"The grim trend could have severe consequences for everyone on the road," said Loretta Worters, vice president of communications for the Insurance Information Institute.
State Farm spokesman Jeff McCollum said that as more uninsured and underinsured motorists hit the road because of the downturn in the economy, the cost of those coverages are likely to go up as well.
For several quarters, insurers have blamed rising costs due to increasing auto repair and medical expenses. Now insurers are factoring in litigation costs. "If you are hit by an uninsured motorist, you may have to sue to recover costs," said Worters.
According to the report, the IRC estimated the percentage of uninsured drivers throughout the United States and by state from 2005 to 2007. An estimate of uninsured drivers was derived using a ratio of insurance claims made by those injured by uninsured drivers to claims made by drivers who were injured by insured drivers. About 50% of the private passenger market was represented in date collected from nine insurers.
If the IRC is right, auto rates could increase in some areas. Elizabeth A. Sprinkel, IRC senior vice president, said drivers who buy insurance end up being the ones paying for injuries caused by uninsured drivers.
Robert Passmore, director of personal lines for IRC member The Property Casualty Insurers Association of America, agreed that increases in auto insurance rates because of the predicted uninsured motorist trend are "definitely a possibility."
"It'll probably take a cycle for the true nature of the problem to surface," Passmore said, "but this could manifest itself quicker than most trends. There have always been those who just don't care and don't buy insurance but now you see people, who are trying to do the right thing, making choices because of the financial situations they are in."
Allstate recently asked New Jersey for a 15.4% average increase on auto rates, citing auto, medical and litigations costs as reasons for the need. In addition, in its fourth-quarter report Allstate executives pointed out customers are beginning to drop collision coverage or are increasing deductibles.
Steve Witmer, spokesman for American Family Insurance, said the company is also seeing fewer drivers purchasing optional coverages to protect against uninsured drivers.
"This leads us to believe that some people are out there unprotected against the uninsured," Witmer said.
McCollum said raising deductibles or dropping collision coverage are better alternatives than letting a policy lapse altogether. Those who go uninsured are "opening him or herself up to the possibility of financial devastation," he said.
In 2007, New Mexico led the way in terms of the uninsured. Almost a third of drivers, 29%, do not have insurance. Mississippi, Alabama, Oklahoma and Florida rounded out the top five states with the most uninsured drivers. None of these states require drivers to carry uninsured/underinsured motorist coverage. Twenty-one states and the District of Columbia do require UI/UIM coverage.
Eight states have a "no pay/no play" law on the books that prohibits a driver without liability insurance to sue for noneconomic damages. In addition, some states have fines for drivers who take the wheel without insurance but many times the laws are not enforced or fines are reduced, PCI said.
"These laws appeal to a person's sense of fairness but they have to be enforced in order to work," Passmore said.