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State budget boosts costs of auto insurance

Buried deep in the state budget that was enacted earlier this year were a number of automobile insurance mandates that will drastically impact Wisconsin’s automobile insurance rates for businesses, nonprofit organizations and consumers across the state.

Gov. Jim Doyle proposed and the Legislature adopted these mandates against the strong objections of the Wisconsin Insurance Alliance and its member companies throughout the state.

The budget increases mandatory minimum automobile liability insurance limits that establish Wisconsin with the highest mandated minimum insurance limits in the nation; mandates underinsured coverage for the first time; establishes the nation’s highest uninsured and underinsured minimum coverage limits, and allows stacking of both uninsured coverage and underinsured coverage for up to three vehicles.

The mandates will force Wisconsin businesses and families to pay hundreds of dollars more for insurance that they can’t afford and in some cases may never need. Consumers, small businesses and nonprofit organizations will begin seeing the increased costs during the coming weeks and months.

You may recall that many editorials in newspapers across the state called on lawmakers to address these issues outside of the budget process in order that they receive proper scrutiny—scrutiny that would have shed light on all the cost increases of the numerous budget provisions. Unfortunately, consumers across the state are beginning to receive policy renewal notices from their insurers and will be surprised to see increased costs directly related to these mandates.

The scrutiny now will come at kitchen tables across the state as families reach deeper into their pocketbooks to pay for the new government-mandated insurance coverages. Prior to enactment of these mandates, consumers had the choice to buy coverage that was appropriate and affordable to their individual circumstances. Passage of these mandates eliminated consumer options by requiring the purchase of the mandated limits and coverages.

In the past, Wisconsin’s competitive automobile insurance marketplace and regulatory environment benefited consumers in the state. According to the Auto Insurance Report’s PAIN index, Wisconsin families now pay the third-lowest rates as a percentage of household income. When combining the out-of-pocket expense for auto and homeowners insurance as a percentage of median household income for a family of four, Wisconsin residents enjoyed the lowest Personal Insurance Burden (PIB) in the country.

Only the future will tell how significant some of these changes will be for both small businesses and household budgets across the state. One thing is clear: Although the insurance industry opposed the legislative changes, automobile insurance costs in Wisconsin are on the rise as a result of the new mandates.

Andrew Franken is president of the Wisconsin Insurance Alliance, 44 E. Mifflin St., Suite 901, Madison, WI 53703; phone (608) 255-1749; e-mail contact@wial.com/; Web site www.wial.com.