New Jersey Law Targets Reverse Rate Evasion

New Jersey Gov. Chris Christie signed into law on May 7 A-2281/S-1727, which includes the so-called reverse rate evasion as a form of insurance fraud and provides for civil and criminal penalties.

The measure targets residents who fraudulently obtain auto insurance in another state with lower rates, even though New Jersey is their principal residence or they principally keep the insured vehicle in New Jersey.

The law would consider the reverse rate evasion a form of insurance fraud, making it a crime of the fourth degree. The bill also specifies that reverse rate evasion constitutes a violation of the New Jersey Insurance Fraud Prevention Act, with various civil penalties and remedies for violations.

The New Jersey Office of the Insurance Fraud Prosecutor has previously documented a growing trend of New Jersey residents insuring in North Carolina and Pennsylvania to avoid higher auto rates, according to Assemblyman Joseph Lagana (D-Bergen/Passaic), the legislation’s co-sponsor.