Research & Commentary: Wisconsin Auto Insurance Mandates and Minimum Rate Hikes

Published May 20, 2010

In his 2009 budget, Wisconsin Gov. Jim Doyle introduced a series of regulatory changes to Wisconsin’s auto insurance market. The new provisions required motorists to obtain at least $100,000 in insurance coverage for injuries to one person and $300,000 in insurance to cover accidents in which two or more people are injured. Those are substantial increases from the prior levels of $25,000 per injured person and $50,000 per multiple-injury accident.

The increased minimums moved Wisconsin from the third-lowest mandatory minimum coverage for auto insurance among U.S. states to the highest. All 50 states currently have some sort of automobile insurance or “financial responsibility” mandate.

Less then a year later, the new Republican-led legislature is considering to rolling back many of these reforms. According to the Insurance Journal, the proposed bill, supported by Rep. John Nygren and Sen. Frank Lasee, would lower the required levels of liability, underinsured and uninsured motorist coverage.

The Doyle insurance mandates attempt to address the “free rider” problem: Some people who drive without insurance and get into accidents cannot afford to pay for the damages they’ve caused. In theory, mandating at least a minimum level of coverage could solve this problem. As a result, few people object to such mandates in principle. The debate has mostly revolved around the size of the mandates: Should the government mandate a minimum level of financial responsibility or require people to buy as much coverage as possible?

Opponents of the new mandates argue that these changes led to higher premiums for policyholders. The Wisconsin Insurance Alliance, which represents insurance companies, argues that those who can’t afford the higher premiums are likely to forgo them and drive without insurance. The Alliance argues that under lower mandates, most consumers could expect a price cut.  Groups opposing Doyle’s provisions, including the WIA, argue that the changes would force families to pay at least 33 percent more for auto insurance.

Supporters of the new minimums, including the State Bar Association of Wisconsin contend that the mandates 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 following articles address some of these concerns and examine auto insurance mandates from multiple perspectives.

Auto Insurance Changes Targeted for Repeal in Wisconsin
This article from the Insurance Journal examines proposals to lower the required levels of liability, underinsured and uninsured motorist coverage in Wisconsin. 

Compulsory Auto/Uninsured Motorists
The Insurance Information Institute examines the current status of compulsory auto insurance across the country, reviewing recent developments and the issue in depth. 

False Claims: New Consumer Protections and the Cost of Auto Insurance in Wisconsin
This study from Citizen Action of Wisconsin examines the insurance industry claim that new minimum coverage requirements would increase auto insurance premiums by “at least 33%.” 

PCI: Mandatory Auto Insurance Doesn’t Reduce Number of Uninsured Drivers
This article discusses the effectiveness of individual mandate laws and the expensive systems needed to track and stop offenders. Insurer advocacy groups such as Property Casualty Insurers Association of America (PCI) say mandates may not be the solution to the uninsured problem. 

State Bar of Wisconsin Responds to Governor Doyle’s Budget The State Bar of Wisconsin examines Doyle’s reform and voices its support for many of the measure’s goals, including reinstating stacking and the minimum mandatory liability limits rate hike. 

Costly Auto Insurance Mandates in Governor’s Budget
This Talking Points document from the Wisconsin Insurance Alliance examines the effects of the Doyle provisions on auto insurance rates and policy affordability and questions the effectiveness of the changes. 

Doyle’s Proposal to Raise Car Insurance Levels Draws Scrutiny
This Milwaukee Journal Sentinel article by Paul Gores and Stacy Forster examines the opposition to Gov. Doyle’s reforms from state legislators and insurance industry representatives. 

Are You a Wisconsin Driver? You’ll Need Insurance by June
This article from Paul Gores of the Milwaukee Journal Sentinel examines the effect of the new insurance regulations on consumers and documents the reaction of insurance groups such as the Insurance Information Institute and Wisconsin Insurance Alliance. 

New Wisconsin Auto Laws
This Consumer Guide from State Farm, the nation’s largest insurer, explains the new Wisconsin insurance laws and their effects on individual policies.