Wisconsin Governor Jim Doyle (D) introduced a series of regulatory changes to Wisconsin’s auto insurance market as part of his 2009 budget, changes that went into effect on June 1 for all Wisconsin drivers.
The new provisions require motorists to obtain at least $100,000 of coverage for injuries to one person, and purchase $300,000 of insurance to cover medical payments for accidents in which two or more people have been injured. The new minimums increased from the existing levels of $25,000 per injured person and $50,000 per multiple-injury accident.
The increased minimums move Wisconsin from the nation’s third-lowest level of mandatory minimum coverage for auto insurance to the highest.
In a veto message regarding his line-item modification of one of the mandated increases, Doyle defended the new regulations: “I have revisited the liability limit increases and other reforms contained in the bill and have made several modifications through vetoes. Section 2962t increases the minimum amounts of liability insurance required for proof of financial responsibility over a three-year period.”
Result of Partial Veto
Doyle partially vetoed the section in question to retain the increase in minimum liability coverage but delete additional increases in 2011 and 2012. He said this “will balance the need to maintain affordability while addressing some of the concerns regarding the insufficiency of the current liability minimum.”
Proponents defend the new mandates as an attempt to address the “free rider” problem. Some consumers who drive without insurance and become involved in collisions cannot afford to pay for the damages they’ve caused, and some patients who receive health care for injuries sustained in auto accidents while uninsured can’t pay their bills. Mandating a higher minimum level of coverage is meant to provide more money with which to pay for such costs.
From Mopeds to Mercedes
Legislators’ reaction to the new law was mixed. Rep. John Nygren (R-Marinette) argued strongly against the new mandatory minimums.
“On the surface this appears to be yet another financial burden imposed on Wisconsin citizens by the Democrat-controlled Legislature,” he said. “However, this new auto insurance mandate is more far-reaching than you may think. I just recently discovered that if you own or operate a Moped or scooter you are now required to carry the same minimum liability limits as [drivers of] full-sized automobiles.”
Nygren added, “The overinflated minimum liability coverage limits are a perfect example why law changes need to be properly vetted through the legislative process and not snuck into the state budget. We need greater transparency in government, and this latest consequence could come at a steep cost for the average student or senior citizen on a fixed income.”
Sen. Tim Carpenter (D-Milwaukee) disagreed. In an interview with Associated Press, Carpenter argued the new law would “provide the extra incentive for all drivers in Wisconsin to be responsible and to carry automobile insurance.” He questioned the fairness of the current system, where those with insurance pay more when involved in an accident with another driver without insurance coverage.
Cost Hike for Consumers
Groups opposing the new minimum liability provisions, including the Wisconsin Insurance Alliance (WIA), say families could end up being forced to pay at least 33 percent more for auto insurance than they were paying before. The WIA argues those who can’t afford the higher premiums are likely to drive without insurance.
“A higher level of mandatory minimums is not in the public’s interest,” said WIA President Andrew J. Franken. “It’s quite possible the Legislature will revisit the entire matter of auto insurance because of the feedback being received [from] consumers, and it’s my hope the discussions will take place in a format that allows for adequate public input and discourse on the proposals and their far-reaching implications.
“The true test will be whether the newly insured maintain their policies over time. In many states, drivers comply with mandatory insurance to obtain their proof of insurance card, and then promptly cancel,” Franken added. “I believe the impact of the other budget provisions, which increase the cost of insurance, coupled with the current economic conditions, will actually increase the number of uninsured drivers on Wisconsin’s roads.”
Bar Association Support
The State Bar Association of Wisconsin supports the new minimums, contending they will provide drivers with more coverage and afford additional security to those who get into automobile crashes.
The association argues the new regulations—especially the repeal of the state’s’ ban on the “stacking” of insurance policies—are positive steps for Wisconsin drivers. Stacking allows people to collect benefits from multiple insurance policies or from multiple vehicles insured on one policy. For instance, a person with a two-car policy could collect up to the allowable limits for each car, not just the one that was involved in the collision.
“The State Bar’s Board of Governors has a longstanding public policy position supporting the ability of insureds to stack automobile policy limits because anti-stacking laws ‘work against the consumer by limiting coverage while providing no visible reduction in premiums,'” said Adam Korbitz, a member of the bar association’s Government Relations Team, in a news statement shortly after the budget’s signing.
Matthew Glans ([email protected]) is a legislative specialist in insurance and finance at The Heartland Institute.