The majority of Colorado motorists have received savings of 15 – 27 percent following the state’s transition to a tort-based automobile insurance system in July, according to a study conducted by the National Association of Independent Insurers (NAII).
NAII, the Rocky Mountain Insurance Information Association (RMIIA) and 13 insurance companies that write two-thirds of the personal automobile insurance in the state participated in the study to examine the overall savings during the initial stages of the transition from no-fault to tort and evaluate the impact of the transition on different drivers in different geographical areas.
“The transition to a tort-based automobile insurance system has been extremely beneficial to consumers,” said Michael Harrold, senior state government affairs director for NAII. “Our analysis of the Colorado market demonstrates that the promise of rate relief has been accomplished. In addition, consumers have more choice regarding the type and amount of coverage they purchase. The bottom line is consumers have more dollars in their pockets, more options regarding how they spend their insurance dollar and greater ability to purchase the insurance products that best fit their individual circumstances.”
In July, Colorado’s 30-year-old no-fault automobile insurance system was allowed to sunset, reverting back to a tort-based system. This followed several years of failed efforts to reform the no-fault system.
Motorists in Colorado were paying the 10th highest auto insurance rates in the country due to the expensive and broad medical coverages that drivers were forced to buy under the state’s no-fault system. As costs spiraled out of control the average personal injury protection (PIP) claim cost increased from $5,000 in 1988 to $7,800 in 2001 and as a result, premiums jumped.
Based on the NAII study, the statewide average auto insurance premium for a liability-only policy dropped 27 percent as a result of the sunset of no-fault. The average annual cost of a liability-only policy, which meets all the state legal requirements and includes optional uninsured motorists coverage, is now $503 compared to $691 with the no-fault requirements and UM/UIM coverage.
The average annual premium for a full policy, which includes required liability coverages, along with optional uninsured motorists, comprehensive and collision coverages has dropped approximately 15 percent from $1,018 to $869
“While the NAII study was designed to examine the short term impact of eliminating no-fault, in the long-term, the elimination of Colorado’s no-fault system means an end to treatment abuses that were driving up claim costs, and as a result, premiums. The Colorado market will benefit from more stabilized auto insurance rates. These positive outcomes, in both the short- and long-term are in sharp contrast to the significant upward trend in costs associated with no-fault coverage,” said Harrold.
Was this article valuable?
Here are more articles you may enjoy.