Posted on 22 Jan 2009
As the Insurance Research Council (IRC) predicts a sharp rise in the uninsured motorist rate, the Property Casualty Insurers Association of America (PCI) encourages policymakers to explore comprehensive solutions to help drive down the cost of insurance when addressing this issue.
“There is no simple answer to reducing the number of uninsured motorists,” said Robert Passmore, director of personal lines for PCI. “However, as economic times tighten everyone’s budget, it is even more important for policymakers to avoid costly uninsured motorist proposals that yield marginal results. We believe, along with strict enforcement of financial responsibility insurance laws, the most effective strategy policymakers can follow for addressing this problem involves making changes that affect the factors influencing the cost of insurance.”
Over the years PCI has found that the best way to keep insurance costs down is to promote competition in the marketplace. By fostering competition with changes in the regulatory system through file and use or flex rating laws, policymakers help make insurance more available and affordable for consumers.
“Policymakers can also have a positive impact on costs by rejecting proposals by special interest groups that drive up the cost of auto insurance,” said Passmore. “In the past few years auto body repair shops have advanced a legislative agenda in many states designed to increase repair costs. These increased costs force consumers to pay more for insurance. Legislators can also help by resisting efforts to increase minimum limits and mandate additional coverages such as medical payments that, based on a consumers individual circumstance, they may not need to purchase.”
There are several other options that policymakers can consider to help reduce costs and make insurance more available.
No Pay/No Play – An approach that provides an incentive to purchase insurance is simple: either motorists obtain automobile liability insurance coverage or they lose the right to sue for non-economic damages. This approach is often called “No Pay/No Play.” These laws bar recovery of non-economic damages for those who have been injured in an automobile accident, but who do not have auto liability insurance themselves. In other words, an uninsured but not at fault driver cannot sue for pain and suffering because they could not have provided the same benefits to others had they been the at-fault driver. Alaska, California, Iowa, Louisiana, Michigan, New Jersey, North Dakota and Oregon have statutes based on the concept of no pay/no play.
Mandatory Fines for Driving without Insurance – In many states the fines for driving without insurance can be lowered by a judge. Although auto liability insurance coverage is mandatory in nearly every state, according to the IRC report uninsured motorists still comprise anywhere from 1 to 29 percent of drivers, depending upon the state. Each year state and local governments and auto insurers expend precious resources to enforce these laws only to have them ignored or minimized.
More Efficient Enforcement – In lieu of uninsured motorist verification database systems that can too frequently misidentify insured drivers, PCI supports instead enforcement measures that target drivers who are most likely to drive uninsured. “Red flags” for verification checks could include drivers whose licenses or registrations have been previously suspended or revoked; have been convicted of insurance violations; have multiple traffic law convictions; and have repeated accident involvement. Repeat offenders would be required to file proof of financial responsibility with the local department of motor vehicles.