CHANGE AHEAD FOR AUTO TERRITORIES:

New Jersey officials claim that caps removed from auto insurance rates in cities will not automatically increase costs for drivers and could help build a more competitive market but advocates for consumers are not so sure. The caps, signed into law in 1998, prohibit companies from charging city drivers more than 35 percent above an insurer’s statewide average.

Agent John Dyke, chairman of the N.J. Auto Agents Alliance Inc. said he expects drivers in urban centers will eventually be hit with steep increases. “The caps were put in place 20 years ago and they were put in place for a reason,” said Dyke. “Rates were soaring in the urban areas.”

The state plans public meetings to obtain input for drawing up a new map for insurers to use in setting rates. Auto insurers could use their own rating maps, but those would need department approval. After the process is done, which could take at least a year, the caps will be lifted.

“Nobody is going to find themselves hung out there until the process is complete,” said Donald Bryan, acting commissioner of the Banking and Insurance Department. “They (the rates) cannot be, and should not be, significantly disproportionate to what they are now.”

But Dyke is worried. “Once the caps are removed, urban rates are going to go through the roof,” he said, although the change may not happen right away.