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How to help Minnesota drivers burdened by the price of auto insurance
Factors that don’t reflect their record on the roads can lead to rates they can’t afford. There’s a solution.
By Julia Decker
July 22, 2024 at 10:30PM
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For many Minnesotans, an article in the Star Tribune last month about rising auto insurance rates highlighted a problem they are already acutely aware of (“Car insurance defies brakes on inflation,” June 13). Many feel they have few ways to resolve the problem, however, other than to drop certain coverages or readjust already strained household budgets.
Auto insurance is required by state law in order for a person to drive lawfully, and given Minnesota’s car-based infrastructure, being able to drive is a necessity for most of us. Since, as the article notes, “the cost of auto insurance is unlikely to fall significantly,” it’s important to ask: Where does that leave Minnesotans who are being priced out of auto insurance with each new rate increase?
In fact, several states — including New Jersey and Hawaii — have worked out a solution, and Minnesota has the opportunity to join them. First proposed in Minnesota in 2023, the Affordable Auto Insurance Program would build on existing state program structures to provide basic liability auto insurance coverage to low-income drivers at affordable rates. This coverage is available to safe drivers who would otherwise struggle to pay the premiums that enable them to drive legally. These drivers avoid the high fines and collateral consequences of driving without insurance, and our communities benefit generally, because everyone on the road is safer when all drivers are insured.
Some context about auto insurance rate-setting is important. There are, as the June 13 article indicated, external factors that can affect the cost of auto insurance. However, auto insurance rates can also be affected by individual factors such as a person’s ZIP code, credit score and/or education level. Notably, none of these factors are connected to or reflective of a person’s driving record. In addition, a factor such as a credit score can weigh against a person simply because they are young and have never had a credit card before, or against a new American citizen for the same reason.
The result is that two drivers in Minnesota with the exact same driving record may be charged drastically different rates for auto insurance. For example, consider: A single, 35-year-old woman with no accidents or tickets on her record, living on the East Side of St. Paul, and who has an excellent credit score, will be charged on average an annual premium of $894 for minimum liability coverage. That’s about $75 a month. The same driver with only a “fair” credit score would face an average annual premium of $1,566, and if their credit score dropped to “poor” — but they maintained a perfect driving record — the average annual premium charged by the 10 largest insurance companies in Minnesota would be $2,943.
The data was acquired by Consumer Federation of America from Quadrant Information Services before the increases cited by the June 13 article, so the East Side driver with a perfect driving record but poor credit would likely now be quoted an annual premium of over $3,000, or over $250 per month. Moreover, the data collected indicates such stark differences in cost were observed across many parts of the state.
Minnesotans, particularly those in greater Minnesota, rely heavily on personal vehicles to go to work, school, medical appointments and more. As insurance costs continue to rise, the unfortunate reality is that more and more Minnesotans may realize they have no other choice but to drive uninsured in order to make sure they can cover the rest of their living costs.
As anyone who has ever been involved in a car accident knows, everyone on Minnesota’s roads benefits from having more drivers insured. And data from California’s affordable auto insurance program indicates that drivers themselves want to be insured: In that state, 93% of applicants for the low-cost auto insurance program were uninsured at the time of applying. This data point indicates that cost was likely a key factor in why people did not have insurance. Further evidence of this can be gleaned from the fact that the California program has seen a sharp increase in enrollment — to more than 35,000 policies currently in effect — in the last year as auto insurance premiums have risen at the extraordinary rate reported by the June 13 article.
Nothing in the Minnesota proposal prevents Minnesotans from continuing to shop various insurance companies’ policies and seeking out the best option for themselves. What the program would do is provide an affordable option for Minnesotans who would otherwise be uninsured because they simply cannot afford the rates they are being quoted by private auto insurance companies.
Auto insurance may not make for the flashiest headlines or the juiciest sound bites, but the impact of rising insurance costs on Minnesotans can affect everything from workforce to education to public safety. When the Minnesota Legislature reconvenes for a new biennium in early 2025, its members must consider the predicament of Minnesotans being priced out of auto insurance due to skyrocketing premium rates. Legislators will have the opportunity to enact a practical solution to the problem that protects both low-income drivers and others on the road. If the Legislature seizes this opportunity to create an Affordable Auto Insurance Program, Minnesotans in every district across the state will benefit.
Julia Decker is the policy director for the Immigrant Law Center of Minnesota.
