Sunday, January 11, 2009

Ohio Auto Insurance Limits: "We're 46th!" (Woohoo!)

Yet ANOTHER reason why Ohio auto insurance laws are lousy and favor insurance companies over consumers. We all know that Ohio law requires you to have liability insurance in order to drive. So does every other state. But some states protect motorists at the hands of dangerous drivers better than others.

For example, most states require drivers to have at least $25,000/50,000 liability limits. Here's what it means: if you are injured by a negligent motorist carrying "25/50" limits, you can collect from the negligent driver's insurer up to $25,000 for your individual injury claim if your injuries and bills and lost wages merit it. And if two or three members of your family were injured, for example, the most that can be collected for everybody is the $50,000 total limit.

These limits are not great, but at least they offer injured drivers more ability to recover their losses than states with bare bones limits requirements. General rule to remember: the higher the mandatory liability limits, the more protection consumers have.

For decades, Ohio law has required that drivers carry puny limits of $12,500/25,000. Forty six states have higher liability limits than Ohio. Yes, that's right--Ohio has stagnated at the bottom of the barrel with Louisiana, Oklahoma, and Florida as having the crappiest minimum liability limits laws in the U.S.

For YEARS insurance companies in Ohio have fought tooth and nail against joining almost every other state and raising minimum limits to more reasonable 25/50 limits. The arguments against simply bumping up the limits a notch usually involve the normal, threadbare ones like "it will make insurance more expensive", "it's bad for consumers," "bad for Ohio's economy," "the sky will fall, insurers will pack up and leave, Ohio will collapse and have to secede from the Union and join Canada, etc" (that last one was a slight exaggeration but you get the point...).

Nonsense. The difference in price between a "12.5/25" policy and a "25/50" one is probably less than $50 per year. If you don't believe me, just call and get some quotes on the difference between the two. I'll bet there isn't much of a difference.

More importantly, if you get clobbered by someone with minimal "12.5/25" limits, it means (1) you might have to access YOUR uninsured/underinsured motorists' policy with your own company to recover the losses not covered by a flimsy "12.5/25" policy; and (2) if you can't make a claim against your own policy and are stuck with thousands in unpaid bills, you might have to go on Medicaid or file bankruptcy.

I guess our Legislature must believe that increasing government assistance rolls and bankruptcy is better than making insurers offer in Ohio what they offer in 46 other states. And, by golly, we sure can't have any insurance laws that PROTECT consumers now, can we?

There are numerous more reasons why Ohio insurance laws are HORRIBLE for consumers, and what you can do about it to protect your family. Just click here to order my free book, "How To Buy Auto Insurance In Ohio To Protect Your Family,"** and its yours.

** Doubles as an all natural insomnia cure. Not to be read in conjunction with any other books or materials, particularly your insurance policy, which may caused bluured vision and headaches...


Anonymous said...

You said "For YEARS insurance companies in Ohio have fought tooth and nail against joining almost every other state and raising minimum limits to more reasonable 25/50 limits."

You seem pretty certain about what you're saying here, but I don't understand why insurers would fight against raising the minimum limits. After all, they collect a higher premium for a higher limit policy. Is there any proof that the insurance industry is to blame and not the dimwits in the General Assembly?

Brian said...

I believe the Legislature has opposed raising the minimum limits based upon negative reaction from the insurance industry. The legislative response that accompanied proposed legislation raising the minimum limits was a proposal prohibiting auto injury victims from collecting damages for pain and suffering from the negligent motorist if the injured person did not carry insurance herself.
This "amendment" had insurance company backing, and served to kill legislative proposals to raise mimimum limits.

Furthermore, while you raise a valid point that insurers would collect higher premiums, those numbers would pale in comparison to the difference in amounts paid on injury claims (potentially 25,000 vs. 12,500)from a global standpoint. Factoring in the increase in inflation for medical bills/costs associated with injured claimants seeking medical treatment, it's not a stretch to think that toal payouts on injury claims would exceed the increased amounts collected for higher premuims/coverage. That, in my opinion, has fueled opposition to raising the mimimum limits. But you are correct that the Legislature has been a major driving force behind the opposition.
Thanks for posting.

Anonymous said...

I'm still not sure I'm buying that it's the insurance industry that's holding things up. You say "it's not a stretch to think that total payouts on injury claims would exceed the increased amounts collected for higher premiums/coverage," but this assumes the industry doesn't know how to underwrite its product.

And is there any proof for the idea that payouts increase across the board when the mandatory minimums are increase? Obviously, payouts would increase in cases where exposure falls between $12.5 and 25 and the at-fault driver carries minimum coverage, but why would the increased minimum change the equation in any other sort of claim?

I'm not in the legislature and don't know for sure, but I suspect the reluctance to increase the minimums is fueled by fear that many, many low income (read: "judgment proof") Ohioans would drop their auto coverage all together if required to pay more. In that balancing act, the lower premium (and lower limit) win out.

I don't disagree with your point that the 12.5 limit is inadequate, I just don't think the insurance boogeyman is to blame.

Brian said...

Two points come to mind in reponse to your post. First, in 20 my years experience, I have seen NUMEROUS situations (too many to count) where injured persons had a legitimate claim well in excess of the minimum 12.5K limits, but could only collect the 12.5K limits. And if they carried the same amount in uninsured/underinsured (UM/UIM) coverage with their own company, in Ohio thay are out of luck and can't collect a penny from their own company. That's because, under Ohio law, if your UM/UIM coverage equals the negligent driver's liability limits, you cannot collect a dime under your own policy, even though you pay premiums for this coverage. Ridiculously unfair, but once again it illustrates how insurance laws favor insurance companies in this state. Why on earth your access to UM/UIM coverage (that you pay a separate premium for) with your own company is dependent upon the arbitrariness of the amount of liability limits a drunk driver decided to carry is beyond me. When I explain this to my clients, they're outraged--and rightly so.

Secondly, if irresponsible drivers drop their coverage in response to a law mandating higher limits, they become "uninsured motorists," which means the injured person has to pursue an uninsured motorists' claim against his own insurance company. So in your example, insurance comapnies are still paying the claim, even if the negligent driver has no insurance.

Your premise that fears of scads of drivers dropping doesn't square with 46 states that have passed higher liability limits.

Bottom line: the insurance industry basically gets its way with whatever it wants in Ohio. And if the industry really wanted higher mimimum liability limits in Ohio, it would have happened a long time ago.

But you raise some good points, and thanks again for posting.

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Anonymous said...

I would like to have specific references to prove that the fault is in the hands of the insurance companies. My company would LOVE to see Ohio's minimum FR increased because of increasingly ignorant drivers getting away without paying at-fault claims and no penalty to face. Our rules need to be changed, and I'm sure all insurance company claims departments are tired of paying out money for someone else's irresponsibility of not having proper limits or ANY auto insurance. Please give me facts - not opinions.