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Auto insurance changes raise questions

Insurance industry experts expect changes to auto and health care coverage as a result of changes in Colorado law on July 1. What exactly those changes will be are hard to pin down.

Colorado switches from a no-fault state to a tort system in July. The Legislature allowed the switch to occur because the no-fault system was considered “broken.”

Under no-fault, each person involved in an accident collected injury damages from their own insurance company. It wasn’t necessary to establish fault to get medical bills paid because drivers were required to purchase personal injury protection, according to a Web site maintained by the Rocky Mountain Independent Insurance Agents.

“In theory, No-Fault was designed to be a simple answer to controlling the cost of auto insurance by discouraging lawsuits and speeding up the process of paying claims,” the Web site reports. In practice, it didn’t work that way. The state had the 11th highest auto insurance premiums in the country in 2000, and rates climbed up to 30 percent in 2002.

Under the tort system, the driver who is at fault in an accident is responsible for paying the victim’s medical expenses. Therefore, personal injury protection, or PIP, can be dropped.

There is speculation that auto insurance premiums will drop because PIP coverage is no longer required. However, some insurance experts also expect premiums for liability coverage, which is still required, will go up.

Charlotte Rankin, a senior vice president with the Van Gilder Insurance Corp., a major broker in the country, said she isn’t convinced the switch to a tort system will have good results for Colorado customers.

“People have this false notion they’re going to see decreased premiums – they’re not,” she said.

Another effect of the change is it can make health care coverage responsible to cover medical expenses from a car accident when a person is at fault or there is no fault.

Brad O’Neil, a Van Gilder representative who helped establish a community health care plan in the Roaring Fork Valley, said the effects of the insurance changes coming July 1 will be like “squeezing a balloon.” If less coverage is required on auto insurance, it requires more dependence on health coverage. That likely means increases in premiums.

Insurance agents said the insurance carriers have told them they are still examining how auto insurance changes will effect health insurance coverage.

[Scott Condon’s e-mail address is scondon@aspentimes.com]


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