Alabama House Votes to Raise Auto Insurance Requirements

February 28, 2008

The state House approved legislation Tuesday that would bring Alabama in line with about half the South by raising the minimum amount of auto liability insurance that motorists must buy.

The House voted 82-0 for legislation by Rep. Marc Keahey, D-Grove Hill, that would require motorists to carry $25,000 in coverage for a single injury or death, $50,000 for multiple injuries or deaths, and $25,000 for property damage.

The current minimum limits under Alabama’s mandatory insurance law are $20,000, $40,000 and $10,000, respectively.

Keahey’s bill now goes to the Senate, where an identical measure by Sen. Roger Bedford, D-Russellville, was passed 33-0 on Feb. 7. For the higher requirements to become law, Keahey’s bill must pass in the Senate or Bedford’s bill must win approval in the House. The governor’s signature would be needed, too.

Keahey, an attorney, said the legislation was the result of negotiations between insurance companies and plaintiff lawyers who represent wreck victims. He said Alabama’s insurance requirements haven’t been raised since 1983.

“It’s something long overdue,” he said Tuesday.

Spokesmen for two of Alabama’s largest insurance companies, State Farm and Alfa, said the bills would have little impact on their customers because very few buy the minimum coverage.

“This bill is a non-issue for us,” State Farm spokesman David Majors said.

Keahey estimated the bill would affect about 10 percent of Alabama motorists and would cause them to pay $20 to $30 more annually.

The proposed new minimums would bring Alabama in line with the insurance requirements in Arkansas, Georgia, Mississippi, South Carolina and Texas.

Tennessee, Virginia and Kentucky have the same limits for injuries and deaths but smaller amounts for property damage. Florida and Louisiana have lower amounts across the board, and North Carolina’s minimums are higher for injuries and deaths than those proposed for Alabama, according to the Insurance Information Institute.

The Legislature overwhelmingly approved a bill last year that would have raised the minimum requirements to the same amounts proposed this session, but Gov. Bob Riley killed it because there was no phase-in period for insurance companies and policyholders to adjust.

Keahey’s and Bedford’s bills provide a 90-day phase-in for new policies and 180 days for renewals.

At Alfa Insurance, spokesman Dave Rickey said the bills would affect 6.5 percent of the company’s customers because most already buy more than the minimum amount of coverage.

But he said 90 percent of Alfa’s customers buy the minimum amount for uninsured motorist coverage. That amount would also be raised by the bills to the same level as liability coverage. Alfa estimates the average customer would have to pay an extra $13.20 annually for the higher uninsured motorist coverage.

Uninsured motorist coverage is optional in Alabama. It kicks in when the driver at fault in an accident has no insurance or too little insurance to cover all the damage.

The insurance legislation does not address the punishment for driving without insurance, but Keahey and Bedford said that is their next goal.

A study released last year by the nonprofit Insurance Research Council showed that 25 percent of Alabama drivers lacked insurance between 1999 and 2004. That tied Alabama with California for the second-highest percentage of uninsured drivers. Mississippi was first.

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