Tom Melms is used to searching for affordable auto insurance. As the owner of Madison-based Badger Cab Co., he's not exactly a low-risk customer. His company has 43 cabs that together cover 3 million miles a year. Going accident-free between policy renewals never happens.

Last year, he paid $244,000 for auto insurance. About a month ago he received a letter from his insurer informing him that his policy was going to nearly double to $468,000. He was told $80,000 of the increase was due to a new state law, part of which took effect Nov. 1, that requires a minimum amount of uninsured motorist insurance of $100,000 per person, $300,000 per accident and $10,000 for medical payments. He has not carried that much insurance in the past.

"Insurance companies do not want to write taxicab insurance," Melms says. "It is a market with a lot of liability. Now the Legislature has made it even more difficult for me to get coverage."

While Melms takes exception to the changes, it was the intent of lawmakers to provide greater consumer protection to insured drivers by increasing policy minimums, particularly in an age of rising health care and vehicle costs. That way, for example, when someone is hit by an uninsured driver, there is more money under the insured driver's policy to cover accident-related costs. Previously, the insured driver, unable to recoup anything from the uninsured driver, ended up paying out-of-pocket to cover such expenses.

At a recent hearing before the Assembly Insurance Committee, one of Melms' employees joined a number of insurance company representatives in speaking out against the auto insurance mandates that were included in the biennial state budget and signed into law by Gov. Jim Doyle this summer.

The changes also are being challenged by Rep. John Nygren, R-Marinette. Nygren introduced a bill that aims to repeal all aspects of the new law except the requirement that all drivers carry auto insurance. Nygren and others say that even though most Wisconsin drivers already have auto coverage that meets the new mandated insurance minimums, insurance costs likely will go up across the board. How much will vary on each driver's current level of coverage. Fifteen percent of drivers statewide currently have no auto insurance.

"This isn't just about the limit increases," says Andy Franken, president of the Wisconsin Insurance Alliance, which includes 63 members. "All the other provisions increase the amount of risk exposure, which increase the amount of a policy."

Besides the mandated minimums in uninsured and underinsured coverage that took effect Nov. 1, drivers beginning Jan. 1 will have to purchase policies with a minimum of $50,000 for bodily injury or death to one person, up from $25,000; $100,000 for multiple injuries or deaths, up from $50,000; and $15,000 for property damage, a $5,000 increase from what was previously required by state law. In addition, all drivers must have auto insurance by June 1.

The Wisconsin Insurance Alliance estimates those who currently carry enough coverage will likely still see a 3 percent increase. Those who don't currently meet the new increased minimum requirements will see a jump between 33 and 43 percent to the cost of their policies, Franken says.

Costs also will rise, Franken says, because of a change known as stacking. The practice allows insurance coverage on a maximum of three vehicles to be ‘stacked' together when considering the amount of damages the victim of an auto accident is owed from the at-fault driver. Previously, only the coverage amount of the vehicle involved in the accident could be considered.

"All this does is allow the ambulance chasers to chase more and to get more for the chase," Melms says, using a pejorative term for personal injury attorneys.

But others point to outdated state law, not the lobbying power of state trial lawyers, as the reason for the changes, particularly because insured drivers now can recoup more insurance money before ever having to hire an attorney to sue another driver for sufficient funds to cover accident-related expenses.

"Liability standards have not increased in Wisconsin since the 1980s," says Robert Kraig, executive director of Citizen Action of Wisconsin. "All the state is doing is bringing costs back in line because of increased health care costs. Having $25,000 in coverage is not nearly enough these days. This is a good thing for consumers."

Kraig adds the insurance industry is simply making a fuss to scare consumers and send a strong message to lawmakers that it doesn't like to be told what to do. He cites the fact there have been some 60,000 complaints filed to the state Office of the Insurance Commissioner in the past decade as a sign insurance companies were not doing an adequate job protecting consumers.

Sen. Jon Erpenbach, D-Waunakee, says his office already has received calls from angry constituents over increased insurance rates. Insurance companies must notify a consumer 60 days before a policy will increase by 25 percent or more, according to the state Office of the Commissioner of Insurance. It is also that office's job to make sure rates aren't artificially inflated. Erpenbach suggests people contact the state insurance commissioner's office if, as portions of the new law take effect, they see their insurance rates increase unreasonably.

"I think the insurance industry is using this as an excuse to gouge people," he says. "They can point their fingers all they want, but we were just making law what most people had for auto insurance coverage already."

But Nygren points to figures from the National Association of Insurance Commissioners that found the average auto insurance policy in Wisconsin in 2007 was $657, down $15 from the 2002 policy average, as a sign the market was working in favor of Wisconsin drivers. He adds that the middle of a recession is not the time to hit state residents with more costs.

"I think when faced with having to buy more, some people will be priced out," Nygren says. "I would rather people have some coverage rather than no coverage at all."

As of June 1, police officers can begin asking for proof of insurance during traffic stops. Failure to carry proof of insurance will carry a $10 fine. Driving without coverage will carry a $500 fine and faking proof of insurance will be a $5,000 fine.

By the time all drivers are required to carry auto insurance with the new mandated minimums June 1, Wisconsin will be the second to last state to mandate auto insurance, leaving New Hampshire as the lone holdout. Those who oppose the new auto insurance mandates cite other issues, including the fact that Wisconsin, along with Alaska and Maine, will now have the highest minimum bodily injury limits in the country and the highest underinsured and uninsured minimums in the country.

As for Melms, he did what Kraig suggests all consumers do. He shopped around for a less expensive policy. Instead of going with his first quote of $468,000, he found a company outside Wisconsin to cover his taxicab business for $300,000. Now there's just the matter of covering an extra $56,000 in insurance-related business expenses.

"It will be difficult," he says. "If I raise my rates, I lose business."

Have an insurance complaint? Contact the Office of the Commissioner of Insurance's complaint line at 1-800-236-8517 or file a complaint online here.

 

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