Blame Shifting Begins Over Costlier Auto Premiums in Wisconsin

By | November 1, 2009

As insurance companies begin mailing notices to Wisconsin customers telling them that their premiums are likely to increase soon, state politicians are scrambling to avoid the blame.

The first changes expected to affect premiums started Nov. 1 with more coming next year when all motorists must carry liability insurance. Minimum levels of coverage are also increasing.

Terry Scheller, of Nichols, received notice that coverage for his three vehicles was increasing $231. “I think it’s awful,” Scheller said. “How much more can people afford? Times are tough. Guess who’s paying for it? People like me with clean driving records.”

The new insurance requirements were approved by the Democratic-controlled Legislature, but Democrats don’t want the blame for higher premiums.

Assembly Majority Leader Tom Nelson, D-Kaukauna, said in an Oct. 7 letter to a constituent who inquired about higher premiums that “any premium increases are due to the business decisions of insurance providers rather than any action taken by the Legislature.”

That’s the same thing he told Scheller. “I’m not buying it from Mr. Nelson,” Scheller said. “I believe it’s the state law. That’s what I’m hearing from two different agents.”

Nelson said in an interview that insurers were “using the Legislature as an excuse to raise premiums and generate more profit.”

Nelson’s assertion is “flat out wrong,” said Andy J. Franken, president of the Wisconsin Insurance Alliance, which represents insurance companies and spent more than $500,000 lobbying against the changes.

Franken said at its most basic level, the Legislature increased the amount of coverage people will have to carry and it’s “simple economics” to see that will result in higher premiums.

Both the insurance industry and state regulators agree that premiums will go up, but they may not go up for all policyholders and how much they increase depends on several factors.

The state insurance commissioner’s office did not prepare, and does not intend to prepare, an analysis of what impact the changes will have on premiums. A departmental spokesman said there are more than 200 insurance companies competing in the state and a variety of other factors, including driving record and past claims experience, affect premiums.

“People who have higher limits that are at or higher than the new mandated amounts, will not be impacted,” said Ken Muth, a spokesman for American Family Insurance, which is based in Madison. However, premiums “may go up significantly for some.”

American Family, the largest auto insurer in Wisconsin, is sending out letters to policy holders warning them about increases. “Every insurance company in the state will be forced to charge more as a result of this legislation,” one letter sent by American Family said.

Nelson called American Family’s letter blaming the Legislature for higher premiums “disingenuous and shameful.”

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