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Frank Gray

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Raising minimums for car coverage could harm, not help

Wrecking a car has never been a cheap experience. Area body shops will tell you that even minor parking lot wrecks involving damage to a bumper and fender can cost $2,500 to repair.

Unless, that is, you happen to run into an expensive car.

At Peters Body Shop on Bluffton Road, they’ve handled wrecks that have cost $15,000 to repair, and a few years ago they made $30,000 in repairs to a Mercedes, although that car cost $100,000 new.

Auto Collision in Fort Wayne has had its share of $15,000 repair jobs, and they’ve had a couple of $20,000-plus jobs involving newer BMWs and Mercedes.

For some time now, that’s caused me to wonder why Indiana requires drivers to carry only $10,000 in property damage liability insurance. It’s been that way since at least 1991, and possibly longer.

That isn’t unusual, though. In Ohio, drivers are required to carry only $7,500 in property damage liability insurance. It’s been that way since 1969, when you could buy a new Cadillac for $7,000. Some states have insurance minimums as little as $5,000, and $10,000 or $15,000 minimums are common.

So what happens when a driver with only $10,000 in insurance plows into a newer Mercedes, BMW, Lexus or other expensive car, or damages several cars in one wreck, doing tens of thousands of dollars in damage?

In Indiana, many motorists carry what is called uninsured motorists coverage. It’s relatively cheap and a smart thing to carry considering that some experts estimate 12 percent to 18 percent of all drivers have no insurance at all.

Then there is underinsured motorists coverage, but that type of coverage sometimes covers only personal injury, not damage to your car. If someone with minimum coverage wrecks numerous cars in an accident and total damage exceeds their coverage, you might have to file a claim on your own collision insurance if you want to get your car fixed.

If you don’t have collision insurance, you are out of luck.

What underinsured drivers might not realize is that insurance companies employ something called subrogation. If they have to pay claims from a wreck caused by someone who was underinsured, they can and often do go after the person who caused the wreck, seeking reimbursement.

So why not just raise the minimum coverage?

This is where things get sticky.

Most drivers who have insurance carry far more than the minimum required. They have homes and assets, so they carry more insurance to protect those assets.

At the Insurance Information Institute, an organization in New York that promotes the understanding of insurance, increasing minimums isn’t viewed as that big of a problem. If the state raised its minimum property damage coverage from $10,000 to $20,000, it wouldn’t double insurance premiums. They might go up only $5 a month, I was told.

The Insurance Institute of Indiana, though, which promotes insurance awareness in Indiana, doesn’t necessarily agree that premiums would rise that little. The institute says it takes no position on whether the minimums should be raised. That’s a matter of public policy, I was told.

But it raises one question. People who carry the minimum do so because that’s what they can afford. If you keep the minimums low, at least people will buy some insurance. If you raise the minimums, will it price some people out of the market, causing more people to drive without insurance?

“Are you sure you want to go down that path?” asked Martin Wood, who is with the Indiana institute.

Wood says bills dealing with insurance minimums are introduced regularly in the legislature. Sometimes they are shelved and sometimes the same debate is repeated.

The issue last came up in the legislature, but instead of being killed, as usually happens, the topic has been turned over to a summer study committee.

It’s a problem, said Sen. Tom Wyss, R-Fort Wayne, who says he has dealt with the issue a little bit. He, too, acknowledges that most drivers carry far more than the minimum, but the questions remains, will raising the minimum result in more people driving without insurance?

“It will all come out in the open, either information that confirms that it will double the cost or we’ll find a way to make it work,” Wyss said.

Frank Gray reflects on his and others’ experiences in columns published Sunday, Tuesday and Thursday. He can be reached by phone at 461-8376, by fax at 461-8893, or by email at fgray@jg.net. You can also follow him on Twitter @FrankGrayJG.

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