In case you missed it, the Governor's budget had a few lines regarding auto insurance when it was passed. Basically starting June 1, 2010 every car on the road in Wisconsin will be required to be insured. Some people don't realize that Wisconsin is one of only two states that don't currently require auto insurance, but starting next year that will all change. You can read all of the details in a Journal Sentinel article http://www.jsonline.com/business/51147942.html. In addition to requiring auto insurance, the budget also requires the minimun insurance requirements to be increased over the next few years.
I have had a few discussions with clients asking me what this will mean for their insurance premiums. In my opinion, it means premiums are going up. If you increase the minimun requirements for everyone then the people with the lowest liability limits are going to need to increase their coverage. Some will decide the increased cost for the new higher limits is too expensive and decide to risk it and not carry any insurance. So the number of uninsured drivers goes up. With more uninsured drivers there are, the more claims that go unpaid increasing everyone's insurance costs. In addition to an increase in the number of uninsured drivers, the insurance companies are also going to see more people buying policies and not keeping them in force. How does this increase costs? Basically an insurance company looks at a new policy as a long term investment. The cost to start a new policy, go through underwriting, issue the policy etc is where the majority of the cost comes for the company. They anticipate the policy will stay in force for 3 years which is about when a company breaks even on a policy, depending on the claims of a client.
Overall, I really disagree with the idea of the government stepping in to make decisions for people. As an agent, I counsel my clients to carry the limits appropriate for their life, family, budget, etc. This is the job of the insurance professional, not the State of Wisconsin. I would love to have every person in Wisconsin insured properly but that is a little utopian in my opinion. The costs associated for the insurance companies and the State of Wisconsin will far outweigh the benefits of a few more people carrying insurance. In fact, the article points out that mandating insurance does not mean an increase in insured motorists. Obviously we are going to have to wait and see what happens with all of the new rules but I am going on the record now as being firmaly against these changes, not just for my agency but for my clients too!
This is the blog for G2 Insurance Services, Inc. It was established by Tom Gaumond to keep people up to date on what is happening in the insurance industry but also to pass along valuable business information from our friends.
