Colo. Democrats Question Claims That Auto Insurance Rates Have Declined

September 25, 2005

Democrats questioned claims by the auto insurance industry and Colorado state insurance commissioner that rates declined after the state switched from a no-fault system to a tort system, saying 48 of 200 companies have not reduced rates and some even raised them.

Rep. Morgan Carroll, D-Aurora, said Insurance Commissioner David Rivera only looked at 24 insurers when he concluded that consumers who purchased protection against damage to their car paid 24 percent less and 51 percent less if they had a minimum, liability only policy under the new tort system.

Rivera said the figures were “weighted” to reflect larger companies that represented more than 50 percent of the Colorado market.

Carroll, who looked at all 200 companies, said 80 carriers filed rate increases after the new system went into effect, and 30 companies hiked their rates just prior to the July 1, 2003 date to switch to the new system. In one case, Federal Insurance Co. applied for a 43.4 percent increase before the new system went into effect, then applied for a 4.5 percent decrease.

“Is that a savings?” Carroll asked Rivera.

A spokeswoman for Federal Insurance did not return a phone call seeking comment.

Rivera said it is difficult to compare the two systems because they don’t provide the same coverage. “Not everyone will save money, but many will under the new system,” he told lawmakers.

Colorado in 2003 switched from a system in which all drivers were required to have coverage for treatment of any injuries resulting from auto accidents to a system in which just the driver at fault pays. Insurance industry officials said the switch away from the no-fault system has saved Colorado drivers by dropping coverage most didn’t need.

Rivera said a person who buys $50,000 in medical coverage and liability under the tort system would pay an average $591.44 a year, compared to $624.89 with personal injury protection and liability under the old system.

He said a person with full coverage would pay $1,238 a year, compared to $1,131.43 under the old system because of higher medical costs.

Rivera said his records show for a liability only policy without medical coverage, the weighted average rate decrease because of the switch was 31 percent, and for full coverage, the average decrease was 21 percent. He said for all policies and all coverage, the average decrease was 20 percent.

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