Dan Meyer's Legislative Update - Oct 23, 2009

Dan Meyer Legislative Update
Oct 23, 2009

Insurance Provisions In The Budget

According to the Auto Insurance Report's PAIN index, Wisconsin has the 3rd lowest auto insurance rates in the country. While this is viewed as a positive by many consumers and auto insurance companies alike, unfortunately, that ranking may soon be history.

Many people have contacted me recently after being advised that their auto insurance premiums may soon be going up due to auto insurance changes that were approved in the 2009-11 Wisconsin state budget. Because of these contacts, and the fact that many of these changes will come into effect on November 1st, I have printed below a summary of the changes that were made in the 2009-11 state budget, also referred to as "Act 28."

As I have mentioned in previous updates, I did not support including these provisions in the state fiscal budget and even supported an amendment to take them out. I didn't think the budget was the place, nor did I believe the timing on these changes were appropriate, when many families are struggling to make ends meet without this added burden.

The connection between coverage levels and cost is clear. If consumer's policy limits were below these new mandatory minimums, they will need to be adjusted to comply with the new minimum state standards.

Summary of Auto Insurance Provisions in Act 28

§ Liability Limits - Minimum mandated levels of coverage are $50,000 (increased from $25,000) for injury or death of one person, $100,000 (increased from $50,000) for injury or death of two or more people, and $15,000 (increased from $10,000) for property damage. Effective: January 1, 2010

§ Uninsured Motorist Coverage - The minimum mandated UM coverage had been $25,000 per person and $50,000 per accident. The state budget increased these levels to $100,000 per person and $300,000 per accident. Effective: November 1st, 2009

§ Underinsured Motorist Coverage - While this coverage had been optional, the state budget requires this coverage and increased the minimum levels from $50,000 per person and $100,000 per accident to $100,000 per person and $300,000 per accident. Effective: November 1st, 2009

§ Medical Payments Coverage - the minimum mandated levels for this optional coverage was increased from $1,000 per person to $10,000 per person. Effective: November 1st, 2009

§ "Stacking" Provision - When multiple vehicles are separately insured by an individual involved in an accident, "stacking" refers to the ability for a lawsuit to be filed against multiple vehicles insured by a defendant, rather than just the vehicle involved in the accident. This practice previously could be prohibited through an "anti-stacking" clause. Effective: November 1, 2009

§ Mandatory Auto Insurance - By June 1st 2010, Wisconsin drivers will be required to have auto insurance. However, as many have pointed out, by increasing the cost of auto insurance, it is unlikely that those who couldn't afford a policy previously will find it easier to afford one now. Effective: June 1, 2010

Surprisingly, some legislators such as democrat Majority Leader Tom Nelson have abdicated any responsibility the state budget, "Act 28," has in increasing the cost of auto insurance for some consumers.

In a recent letter, Representative Nelson wrote, "Some members of the insurance industry are trying to pass the buck for increasing rates on their customers, blaming rate increases on the state budget passed by the Legislature and signed into law by Governor Doyle. These claims are misleading. It is a well-documented fact that rates fluctuate with the ebb and flow of the economy. Quite frankly, any premium increases are due to the business decisions of insurance providers rather than any action take by the Legislature.

"This assertion contradicts a study done by the Wisconsin Insurance Alliance (WIA) that estimated rates could increase by 33-43% if the budget provisions were enacted. According the non-partisan Legislative Fiscal Bureau, which reviewed the study, "the approach WIA used to reach its conclusion appeared reasonable.

"There is one bright spot for auto insurance in rural Wisconsin: zip codes. The Senate Democrat version of the state budget included a provision that would prohibit the consideration of a consumer's zip code as a factor in the determination of auto insurance premiums. Fortunately, this change was vetoed by Governor Doyle. In his veto message, Governor Doyle said, "This provision is disruptive to the market and would increase premiums for policyholders in many locations.

"Unfortunately, democrat legislators are still pushing for this change through Senate Bill 289. The legislators from South and Southeastern Wisconsin that are backing this proposal don't think it's fair that not everyone in the state lives in an area that mirrors inner city Milwaukee's prevalence of auto accidents and auto thefts. Of course, what this means for everyone who does not live in inner city Milwaukee is they would be subsidizing that risk.

Senate Bill 289 is currently in the Senate Committee on Judiciary, Corrections, Insurance, Campaign Finance Reform, and Housing. To follow the progress of this or any other bill, please visit the Wisconsin State Legislature Website.

For a complete Legislative Fiscal Bureau summary of the auto insurance provisions of Act 28, please click here.

State Representative Dan Meyer
State Capitol - Room 308 North - Post Office Box 8953 - Madison, Wisconsin 53708
(608) 266-7141 - Fax (608) 282-3634 - Toll Free: (888) 534-0034
Email: Rep.Meyer@legis.wi.gov