INSURANCE COUNCIL OF NEW JERSEY
820 Bear Tavern Road, Suite 303
Ewing, New Jersey 08628
(609) 882-4400 Fax: (609) 538-1849
Myth vs. Fact: New Jersey Automobile No-Fault Insurance
Myth: Thirty-eight states do not have no-fault insurance systems and have lower auto
insurance rates because they don’t have no-fault.
Fact: Many of the states that do not operate under a no-fault system are rural states such
Kansas, North Dakota, Utah, Montana, Wyoming and Indiana. These states have
inherently lower insurance costs due to demographic factors.
Even under the most positive conditions, New Jersey is an expensive state in which to
live and conduct business. We are the most densely populated state in the nation (1,134
people per square mile) and are ranked third-longest commute in the country, driving 10
billion miles more than the average as a group. In addition, we have more registered
motor vehicles per square mile (822) compared with the national average of 61. Add to
these realities New Jersey’s more than 35,000 miles of roads and highways (more paved
roadway per capita than any other state), and the fourth-highest number of non-fatal
Further, a state-funded study recently found that repealing no-fault medical coverage and
eliminating all limits on the filing of “pain & suffering” lawsuits would increase auto
insurance costs by as much as 27 percent under a variety of scenarios.1
Myth: In 1994, Connecticut repealed no-fault and rates came down as a result of that change.
Fact: The Connecticut system was no-fault in name only. Connecticut had only a monetary
threshold of $400, not a strong verbal threshold to limit lawsuits such as New Jersey.
Therefore, Connecticut’s level of litigation remained relatively stable pre- and post-repeal
of no-fault. Furthermore, Connecticut’s mandatory PIP coverage was only $5,000 unlike
New Jersey, which has had a $250,000 standard level of PIP since 1990 (prior to 1990,
New Jersey had unlimited PIP coverage).
Additionally, when Connecticut repealed its no-fault system, at the same time it also
eliminated mandatory medical payments coverage. It was the elimination of these
mandatory medical payments coverages that actually brought rates down in Connecticut.
Those who cite Connecticut as an example state also ignore the impact on Connecticut’s
health insurance system when no-fault medical coverage was eliminated.
Estimates of the Cost of Changes to the New Jersey Automobile Reparation System, compiled for Auto Working
Group/New Systems Roundtable of the New Jersey Department of Banking & Insurance by Insurance Services
Office, Inc., Consulting Services, 545 Washington Boulevard, Jersey City, NJ, September 16, 2002.
Myth vs. Fact
Myth: Under New Jersey’s no-fault system, people are denied appropriate medical treatment.
No-fault is essentially managed care.
Fact: New Jersey’s personal injury protection (PIP) coverage guidelines are very different from
managed care. PIP is not managed care. In a managed care situation, you must use the
services of a physician who is part of a network of doctors. Under New Jersey’s medical
guidelines, it remains the policyholders right to choose his/her own physician.
A policyholder’s physician and other health care professionals determine the medical
necessity of treatment and an independent medical review board physician, not insurance
company employees, resolve disputes that arise.
Myth: Personal Injury Protection (PIP) coverage duplicates a policyholder’s current health
Fact: Many health policies do not cover auto accident-related injuries and since New Jersey has
maintained no-fault coverage for thirty years, today’s health insurance policies are not
priced to include the significant costs of treating auto accident-related injuries.
Myth: No-fault places arbitrary thresholds on people who are legitimately injured and limits
appropriate redress in the Courts.
Fact: No-fault applies to personal injury protection coverage only. Since 1989, New Jersey
policyholders have been able to choose between Bodily Injury Liability coverage with a
Lawsuit (or Verbal) Threshold or a Zero Dollar Threshold option. A policyholder’s
selection of one of these thresholds determines his/her ability to sue for “pain and
suffering” for injuries sustained in an auto accident.