Counterpoint: Affordable Auto Insurance Program is not affordable, and not a solution

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When something sounds too good to be true, well, you know the rest of the saying.

In a recent commentary (“How to help Minnesota drivers burdened by the price of auto insurance,” July 23), the “solution” to the issue of uninsured drivers in Minnesota might sound good, but it won’t solve the problem and will further raise auto insurance premiums for everyone else, all while offering substandard insurance that will provide a false sense of security to low-income drivers.

The writer wants more uninsured drivers to be insured, which is something we can all get behind. Under Minnesota law, vehicle owners are required to insure their vehicles at minimum levels. It’s estimated that about 10% of vehicles — about 400,000 — on the road in Minnesota today are not insured.

And that’s a problem for several reasons, including that if you are hit by an uninsured motorist, it’s your insurance that pays. So the 90% of Minnesotans who obey the law and have coverage are already paying for those who don’t.

The premise of the commentary suggests that cost is the only barrier to why someone drives without insurance. The writer argues that, if insurance costed less, everyone would be insured. Even if that were true, it means that either someone would need to further subsidize the cost of these policies, or coverage benefits would need to be slashed so the price comes down. The proposal doesn’t do one; it does both.

To make this program “more affordable,” it would reduce the amount of coverage people are required to carry. Current Minnesota law requires drivers to maintain bodily injury liability of $30,000 per person and $60,000 per accident, as well as $10,000 of property damage liability. The proposed program would reduce those limits to $20,000 per person and $40,000 per accident.

The purpose of insurance is to protect you and your assets in the event you injure someone. One of your biggest assets is your future earnings. By reducing this required coverage, we are hurting the people most in need of the protection insurance affords.

The program artificially lowers the required premium for one group of people, which raises the premium for another group of people. Think of it as squeezing a balloon: When you squeeze on one side, the air is forced to the other side.

To be clear, auto insurance premiums have increased in recent years for everyone. But the reasons for that are conveniently missing from the commentary. That’s because the so-called “Affordable Auto Insurance Program” does nothing to address the rising cost of insurance; it merely shifts the cost from low-income people onto the rest of the market.

Insurance at its core is relatively simple: Insurers collect premiums to pay the cost of claims. The more insurers pay out in claims, the higher premiums must go. In 2022, for example, insurers paid out $1.15 for every $1 collected in premiums. The five-year average is 99 cents paid for every premium dollar.

A number of factors have led to these increases:

• The frequency and severity of crashes. Driver behavior has become increasingly risky as speed and distraction are on the rise.

• Inflation, leading to higher repair costs for labor and material. And newer vehicles are more expensive to repair than ever before with all the sensors and high-tech features.

• The cost of medical and hospital services is also rising dramatically. Couple that with an incredible growth in lawsuits and legal system abuses, including nuclear verdicts, and we all end up paying higher premiums to protect ourselves.

Addressing these issues would help all Minnesota insurance consumers, not just a select few.

In the meantime, consumers can take steps to reduce their insurance costs:

• Shop around for coverage. Carriers have different risk appetites for different types of business, so reaching out to an agent to have them price coverage from different companies could help you save money.

• Review your coverage with your agent to see if anything has changed since your last review. Are you driving fewer miles due to a job change or retirement?

• Consider raising your deductible, which lowers your premium.

As ideas are floated from various groups and organizations on how to address insurance affordability, legislators would be smart to focus on factors that will lead to lower premiums for everyone.

Aaron Cocking is president and CEO of the Insurance Federation of Minnesota.