Got Car Insurance? Next June, It's a Must But Law May Not Mean More Will Have Coverage

At this time next year, it will be illegal for Wisconsin motorists to drive without insurance.

But exactly how many will obey the new law and obtain a policy is anyone's guess.

That's because, in part, the mandatory auto insurance law just approved as part of the state budget won't make motorists prove they have insurance unless they are pulled over by police for an unrelated traffic violation.

Also working against buying insurance: the cost.

Advocates for the poor say people who now are driving without insurance will be even less able to afford it because changes in the law make minimum coverage more expensive.

But 48 other states already have mandatory auto insurance - New Hampshire is the last holdout - and the public wants it here, too, said state Sen. John Lehman (D-Racine).

"My belief is - and my constituents have repeatedly said - that it's viewed as a responsibility for being a good citizen," said Lehman, who added mandatory insurance to Gov. Jim Doyle's budget bill. "If you are going to go on the road, make sure your vehicle is insured. And if you can't afford to do that, then you shouldn't be on the road. That's what I've heard from people."

Auto insurance will be required in the state starting June 1, 2010. While the Department of Transportation has almost a year to figure out the details and some of its fuzzier enforcement aspects, this much seems clear:

- Wisconsin drivers will be required to carry with them proof - probably a card or letter issued by an insurer - that they have auto insurance.

- If a driver is stopped on suspicion of a traffic violation, the police officer can ask for proof of insurance. The officer can issue a $10 ticket to those who have insurance but don't have proof with them. Those who don't have insurance can be fined up to $500. (One of the still-fuzzy aspects, according to state officials, is how police will discern the difference between a person who doesn't have insurance or simply doesn't have proof).

- Underinsured motorist coverage, which now is optional, will be required for state drivers on new or renewed policies starting Nov. 1.

- Motorists will need to have a policy providing at least $50,000 in bodily injury coverage for one person, $100,000 in bodily injury coverage per accident and $15,000 to cover property damage. The current limits are $25,000, $50,000 and $10,000, respectively. The higher limits go into effect Jan. 1.

"I think most people are already carrying $100-$300 ($100,000 bodily injury coverage for one person and $300,000 per accident) as a standard, so this likely will not impact a large amount of consumers," said Kimberly Shaul, deputy commissioner of the Wisconsin Office of the Commissioner of Insurance.

Some consumers will be hit hard, however, said Nichole Yunk, director of the Center for Driver's License Recovery & Employability in Milwaukee. The people most affected are low-income earners who need their cars to get to work but don't have enough money to buy insurance, Yunk said. They'll "end up getting fine after fine after fine" if they get caught, she said.

"They can't afford it in the first place, and the law is not going to change their financial situation," Yunk said.

Mark Lindow, a general partner with Pewaukee-based American Advantage Insurance Group, had a similar view. He said a 21- to 24- year-old driver in Milwaukee might pay $600 to $700 in premiums every six months under the higher limits.

"It's questionable whether or not mandatory insurance really does cause more people to have insurance, because it's really an economic issue for the person who doesn't have insurance," Lindow said.

Effectiveness questioned

The New York-based Insurance Information Institute questions the effectiveness of mandatory insurance. It cites a study by the Insurance Research Council estimating that in 2007, 15% of Wisconsin drivers were uninsured. That's just a little above the national average of 13.8% -- an average derived from states that almost all have mandatory auto insurance.

Even in states that require proof of insurance at the time a motorist obtains or renews vehicle registration - as about half do - it doesn't mean more drivers will be covered, said institute spokeswoman Carolyn Gorman.

"If a person goes and buys the compulsory auto insurance when they register the car or whenever it's required, they can then turn right around and not pay the premiums. And that frequently happens," Gorman said.

Gorman added: "Maybe for some people the simple fact that it's the law will result in them making sure they have it, because most people are law-abiding. But for people who can't afford it or are not law-abiding, it's not going to cause them to buy it and keep it."

The Wisconsin Insurance Alliance hasn't developed a firm estimate on how much the changes will raise rates for most already-insured drivers, said Andrew Franken, president of the group. He said adjustments such as raising the liability limits, which were supported by Wisconsin trial lawyers, were unnecessary because more than 90% of claims last year were covered under the current thresholds. Franken also was unhappy that the changes were introduced in the budget rather than through the regular legislative process, where he said they would have had more scrutiny.

"These provisions will disrupt the marketplace and increase costs for consumers," Franken said.

It's possible that mandatory auto insurance in Wisconsin will lead to follow-up legislation. Yunk said some states make insurers provide low-cost policies to low-income drivers who meet requirements. Lehman said it's something he might consider in the future.

"I'm very empathetic, sympathetic toward poor people," Lehman said. "I'm on the Democrats' side, and it's a tough choice. But I went with what I believed the people of Racine and the people of the state want, and that's financial responsibility when it comes to automobiles."

MANDATORY AUTO INSURANCE

- On June 1 next year, Wisconsin will become the 49th state requiring drivers to have auto insurance.

- Minimum coverage for bodily injuries and property damage will increase.

- If stopped by police for an unrelated reason, drivers must show proof that they have coverage. Typically, this will be with a card or letter from their insurer.

- Motorists without coverage can be fined up to $500.