to allow insurers to take the complete picture into account to identify a good risk, rather than simply penalizing drivers for accidents and motor vehicle violations.

Insurers can consider a number of risk characteristics, including driving record, years of driving experience, vehicle type, coverage limits, claims and credit history when determining a driver’s tier placement. Other factors, like age, gender and marital status, may also impact an individual’s rate within a specific tier.

Not all companies use the same tier characteristics. For example, some insurers use an insurance score which is based on a driver’s credit history, while others may emphasize factors such as driving record and claims history. Insurers are permitted to establish their own tier rating criteria as long as they can show that they are not arbitrary, capricious or unfairly discriminatory. Insurers also have to show that tiers are reasonably based on loss experience, meaning that the guidelines they use to place drivers in specific tiers are substantiated by the losses the companies actually incur.

Tier systems can vary greatly from company to company. Auto insurers have developed a number of ways to evaluate risk; risk characteristics considered important to one insurer do not necessarily carry the same weight with another. So rates can vary considerably from one insurance provider to the next depending upon the rating system of each insurance carrier.

This all being said, in general most insurance companies will typically raise your rates for a certain period after an accident or conviction of a moving violation, the average time being 3 years. Since the state of NJ does not set the time period through insurance companies may charge for a longer or shorter period of time. Some insurance companies may rate based on your driving record for the last 5 or 7 years instead of just 3 years.

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