What should happen to the state minimum insurance levels?

The value of money changes. The buying power of a dollar twenty-five years ago has fallen to just twenty-five cents today. Inflation erodes the value. Under normal circumstances, this is not a problem. As the cost of living rises, so employers pay more money to their employees and it evens out. Similarly, bonds and other interest-bearing products are often index-linked so that the value of what is paid is adjusted in line with inflation. But some things do not change as they should. Take the issue of the minimum insurance values imposed on car owners. These sums were set twenty-five years and more ago. In other countries, governments adjust these imposed figures in line with inflation. They have an index or a basket of indices, and link the numbers to those national or international guides. That way, the intrinsic value of the numbers stay more or less the same over time. But US states have not made the adjustments. This has created serious problems. In states where the statutory minimum is $10,000, an amount that would have been significant twenty or thirty years ago, people involved in traffic accidents suddenly find an insurance company chasing them for awards of compensation not covered by the minimum. This can be several hundred thousand dollars where the person inured required extensive medical treatment. Needless to say, bankruptcy is the usual consequence.

Wisconsin which, alongside New Hampshire, does not require drivers to carry insurance, is now proposing to change the law, increasing the statutory minimums. As it stands, drivers who buy insurance are only required to buy cover of $10,000 for one injured person, and $50,000 where there are several people injured. The property damage minimum is $10,000. The latest budget proposals will reset the minimums at $100,000 for one person injured, $300,000 for several persons injured and $25,000 for property damage. The local insurance companies are predicting that this will force premiums to rise by one-third for all those who decide to carry insurance. As it stands, about 15% of all drivers on the Wisconsin roads elect not to carry insurance. If premiums were to rise sharply, this percentage could also rise sharply. The justification? As it is, the inadequacy of the sum for personal injuries means most people cannot afford to pay for their medical treatment. This costs the taxpayers millions a year in Medicaid payments.

Auto insurance is not usually such a controversial political issue but, when you look at the numbers, it is not hard to see why some states with budget problems should see car drivers as having too easy a ride when it comes to the costs of treatment. Hospitals have to pay their way or find support from the taxpayers. When treatments now cost four times what they did when these minimum amounts were set, something has to give to make the system more fair. If that means car owners must pay more for their auto insurance, then that is the price they pay for driving. No-one has to drive. Every adult in work has to pay tax.

Tags: car owners, hundred thousand, inflation, insurance companies, insurance company, local insurance, medical treatment, minimum insurance, thirty years, thousand dollars, traffic accidents