Costs not on rise
Group: New laws didn't lead to premium increases

By Heather Stanek
Fond du Lac Reporter
September 24, 2010

A consumer advocacy group says new insurance requirements haven't contributed to premium price increases, despite forecasts to the contrary by the insurance industry.

Citizen Action of Wisconsin found that auto insurance rates rose less than 1 percent this year, far below what the insurance industry had predicted.

Industry spokespersons estimated that new insurance requirements that began taking effect last year would drive premiums up at least 33 percent, according to the report, "False Claims: New Consumer Protections and the Cost of Auto Insurance in Wisconsin."

Gov. Jim Doyle signed the changes into law last year, and most took effect last fall. Insurance became mandatory for all drivers on June 1. The legislation increased limits and changed underinsured and uninsured motorist coverage to keep pace with the rising cost of repairs and medical bills.

New Hampshire is now the only state that doesn't require drivers to carry auto insurance.

But motorists probably haven't noticed much of a change on their insurance bills, according to the report.

Paul Gagliardi, president of the Wisconsin Association for Justice, said that's because consumers have been paying too much for insurance. He said companies have overcharged for so long that they have enough profits and financial reserves to avoid raising prices.

According to the Citizen Action report, property and casualty insurers overcharged consumers more than $200 billion over the past four years. Over the last two decades, Wisconsin auto insurance industry profits have been 25 percent above the national average.

"The insurance industry has been an incredibly profitable industry over the past 15 years," Gagliardi said. "The public needs to understand that they've been hoodwinked into paying higher premiums."

Robert Kraig, executive director for Citizen Action of Wisconsin, said the organization studied the state's largest insurers, reviewing their loss ratios — or how many premium dollars they spent toward claims. According to the study, Liberty Mutual Fire Insurance Co. paid the most — 84 percent— for late 2009 and 2010. Most other companies paid between 50 and 65 percent. Allstate Insurance Co. was the lowest with 14 percent.

Kraig couldn't explain why some companies paid more than others. He said it's possible that they had fewer claims than competing insurers, or they used the funds for operating expenses, including salaries.

"I'm not against the insurance industry making a living," Gagliardi added. "I do have a problem with them overcharging for excessive profits."
Upside

Kraig said Wisconsin's auto insurance rates are still the fourth lowest in the nation thanks to competition, and the legislation ensures that motorists have enough insurance to cover their expenses.

He said it's easy to switch if drivers aren't satisfied with their coverage.

Gagliardi added that if a company doesn't seem to be meeting expectations or refuses to cover what's listed in the policy, motorists may contact the State of Wisconsin Office of the Commissioner of Insurance. More information is available at oci.wi.gov/ or by calling (800) 236-8517.

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