NAMIC Raps Gov.'s Plan For Wis. Auto Liability

A provision in the budget proposed by Wisconsin Republican Gov. Jim Doyle to increase the minimum amounts of driver liability coverage is being assailed by carrier trade groups as expensive and unfair to consumers.

The Indianapolis-based National Association of Mutual Insurance Companies said such a change would cause auto insurance premium hikes of 40 percent or more with the severest impact on low- and middle-income drivers.

Deirdre Manna, Property Casualty Insurers Association of America (PCI) vice president of industry, regulatory and political affairs, estimated there would be an increase of about 30-to-39 percent in overall liability premiums for policyholders carrying basic limits.

Asked for comment, Gov. Doyle's office referred the issue to Insurance Commissioner Sean Dilweg, who said the liability levels have not been changed for an extended period of time. He said the budget proposals were just at the start of a process that will involve rigorous legislative debate.

"These provisions, which were buried in the budget bill, will hurt rather than protect consumers. It's concerning that the governor is inserting legislation not directly related to spending into a budget bill. In addition, many of the changes included in the provisions favor trial bar attempts to expand their ability to bring lawsuits over consumer protection," said Ms. Manna.

NAMIC said it has begun lobbying with other trade groups, including the Wisconsin Insurance Alliance and the Wisconsin Association of Mutual Insurance Companies, to defeat the proposal.

Gov. Doyle in his budget address called for raising the current liability limits of $25,000 for each person to $100,000, $50,000 for each accident to $300,000, and $10,000 for property damage per accident to $25,000.

Approximately 20-to-25 percent of all insured drivers in Wisconsin would be adversely affected by the proposed provisions in this bill, if the higher limits were approved, Ms. Manna advised.

According to NAMIC, if the changes were approved Wisconsin would have the highest mandatory auto liability limits in the nation.

Mark Johnston, NAMIC's Midwest state affairs manager, said in a statement the changes "would translate to increases of 40 percent or more in auto insurance premiums. This would especially impact low- and middle-income families, since many of those with higher incomes already choose the higher coverage levels and, therefore, would not be impacted as severely."

Mr. Johnston said the governor's proposal would also undo many legal reforms that protect defendants who bear little responsibility for an accident.

According to NAMIC's reading of the governor's plan, someone who is barely connected to an accident could be held liable for the entire amount of the damage.

"An example would be when an uninsured drunk driver causes a horrific accident. The plaintiff's lawyer will strain to look for someone else with insurance, such as another driver or a property owner near the scene of the accident, who somehow can be said to have contributed to the accident," Mr. Johnston explained.

NAMIC said the proposal would also drive up costs by allowing the "stacking" of insurance policies, requiring uninsured motorist coverage when an accident is caused by a phantom car--which would result in increased fraud, and increase the amount of paperwork required.

According to PCI estimates on the cost impact of higher liability, Milwaukee and suburban Milwaukee drivers would receive the highest dollar increases.

"Drivers would be paying more for superfluous coverage if these provisions are passed," said Ms. Manna. "Mandatory UM [uninsured motorist] coverage would mean an additional annual payment as high as $22 for some Wisconsin drivers and mandatory UIM [underinsured motorist] would mean an additional annual payment as high as $18."

PCI said other proposed budget provisions that would have negative effects include: defining "uninsured motor vehicle" in such a way that the "hit-and-run" requirement for an unidentified vehicle is deleted; requiring UM coverage to be offered on umbrella policies; and banning an anti-stacking provision.

Mr. Dilweg said liability minimum had not been updated "for decades" and they fail to take into account that the costs involved have expanded over the years.

"In Wisconsin", he noted, "we [the regulators] do not set rates and we have a very competitive marketplace."

Regarding the complaint that the change would put a heavy financial burden on some drivers, Mr. Dilweg promised he would do a review to see how it might affect the marketplace. "Other states have some of these pieces in place, and I'll be doing due diligence so legislators [who vote on the budget] will have the have the information they need."

Concerning legal reforms, he said changes were proposed to deal with issues that could arise when, for example, a driver swerves to avoid a multiple car pileup and damages their vehicle. In such an instance, he said there might not be coverage and "they are trying to rectify that."

He noted that insurers had raised the issue of possible fraud so he would look closely to see if the language in the proposal had safeguards.