Laws mandating that consumers buy auto insurance do not reduce the number of uninsured motorists, are virtually impossible to enforce and a bill to implement such a program in Wisconsin will not help the insurance market, according to a major trade group.
“As a national trade association, the National Association of Independent Insurers (NAII) has witnessed the implementation and enforcement of compulsory auto insurance laws around the country. It hasn’t been a pretty picture,” said Donald S. Cleasby, assistant vice president and assistant general counsel for NAII.
In testimony before the Wisconsin Assembly, Cleasby argued A.B. 384, which would make auto insurance compulsory, would end up costing insurance companies, their customers and the state money.
“Compulsory laws are a little bit like quicksand. Once you get into it, you get stuck. And the more you struggle in it to make things better, the more stuck you get,” Cleasby said. “Simple compulsory laws like A.B. 384 require that the driver of a car meet financial responsibility requirements as a condition of operating a car on the state’s roads. However, legislation seldom stops there.
“For example, the legislature might make insurance companies report all cancellations, nonrenewals, lapses and new business to the motor vehicle department — requirements which add to the administrative expenses of insurers and get passed along to consumers.”
According to the Insurance Research Council, the estimated uninsured driver population in Wisconsin is 10.6 percent, the 30th lowest in the country, lower than the national average of 13.7 percent. Twenty-eight of the 29 states with an estimated uninsured driver population higher than Wisconsin have compulsory auto insurance. If these compulsory auto insurance laws were effective, this would not be the case.
And a 1998 NAII study on the effectiveness of these laws found that 13 states with compulsory laws had estimated uninsured motorist populations higher than the national average, with five of the states having an estimated uninsured motorist population of over 20 percent, Cleasby noted. The same study found that states with compulsory liability laws enacted prior to 1976 had an estimated uninsured motorist population growth rate of anywhere from 6 to almost 300 percent between 1976 and 1985. And uninsured motorist claims frequency in these states rose more than 87 percent from 1982 through 1986.
“Given all of this, it’s hard to see how programs which have not worked in other states will make any improvements here in Wisconsin,” Cleasby said. “The experience in these other states and the lower numbers of uninsured drivers in Wisconsin bring into question the effectiveness of and need for A.B.384.”
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