It seems everyone is taking notice of the premium increases being applied to their auto insurance rates. Rightly so! The Providence Journal did an article on June 16 blaming it on Uninsured Motorists and a Zip Code based rating system. Again on June 18 they had an article blaming the legislature’s influence that is bought disproportionately by the Auto body Industry. Those legislative lobbying efforts by Auto body shops do add costs to your insurance policy, but that is a small part of why your rates are so high. There’s blame to direct at the legal community for allowing TV lawyers to tie up your courts with efforts to seek excessive claim settlements and there are laws in Rhode Island that seem to encourage higher claims costs. The insurance companies are not innocent of blame for your rate increases. They seem to simply raise your rates to reflect their costs with little effort expanded to better manage our Rhode Island mess.
Rhode Island’s high auto insurance costs could be dramatically impacted by reducing the number of uninsured and under-insured drivers in our state. Rhode Island has the 6th highest cost of auto insurance in the Country. The primary reason attributed for what got the top 5 most costly states to that level is uninsured and under-insured motorist claims.
For years insurance agents complained that the Department of Motor Vehicles needed to address this issue; it seemed to fall on deaf ears. The DMV blamed it on an over taxed computer system. I know agents, including myself, who were told by the DMV Enforcement Division not to report conditions where we had evidence of drivers without insurance. Their lack of action unintentionally encouraged the development of a scam whereby a person would go to an insurance agency, take out an auto policy, go to the Registry with a valid Insurance ID card, register the car, then cancel the policy and drive for the next 6 months to a year with a seemingly valid insurance id card.
Eleven years ago-just after starting my agency, the sister of a high school friend came to me excited to be one of my first customers and to have me as her agent. After going through a divorce, she had been using her dad’s car and now was getting her own car. I prepared her policy and gave her the ID card she needed to register her car. About 5 weeks later I was following up with Progressive to determine why I had not received the commission earned for this woman’s policy. They advised that the policy was cancelled immediately after being issued. Making matters worse, 6 months later she came back and wanted me to issue her another new policy. When I refused, she came back with her father and his credit card. Surely he would not play into this game, so I prepared a new policy. You guessed it! She called her dad’s credit card company advising that he had taken out the policy without her knowledge. She got them to reverse the charge and Progressive cancelled the policy for non-payment. With that being such a blatant abuse of the mandatory insurance law, I had to believe the DMV would take some action if given notice of the situation. I called DMV, talked with a few people, and was simply told they do not have the resources to address this issue. I even felt chastised for taking the time to report this to the DMV.
Step forward to current day. The DMV has a new computer system that allows them to better track when you do not have insurance. People are regularly coming to agents with stories of how their car was impounded by policy when the officer checking their registration status with the DMV computer got feedback that driver wasn’t expecting. Seemingly simple violations such as failure to have a state inspection, lapsed insurance coverage, unpaid violations/fines, and expired registrations are all reasons cars are being impounded.
This enforcement effort will reduce the number of uninsured drivers in our State. It will take a couple more years for uninsured motorist claim data to indicate an actuarially significant decrease in claims activity. Once that reduction is established, insurance company rate filings will be adjusted to reflect this improvement.
Getting just the Uninsured drivers off the road will not solve our problem; we need to address the Under-insured drivers also. The mandatory insurance law was passed 35 years ago requiring minimum liability limits for all registered vehicles of $25,000 per person injured, $50,000 for all those injured, and $25,000 for the property you cause to be damaged. Inflation has impacted the adequacy of those limits. Better than 40% of the time, those minimum limits are not enough. When the person who is at fault for your accident has inadequate limits, you are forced to use your Under-insured motorist coverage to cover your loss. You are now paying exorbitantly high Uninsured and Under-insured rates because so many drivers do not have the insurance they need. Why should you have to buy insurance to protect yourself against the failure of people to be responsible to insure their cars properly?
Ironically just a 2+ hour drive north, Maine residents enjoy the lowest insurance rates in the nation. They have the fewest uninsured motorists; the fewest cases of under-insured motorist claims; have the highest mandatory minimum bodily injury liability limits in the nation at $50,000 per person and $100,000 per accident. When residents carry at least the minimum required limits, the demand for Uninsured and Under-insured Motorist coverage is reduced. Could Rhode Island learn from what Maine is doing right to reduce your insurance costs?