Capitol Connection
By Senator Joe Leibham
September 25, 2009
Fiscal Budget Includes Changes for
Auto Insurance Coverage
Over the past couple of weeks, numerous constituents have contacted me seeking information on recent changes made to various state laws that regulate automobile insurance. Each of the constituents contacted me after they learned from their insurance agent that their rates will be going up by hundreds of dollars due to these legislative changes.
The insurance policy changes were made as part of the 2009-11 state financial budget (Wisconsin Act 28) approved by Governor Jim Doyle and the Democrats in the legislature. While none of the policy changes have anything to do with state finances, each of them were inserted into the budget and approved with very little legislative debate and even less public input.
Following is a listing of the most major changes made, along with a brief summary of each:
- Liability Coverage – Previously, minimum mandated levels for liability insurance for one accident were $25,000 for injury/death of one person, $50,000 for injury/death of two or more persons and $10,000 for property damage. Under Act 28, these mandated levels increase to $50,000, $100,000 and $15,000 respectively. Beginning in 2017, these levels will be modified every five years to account for inflation.
- Uninsured Motorist (UM) Coverage – Previously, the minimum amount of UM coverage required under an auto insurance policy was $25,000/person and $50,000/accident. Act 28 increases this minimum amount to $100,000/person and $300,000/accident.
- Underinsured Motorist (UIM) Coverage – Previously, UIM coverage was not required (if a consumer chose to purchase this coverage, their coverage requirement was $50,000/person, $100,000/accident). Act 28, however, imposes a universal UIM coverage mandate of $100,000/person and $300,000/accident.
- Medical Payments Coverage – Under Act 28, a consumer may choose not to purchase medical payments coverage. If they do, however, the required minimum amount of coverage is $10,000/person. Previously, this “floor” was $1,000/person.
- “Stacking” Clauses – Previously, if a driver was involved in an accident in an insured vehicle, they were not allowed to apply the coverage from other insured vehicles to pay for damages in that accident (also known as “stacking”). Effective November 1, Act 28 permits stacking for UM and UIM coverage and also allows the stacking of the coverage limits for a maximum of three vehicles.
- Reducing Clauses – Prior to Act 28, an auto insurance policy could contain a “reducing clause” stating that any limits for UM or UIM coverage could be reduced by the amounts paid from other sources, including another driver’s liability insurance payments. Act 28, however, bans these clauses.
- High-Risk Category – Act 28 prohibits an insurer from placing an individual in a high-risk category on the basis that the individual has not previously had auto insurance.
Most of these changes will take effect on November 1, 2009.
In addition, in the middle of the night during the budget debate, a provision was inserted into the fiscal budget that will now mandate that you have an auto liability policy in place in order to drive on Wisconsin’s highways. This new requirement is still being developed, but it is scheduled to begin on June 1, 2010.
Again, each of these major policy items received little, if any, debate by the legislature. I believe that most legislators who voted for the budget still don’t realize what they voted for, if the changes were necessary or what impact these revisions will have on insurance rates. Most analysts suggest that the changes could result in 20-40 percent increases in average insurance rates across Wisconsin.
I strongly disagreed with these policy items being inserted into the budget and offered an amendment to have them removed. Unfortunately, this amendment failed and they are now state law – yet another reason why I voted “No” on the state budget.
I am interested in understanding how these changes will impact your auto insurance rates and I encourage you to share this information with me over the next couple of months. Let’s hope the increases are not all as high as those that have already been reported to me.
As always, it has been a pleasure communicating with you. Please remember to communicate with me and share your input by calling 888-295-8750, writing to me at P.O. Box 7882, Madison, WI 53707-7882, or by e-mailing me at Sen.Leibham@legis.wi.gov. You can also log on to the 9th Senate District on-line office at www.leibhamsenate.com.
It is an honor representing the residents of the 9th District in the State Senate.