The 2006 Wyoming legislative session opened Monday and will be a mixed-bag for the insurance industry, said the American Insurance Association (AIA), with legislation it expects to both support, such as uninsured motorist measures, and oppose, such as third party bad faith measures.
The legislature plans to consider legislation to implement an uninsured motorist database. AIA, working in conjunction with the Insurance Industry Committee on Motor Vehicle Administration (IICMVA), recommends that Wyoming legislators address the following concerns while considering this proposal:
* data problems can cause insureds to be mistakenly identified as uninsured;
* reporting systems are costly for jurisdictions, insurers, and consumers;
* reporting programs do not conform to the needs of commercial insurers and their customers; and
* no correlation exists between reporting programs and the number of uninsured motorists.
“It is imperative that Wyoming learn from the mistakes and problems that other states have encountered while trying to implement similar systems and avoid those pitfalls,” said John Marlow, AIA assistant vice president, AIA Southwest Region. “The objective of an uninsured motorists database is to identify and track uninsured motorists while not imposing additional burdens to insured drivers or increasing costs in the system.”
Also of concern to insurers is SB 68, a bill regarding unfair claims settlement practices, which would create a third party cause of action. Only six other states in the country have similar laws in place and all have experienced negative outcomes following adoption and implementation, such as the following: significant increase in the number of claimed bodily injuries; significant increase in dollars paid out by insurance companies; significant increases in the cost of insurance; and significant increases in the number of uninsured people as the cost of insurance rises.
“A liability insurance policy is a private contract between an insurer and its customer, which has the sole purpose of protecting the customer. Liability insurance is not a benefit delivery system for third party claimants, and claimants have no ‘right’ to its proceeds,” continued Marlow.
“Creating a third party cause of action against an insurer results in insurers settling more unsubstantiated claims with third parties to avoid lawsuits, which increases insurers’ settlement costs,” said Marlow. “In other words, these laws create an opportunity for legalized extortion. Passage of this bill would encourage fraud in the system, and ultimately raise the cost of insurance to offset those additional costs.”
The 2006 Wyoming legislative session is scheduled to adjourn by March 10.
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