Legislators, industry push reforms to auto insurance

Prospects for sweeping changes remain unclear

Auto-insurance reform will come before the Colorado Legislature again this coming year, but whether the lawmakers will enact broad, sweeping changes is open to question.
So far at least, it appears that changes may be more modest than some consumer advocates or insurance-industry representatives would like.
In Wyoming, meanwhile, legislators will be asked to approve an anti-insurance-fraud law that will end Wyoming˜s status of being one of the few remaining states without such a law.
Auto-insurance affordability was a big issue in the Colorado Legislature this past session, resulting in appointment of a special interim House-Senate committee to look at a wide array of issues, including whether the state˜s mandatory insurance law or its no-fault insurance law is driving up insurance premiums.
The study was driven by the fact that Colorado˜s auto-insurance rates have been climbing faster than rates in other states, and Colorado now ranks 13th nationally in cost of auto insurance. (Wyoming, by contrast, doesn˜t have a no-fault law but ranks 47th in insurance cost).
The Joint Interim Committee on Auto Insurance Affordability responded by recommending continuing Colorado˜s mandatory auto-insurance law. Some lawmakers had wondered whether the combination of mandatory coverage and high premiums is driving up the number of uninsured motorists, but the committee decided that mandatory coverage should remain.
The Affordability Committee also is recommending some changes to the state˜s no-fault insurance law, including provision for more basic coverage that would cost less. But at its last meeting late in September, the committee rejected an insurance-industry push for a change in the no-fault law that could limit the number of personal-injury lawsuits that the insurance industry maintains are driving up insurance costs.
"If we don˜t fix that, we˜re never going to have significant impact on costs, and it˜s only going to get more expensive," said Bill Hopkins, government relations director for State Farm Insurance Cos. in Greeley. "At some point, perhaps there˜ be enough people who understand the significance of it that they˜ take it on."
Colorado˜s no-fault insurance law is based on the premise of providing a high benefit package in exchange for reducing the number of personal-injury lawsuits, except in very serious cases. Benefits for Personal Injury Protection (PIP) is the third-highest in the country and now total almost $130,000, including $50,000 for medical costs, $50,000 for rehabilitation, and almost $21,000 for lost wages.
The problem, said Taylor Stephens, director of regulatory and legislative affairs for Farmers Insurance Co. in Denver, is a relatively low threshold of $2,500 in medical costs that opens the door to personal-injury lawsuits.
"The hope was that you would control auto-insurance costs by eliminating suits," Stephens said. "Unfortunately, it could be a lot better here in Colorado, because now we give the high benefits, but we don˜t really eliminate very many lawsuits. From the insurance-industry perspective, that˜s one of the primary reasons why our cost of auto insurance is high.
"Our no-fault law in Colorado is not known as a real good no-fault law, and we have not been able to change it because of the political climate," Stephens said.
The interim committee rejected a number of insurance-industry recommendations, including one to replace the $2,500 threshold with a verbal threshold referring to serious injury or serious impairment to a bodily function.
Trial lawyers led the charge against the proposed change, arguing that it could limit an individual˜s right to seek redress in court for pain and suffering beyond mere medical costs.
But while conceding the right of people to seek redress for serious injuries under a no-fault system, industry representatives maintained that the system is being abused.
"I think we have a no-fault system that encourages over-utilization of benefits and then allows minor injuries into the torts, which is really killing the system," said State Farm˜s Hopkins. "We think that low-dollar threshold is not appropriate" and encourages people with minor injuries to migrate into the tort system seeking to collect large amounts for pain and suffering. "We think that should be reserved for those with more serious, significant and permanent injuries."
Other auto-insurance issues likely to come before the Colorado Legislature include a proposal to direct the Colorado Division of Insurance to publish a claims payment disclosure on insurance companies similar to its rates comparison and a proposal to encourage writing of group auto-insurance policies.
The committee is scheduled to meet again Oct. 29 to continue developing proposals for the 1998 session.
In Wyoming, legislators are facing a 20-day budget session with the daunting task of completing school financing reform, but members of the Joint Judiciary Committee are hoping to win the needed two-thirds approval to introduce the anti-insurance fraud bill and push it through.
The bill was introduced at the General Session earlier this year but held back for interim study because it needed more work, said its sponsor, Sen. April Brimmer Kunz, R-Cheyenne. This time it will have the sponsorship of the Joint Judiciary Committee, of which Kunz is co-chair.
She calls the proposal a "balanced approach" with a twofold purpose: "It˜s to protect consumers against fraudulent acts by insurance companies and also to protect insurance companies from fraudulent acts by consumers."