The National Association of Mutual Insurance Companies is urging Colorado Gov. Bill Ritter to veto Senate Bill 256, legislation concerning uninsured and underinsured motorists. In a letter to the governor, NAMIC warned that the legislation would hurt consumers.
“On behalf of NAMIC’s members, I respectfully request that you veto SB 256, so that insurance consumers are not forced to needlessly pay higher insurance rates for insurance coverage they may not need or desire,” wrote Christian Rataj, NAMIC’s state affairs manager for the western region. “Although SB 256 may seem like a consumer-friendly bill, in reality, it will only confuse insurance consumers, increase insurance rates for all insureds, and lead to frivolous insurance litigation.”
If signed by the governor, SB 256, Concerning the Payment of Uninsured Motor Vehicle Insurance as Excess to Other Insurance, would require insurance carriers to offer underinsured motorist coverage in an amount equal to the insured’s liability coverage, allow for “stacking” of coverages in certain circumstances, and would turn underinsured motorist coverage into excess coverage, NAMIC said. Stacking includes aggregating, combining, multiplying or pyramiding limits of separate policies.
NAMIC believes the bill should be vetoed because it is unwarranted and unnecessary. Colorado’s system benefits insurance consumers and is consistent with the very concept of UIM coverage — to provide insurance consumers with an optional contractual gap coverage to address insurance claims that are not resolved by the at-fault driver’s liability insurance coverage, Rataj said.
If the bill becomes law, it could make UIM coverage less affordable and available to insurance consumers. Because UIM rates are based on the idea that the insurance is gap and not excess coverage, the underlying liability coverage of the driver at fault is set off against the available UIM coverage, he explained. SB 256 would eliminate the setoff and force insurers to increase UIM rates to be commensurate with the increased claims exposure.
NAMIC believes this will lead to more litigation, which will drive up claims costs, and subsequently insurance rates. “The excess coverage and stacking provisions of the bill will create a breeding ground for claims litigation,” Rataj said. Current state law is clear in its prohibition against stacking, he said. SB 256 would allow stacking of policies under certain circumstances. “This legal ambiguity will lead to complex, convoluted, and expensive coverage disputes. As claims and defense costs rise, so, too, will insurance rates.”
Furthermore, NAMIC believes the mandatory offer provision is likely to confuse consumers. SB 256 requires carriers, before a policy is issued or renewed, to offer the right to obtain uninsured motorist coverage in an amount equal to the insured’s bodily injury liability limits. Insurance consumers will be confused by this new mandated offer, and that could ultimately lead them into making improper insurance coverage decisions, the association said.
The proposed legislation will create needless administrative costs for insurance carriers, which could detrimentally impact the scope and quality of professional services offered to insurance consumers, limit the development of new insurance products, and adversely affect the claims adjusting process, the association said.
“NAMIC respectfully requests that you veto SB 256 for the aforementioned reasons, and protect insurance consumers from being forced to pay higher insurance rates to solve a nonexistent UIM problem,” Rataj wrote. “The current UIM law has worked well for the vast majority of insured and has stimulated a marketplace where UIM coverage is affordable for insurance consumers.”
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