Like many of you this last weekend, I spent much of it catching up on the “to do” list. No, it does not include getting a gift for Rush Limbaugh’s wedding. Somehow I was left off the guest list again.
Let’s see: get chain saw, set up pool for children, answer e-mail, have “recreational” fire in backyard fire pit coincidentally disposing of brush pile in the process, spray chemicals in back yard for mosquitoes, trim trees, look for proof of auto insurance…
Uh oh. Starting today, Wisconsin joins 48 other states requiring auto drivers to have insurance, thanks to the state budget passed last year. The lone hold out on mandatory auto insurance is the “live free or die” state, New Hampshire, which sounds lovely this time of year except for all the refugees from Massachusetts.
Not only do you have to have insurance, you have to carry proof of insurance with you when you are driving. “Your papers please,” will be heard more often in traffic stops by Wisconsin’s men in blue patrolling the highways than in Arizona.
The fine for not having your proof of insurance, your papers, with you at all times is $10. No, you can’t just wrap the $10 around your driver license when they pull you over. This isn’t Illinois.
I have insurance, of course. Mine costs a little more because of a tragic lead foot condition, but I have insurance. I just don’t know where I have the “proof.”
Of course, I won’t be alone with higher insurance rates. With the change in the auto insurance requirement also came an increase in the minimum required coverage.
As of last January 1st, auto insurance policies must cover $15,000 of property damage, $50,000 for the injury or death of one person and $100,000 for more than one person. The amounts were $10,000, $25,000 and $50,000 respectively.
Higher minimum insurance requirements mean higher insurance premiums. About 14% of Wisconsin’s motorists are uninsured, according to the Wisconsin Insurance Alliance. If the goal of mandatory auto insurance is to push a significant percentage of the uninsured onto the insurance rolls, than surely increasing the cost of a minimum insurance premium runs counter to that goal.
The fine for not having auto insurance can be up to $500. The uninsured may be willing to take the risk of being caught without insurance given that the insurance policies may be close to that number, or even higher, especially for new, young drivers.
Even as the insurance requirements become mandatory on every driver, some drivers newly seeking insurance will run into higher rates because the insurance companies will look at their lack of previous insurance as higher risk. Add in the fragile economy, and we may actually see higher rates of uninsured motorists rather than lower.
If the goal was to increase the number of insured on the roads and spread the insurance risk, than why did the legislature increase the mandatory minimums?
One answer may be in whom ultimately benefits. The trial lawyers in Wisconsin pushed for the higher minimums because they claim the current minimums do not cover the costs associated with motor vehicle accidents.
However, in the Wisconsin Law Journal Andrew Franken, President of the Wisconsin Insurance Alliance, said more than 95 percent of claims were under the $25,000 threshold. Franken said that the higher thresholds will result in more room for higher settlements.
With higher settlements come higher fees for trial attorneys.
According to Franken, “The increase in limits will increase costs because the bar has been raised and the amount of dollars on the table will increase,” he said. “There will be those individuals that go after those limits.”
As costs for insurance companies go up, so will the premiums. As the premium costs go up, so will the number of people willing to risk the $500 fine for being caught without insurance.
Getting hit the hardest by the mandatory insurance requirement will be those at the bottom of the socio-economic ladder. Having a car and a valid driver’s license may mean the difference between having a job and not having a job. By increasing the costs of owning a vehicle, the state may be increasing the barriers for employment for many struggling to pull themselves out of poverty.
The new auto insurance mandates passed in the last state budget may sound “fair,” but they run counter to the mandate’s goal of increasing the number of insured motorists. Worse, the impact will fall disproportionately on those that the Democrats claimed they helped in the last budget. It’s a classic example of the government’s good intentions running into harsh reality, and ignoring the consequences because at least one special interest, the trial lawyers, will be rewarded.
By James Wigderson
Special Guest Perspective for the MacIver Instititute