Minimum car insurance coverage drives panel’s debate

Aug. 25--FRANKFORT -- Concerned that the minimum auto insurance allowed under Kentucky law doesn't provide motorists with enough coverage for property damage, a panel of state lawmakers met today to discuss whether legislative action was needed.

"The current limit seems to be sufficient to cover the vast majority of claims," Carl Breeding, representing the Property Casualty Insurers of America, said in testimony before the Interim Joint Committee on Banking and Insurance. He cited industry research that found the average property damage liability claim in Kentucky was $3,467 -- far below the current $10,000 limit.

Breeding said 22 states have property damage limits of $10,000 or less and four states have property damage minimums of $5,000. There are seven states at $15,000. Three are at $20,000. The remaining 19 are $25,000. He said only two states have made changes to property damage limits in recent years. Indiana and Kansas both will increase their limits to $25,000 from $10,000, effective next year.

"It is our opinion that raising the limits raises costs for insurance and ultimately will impact those most often struggling to afford basic coverage," Breeding said.

He said Kentucky already has a relatively high uninsured motorist rate despite some severe penalties for driving without insurance including fines of up to $1,000, 90 days in jail and license suspension. Breeding said the Insurance Research Council estimates 15.8 percent of all motorists tooling along Kentucky's roads are uninsured. The national rate is 12.6 percent.

Insurance Institute of Kentucky Executive Director Mark Treesh said raising the minimum coverage will cause premiums to rise. He said that will most likely increase the number of uninsured motorists.

"What you really face is a public policy decision," he said, adding that lawmakers will have to decide whether it is better for some to be underinsured instead of being uninsured.

Rep. Michael Meredith, R-Brownsville, asked how high premiums would go if lawmakers raised the mandatory minimum coverage for property damage to $20,000 or $25,000. Treesh said he couldn't cite specific figures but the increase "wouldn't be a lot" for motorists with good driving records. He said premiums for motorists with poor driving records would "rise quite a bit."

Meredith asked Treesh and Breeding to get him specific numbers.

"This is an issue that has been of concern to me," Meredith said. "As vehicles continue to increase in costs ... this becomes a bigger and bigger problem. I think that is something we really need to take into account as we move forward because the economics of this is changing for all consumers out there."

He said if a driver with $10,000 coverage causes $50,000 worth of damage in a wreck, the other driver and their insurance company is left paying the $40,000 difference. He said it's extremely frustrating to have to pay a deductible and submit a claim for a wreck you didn't cause.

Rep. Wilson Stone, D-Scottsville, said there are Kentuckians that can't afford car insurance if they miss even one weekly paycheck. He said that causes a cascade of problems that results in the individual either without insurance or losing their job because they don't have transportation to work.

"When considering legislation, and raising those limits, I think we need to always think about those folks," Stone said.

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