A new study by the Property Casualty Insurers Association of America (PCI) revealed a 15-27 percent savings for Colorado motorists under the state’s new tort-based automobile insurance system.
The PCI, in conjunction with the Rocky Mountain Insurance Information Association (RMIIA) conducted a survey of 13 insurance companies that write two-thirds of the personal automobile insurance in the state to examine the savings of Colorado’s transition from a no-fault auto insurance system to the new tort-based system.
Some of the major findings of the study revealed:
• The average annual cost of a liability-only policy, including optional uninsured motorists coverage, is now $503 compared to $691 with the no-fault requirements and UM/UIM coverage (a 27 percent savings).
• The average annual premium for a full policy, including required liability coverages along with optional uninsured motorists, comprehensive and collision coverages, is now $869 compared to $1,018 (a 15 percent savings).
Colorado’s 30 year-old no-fault system saw its sunset July 1, 2003, when Governor Bill Owens failed to reauthorize the law after giving the Legislature its final chance to reform the system. “The whole system was simply out of control and there was no way to control the costs,” Michael Harrold, senior state government affairs director for PCI, said. “There have been a couple of efforts to reform the system over the past few years, but they always got bogged down, and they always were defeated. There were simply too many interests that had something at stake.”
Harrold said there had been several efforts to reform the no-fault law, including a verbal threshold for the ability to sue as well as a higher monetary threshold. Both measures were opposed. “There was also an effort to have treatment guidelines and treatment protocols and standards, very similar to what exists currently in Colorado underneath the workers’ comp system,” he added. “But those too were something that people ultimately couldn’t live with, and any particular group that felt that they may be on the short end of that ended up opposing it.”
Colorado motorists have several coverage options under the tort system, including whether or not they want to purchase medical payments coverage through their auto
insurance plan.
The companies surveyed offer policyholders different levels of medical payments coverage ranging from $1,000 to $100,000. The PCI estimated that one-fourth of all policyholders bought medical protection coverage after the conversion to tort. The average
purchased amount for medical protection coverage was $5,000.
Under the no-fault system, Colorado motorists were paying the 10th highest auto insurance rates in the country due to costly medical coverages that drivers were mandated to purchase with their policy. “There had just never been enough medical cost control,” Harrold explained. “You had a tremendously rich benefit —$130,000—that people had to buy for medical rehabilitation wage loss, and you had a system that also had a very low threshold in order to file a lawsuit—only $2,500.”
According to the PCI, the average personal injury protection (PIP) claim cost increased from $5,000 in 1988 to $7,800 in 2001. “You had all types of providers who were eligible to feed off of the PIP payments, from chiropractors to alternative care practitioners to aromatherapists to massage therapists,” he added. “You had courts that were awarding hot tubs to people who had PIP claims.”
“We anticipate a lot of challenges to it, and that’s what we’re looking at right now. This is a system that’s new to Colorado, but it’s a system that exists in 30 other states.
“Going forward, the challenge that we’re going to see is that there is a real effort to require mandatory medical payments purchases coverage,” Harrold said. “As the law exists right now, there is no mandatory medical payments coverage, but there are a number of groups, whether it’s the providers, hospitals, health insurers or chiropractors, who are all feeling a little bit of a pinch because they don’t have the golden goose anymore. So there is going to be an attempt in the upcoming legislative session to have a mandatory medical payments coverage bill introduced.
“We really want to be able to see the system being preserved in it’s pristine form that it exists right now and that it’s the consumers themselves who make the choices about whether or not they want to buy medical payments coverage and how much they want to buy,” Harrold added.
Topics Colorado
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