April 6, 2010

Insurance companies oppose expanding required auto coverage

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By Andy Rosen
Andy@MarylandReporter.com

Auto insurance companies might be expected to get behind legislation that would boost the minimum amount of coverage that drivers must buy to keep their vehicles on the road.

On its face, the proposal now being debated in the Senate would require people to spend more on insurance. This could help the state’s auto insurers – if they believed drivers would actually pay for more coverage.

But many of the state’s largest policy writers oppose the bill moving toward final passage.

Insurance lobbyists have joined advocates for the poor in opposing raising minimum coverage by 50 percent — from the current $20,000 per individual and $40,000 per crash, to $30,000 and $60,000. That translates into rate increases of between 5 and 15 percent, and the rate hikes would cause large numbers of people with minimum coverage to carry no insurance at all, they say.

The bill has already passed the House and has strong support from the Maryland Association for Justice, the advocacy group for trial lawyers. The opposition has framed the bill as a boon to lawyers, because as minimum damage awards went up, lawyers could collect more fees.

But advocates for increased coverage have trotted out people who were in accidents with uninsured drivers, trying to show that today’s limits are too low.

That apparently doesn’t fit with insurers’ experience. There’s no clear figure on how many people would drop insurance, but providers seem convinced.

“This is a bill that is focused like a laser beam on the poor,” said Minor Carter, a lobbyist working on the issue for Liberty Mutual, one of the largest auto insurers in the country. Much of the discussion has been focused on the bill’s effect on the poor, and it has gotten enthusiastic opposition from advocacy groups such as the Job Opportunities Task Force, the NAACP and the Maryland Alliance for the Poor.

As the Senate Judicial Proceedings Committee approved the bill Monday, senators seemed puzzled as to why an insurance company would oppose a mandate to buy more insurance.

Carter acknowledged that his client has a business interest in the issue. He said people “consistently” drop coverage in states where the minimum insurance requirement is raised. Though Maryland requires drivers to carry auto insurance, about 14 percent of the state’s drivers still do not. In Baltimore City, that number is closer to a quarter of drivers. The Maryland Automobile Insurance Fund says 99 percent of its claims are handled within the existing limits.

“What it’s going to lead to is more drivers on the road with no insurance,” said Sen. Delores Kelley, D-Baltimore County.

But for the clients that the trial lawyers brought out, getting in an accident with an underinsured driver can be financially crippling. Proponents of higher coverage also argue that it will save on uncompensated health costs that are passed on in health premiums when auto insurance coverage runs out.

Carol Summers of Brandywine spoke to the Judicial Proceedings Committee Monday, and said she was still dealing with brain and spine injuries from a 2008 accident. She has been out of work since, and still doesn’t know what will happen with her mounting medical bills. The insurance payment from the accident won’t cover all of the costs.

“I just bought the basic,” she said. “I didn’t know you needed more.”