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A 2012 Problem with a 1980’s Solution?

January 3, 2012

Chris Garlasco, Owner & Managing Partner - Founders Insurance Group

There is a startling movement within the world of auto insurance that all drivers should be aware of, especially in this difficult economy. It would be easy to conclude that in difficult times, folks trying to save some money may choose to drop or cancel their auto insurance coverage in an effort to save some money. Rather than pointing out the obvious, I want to talk about an even more troubling and wide spread problem. It is the apparent rise in drivers carrying coverage that is far from the amount needed to protect you from their negligent mistakes.

Here in the state of Connecticut, the minimum required limits to legally operate a motor vehicle are 20/40/10. What that simply means is that a driver carrying minimum limits must carry $20,000 of liability coverage per person with a maximum of $40,000 per accident. In laymen’s terms, if you in an accident with one of these drivers, the most you can expect to receive as an individual from their policy is $20,000! This $20,000 is designed to help pay for your medical bills and any long term pain and suffering award. The “10” refers to $10,000 of property coverage, the maximum limit of the policy available to repair your vehicle from the negligent driver’s policy. If your car is valued at more than $10,000, you can expect to be paying the additional cost in an accident that is not your fault.

The required minimum limits have not changed since the 1980’s! Efforts by some legislators to increase the minimum required limits have failed in the legislature each and every time. It is reasonable to believe that $20,000 doesn’t have the buying power it did nearly thirty years ago. Opponents of raising the required limits have cited an increased burden on lower income families that would be the result of a required higher limit. Both sides of the argument have strong points, however, at some point a compromise will have to be reached as the burden of negligent party is being felt by hundreds of thousands of innocent state residents as they are forced to shoulder the negligence of others.

What makes this issue especially troubling is the rise of the “fifteen minutes will save you 15%” or other “800” number and internet insurance companies. I would offer a challenge to those companies to make public their percentage of minimum limit, and low limit (25/50) drivers. In other cases, unethical agents have gone so far as to use the “blood from a stone” argument. Meaning, if you have no assets to protect, the innocent party won’t have any recourse anyway so why not carry just the minimum limit. At Founders, we will not offer minimum limits except in the rarest of special circumstances.

It is hard to tell what percentage of drivers on our roads happen to be carrying minimum coverage, but forty percent may be a good guess. What we do know for sure is that there is a substantially higher number of under insured motorists on the road than those that are actually not insured at all.

Lastly, rather than just point out the problem I would like to offer a simple, but effective solution that should satisfy both points of view on this subject. Rather than the state requiring a minimum limit of coverage, why not offer two minimum limits of coverage? First, a higher required limit for all of the state’s residents while keeping the current low, 1980’s limit for those that can show proof of low income. The motor vehicle department could be required to verify the income of those seeking the special lower limit, while forcing all other motorists to carry at least the new minimum limit. The end result would be a substantial number of drivers carrying low limits now being forced to be responsible for their actions. It would create more work for the Department of Motor Vehicles, but the trade off to the hundreds of thousands of innocent drivers would be well worth the cost. In fact, those drivers in the end, may see a decrease in their rates as they would be shouldering far less of the burden.

Think about it.

Chris Garlasco

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