Drivers in Minnesota pay more for insurance than drivers in most neighboring states due to a no-fault automobile insurance system that encourages inflated billing, over-treatment, and allows far too many claims to go to court, according to a new study conducted by the Property Casualty Insurers Association of America (PCI) and the Insurance Federation of Minnesota (IFM).
The study was presented last week (Feb. 28) by the IFM to the Joint Senate Commerce Committee and House Commerce and Financial Institutions Committee during an informational/policy hearing. The committee, which met prior to the beginning of the legislation session, took no action on the issue.
“By any measure, Minnesota’s auto insurance system is very costly,” said Michael Harrold, vice president and regional manager for PCI. “Based on our study we found that the Minnesota no-fault system is burdened by expensive health care coverage, higher-than-average amounts of medical care utilization, treatment and provider costs, especially for chiropractors, an increase in the rate of filing liability claims, and greater attorney involvement. These factors result in the cost of auto insurance being out of line with many other Midwestern states. These findings clearly demonstrate the need for reform.”
The study reviews the performance of Minnesota’s no-fault law in the context of its effect on insurance claiming patterns. The analysis compares the average price for auto insurance in this state with the remaining Upper Midwest region and countrywide, and contrasts the injury loss experience incurred by drivers in Minnesota against those of the nation, surrounding states and other no-fault states.
According to the study Minnesota’s full coverage auto insurance premiums are 19th highest in the country, while several other neighboring states rank among the least expensive. Furthermore, auto insurance in Minnesota is getting more expensive compared to the rest of the country. In 2000, this state’s average full coverage premium was ranked at 24th highest.
“To change this trend, the state should consider reforms that will address a system that forces insurers to pay for unreasonable and unnecessary medical expenses,” said Harrold. “In addition lawmakers should consider abolishing the monetary threshold and revising the verbal threshold that enables claimants to easily take cases to the court system. During the legislative session we will continue to urge legislators to fix the system and make insurance more affordable for consumers.”
The second half of the Minnesota 2005-2006 legislative session began last week. Bills introduced but not acted upon during the 2005 session remain eligible for consideration and action in 2006. Reform of the no-fault system is a carry-over issue. During 2005, SF 1094 failed to make it out of committee in the Senate; however Sen. Linda Schied may again attempt to advance legislation during the 2006 session.
Other issues that are expected to be considered in 2006 include a bill to ban the use of credit, a privacy package of security freeze/identity theft legislation.
Several new bills that were pre-filed for the 2006 legislative session address issues like no pay/no play for auto insurance, restrictions in homeowners insurance policies relating to the underwriting of home-based adult foster care and some further modernization of the insurance code.
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