Writing auto insurance in New Jersey...and linking it

Rough Notes, Jun 1999 by Pillsbury, Dennis

Seven-year-old reciprocal carrier gets high marks from agents and consumers

A funny thing happened in New Jersey in 1992-an auto insurance company entered the state. That was contrary to the norm. Auto insurers usually left the state.

Curioser and curioser, as Alice noted under different circumstances, the auto insurer not only wanted to be in the state but it sold through independent agents. And, most amazing, the company wants new business. For agents who have been jumping through hoops trying to get their companies to write auto, followed by other interesting tricks designed to convince the company to service that business, the new company has been a breath of fresh air.

Of course, when the company first started doing business, that was not how everyone viewed it. There was some natural skepticism, accompanied by the usual East Coast cynicism, that ranged from seeing the company as some strange aberration that would learn all too quickly that its behavior was fundamentally unsound to seeing it as yet another sheep to be fleeced.

Well, pretty much everyone was wrong. And, fortunately for the Palisades Safety & Insurance Association and for many New Jersey motorists, a few agents were willing to take a chance on the company, and they and their clients have been rewarded.

Palisades is a reciprocal exchange that markets through independent agents, an unusual arrangement. Most reciprocals operate on a direct basis.

Palisades came to New Jersey when Jim Florio was elected governor. The company had negotiated with Commercial Union to come in as a replacement carrier for that company. Palisades inherited all of CU's obligations, including the removal of 16,000 cars from the JUA. Negotiations with other carriers that wanted to leave the state continued; and soon after entering the state, Palisades took on another 12,000 cars when it was named the replacement carrier for American Reliance. "We met the depopulation requirements by working with good agents," says Hal Belodoff, president of Palisades.

Last year, the company paid dividends to policyholders who had been claims free for five years.

Jim Rick, an agent with LaFontaine&Budd in Somerville, New Jersey, started using Palisades about three years ago. "It's been a terrific experience," he says. "I've been an agent for 35 years now and this is like an old-time insurance company. The people at Palisades value the service we agents provide. They have a good rapport with our agency. They really accommodate the agent's need. This is probably the best service I've seen in 20 years."

He continues, "The real difference is that the people at Palisades are proud of what they do. They're proud they're bringing a needed service. They run an auto insurance company the way it should be run."

Jim Davies, an agent with Davies & Associates in New Providence, agrees that Palisades is a "fantastic company. It's come across with good products and is great with service and claims. We've had very few complaints." Davies started out with the company when it was formed. "They came in and filled a void. Most companies were leaving or threatening to leave the market. It was extremely tight. We've tried to submit a good book of business to them."

Hal Belodoff says the idea has been "to create a special club, a very loyal group of agents. We get together with our agents regularly and meet every Monday to work on any problems they bring to us." He continues that "our intention is to grow. We're eager to grow. We promised our agents that we would be a market and we intend to live up to that promise."

Defying conventional wisdom and tuming a profit

So far, the reciprocal has defied common wisdom and is making money in a market and state that everyone says is a guaranteed loser. And they've done it by living up to their motto as "The Nice New Jersey Auto Insurance Company." The result has been loyalty from customers. The company boasts a retention rate around 92% and one of the lowest complaint ratios in the business. For the last four years, it has had the best complaint record of any New Jersey insurer, according to Insurance Department statistics.

One of the company's unique services is on-the-spot claims service. They have mobile claim offices called "Crashbuster" vans. The vans are operated by experienced claims adjusters who can authorize payment at the crash site. "We're working real hard to have customers say `wow," Belodoff says. "Our customers get a different feeling about auto insurance when they deal with us. And a good part of the reason for that is because our employees enjoy giving good service."

Jim Rick offers one incident where Palisades behaved differently from the norm. "We had an insured who could not make her payment. She called the company and they gave her five more days to make the payment. They really do live up to their slogan."

Only time will tell if a "nice" company can make it for the long haul. But all signs are good. And if it does succeed, maybe other companies will decide this is the way to go and their employees will start enjoying giving good service and their customers will start saying "wow," and they won't turn to lawyers the instant they're injured and ... Okay, maybe not.