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3/13/2009
Rep. Petersen: Hidden Doyle policy would hike auto insurance rates
Every two years the governor submits his budget proposal to the legislature. A budget is, by definition: - an itemized summary of estimated or intended expenditures for a given period along with proposals for financing them (thefreedictionary.com).
Not included in the definition of a budget is policy. Policy is drafted, debated, and passed by the legislature through an open public hearing process. In his current budget proposal, Governor Doyle is hiding policy in the budget in an attempt to legislate from the executive office. Worse yet, this hidden policy will increase Wisconsinites auto insurance rates.
Wisconsin has a solid record of providing affordable automobile insurance rates to consumers. In fact, our state has the third lowest cost for automobile insurance in the nation even though our insurance requirements equal or exceed those found in other states.
Currently, Wisconsin auto insurance policies must provide mandatory minimum coverage of $25,000 per person and $50,000 per occurrence for bodily injury liability and $10,000 per occurrence for property damage (summarized as 25/50/10). The governor’s budget proposal raises those minimums to $100,000, $300,000, and $25,000 respectively (100/300/25).
Lower and middle income families are more likely to purchase policies with minimum coverage because they cost less. If Governor Doyle’s mandate becomes law, premiums for these policies would rise by 33% - 43%. This increase would propel Wisconsin from having the third lowest average premium to among the country’s highest premium. That begs the question – will families already struggling to stay financially afloat during this time of declining economy and high unemployment drop their auto insurance when rates soar?
This extra coverage comes at a much higher cost because insurance regulations require companies to charge premiums that reflect the risk in order to maintain sufficient assets to pay out on all the claims they receive. Increasing the minimums will increase the risk, and increasing the risk will increase the premiums that all responsible car owners pay.
You may be wondering if this increase in minimum coverage is necessary. Wisconsin currently has the fifth highest mandatory minimum coverage requirements in the nation. Governor Doyle's proposal would put us at number one.
Furthermore, according to the Wisconsin Insurance Alliance, our state's current 25/50/10 limits are sufficient to cover over 90% of all claims. In 2007, bodily injury claims averaged $16,600, well below the current law minimum of $25,000. The average property damage claim in Wisconsin was $2,500; also well below the current law minimum of $10,000.
In addition to increasing mandatory minimum coverage, Governor Doyle also proposes mandating underinsured motorist coverage, increasing medical payment coverage ten-fold, and requiring “stacked” insurance policies.
“Stacking” combines the limits on all vehicles you insure. In other words, if you own three cars with $300,000 coverage on each and you are in an accident, the insurance company is potentially liable up to $900,000, not the $300,000 for the one vehicle that was actually involved in the accident. All of these other mandates will cause significant additional increases in your insurance premiums.
As with so many other facets of Governor Doyle’s budget, there are winners if this hidden policy becomes law. Higher liability limits will enable trial lawyers to sue for and recover higher awards in auto accident cases. It’s no wonder that my office has received numerous letters from lawyers around the state in support of higher mandatory liability limits.
Auto insurance mandates should not be included in the budget bill. They are unrelated to state finances, and they won’t do a thing to plug our $5.7 billion budget hole. Insurance liability mandates, as well as any policy change, should go through a public hearing process and be debated in both houses as stand-alone bills.
Kevin Petersen is a Republican and represents the residents of the 40th Assembly District.
COMMENTS
While looking out for rate-payers, let's get regulations on the insurance companies practice of basing premiums on credit scores.
non quixote (Fri Mar 27 09:12:06 2009)
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