Two States Get New Minimum Car Insurance Requirements in 2011

The minimum amounts of bodily injury liability coverage that drivers must carry in both Texas and Maryland went up on Jan. 1 with the intention of bringing the minimum limits of coverage in line with rising medical costs.

New and renewal policies issued in both states now must provide for at least up to $30,000 of bodily injury liability for one person injured in an accident and $60,000 for two or more people injured in an accident — which is commonly denoted as 30/60 coverage.

Graph showing diff. bodily injury liability limits and state counts

Click on graph to enlarge

Previous minimums for the two states were 25/50 for Texas and 20/40 for Maryland.

The change won’t affect every driver in the two states. Rather, it will affect only those drivers who carry the bare minimum coverage levels.

Despite the changes, affordable auto insurance should still be available in the two states. For Texans carrying the minimum levels, the state insurance commissioner says they can expect a 2 percent to 3 percent rise in premiums to make up for the cost of the additional coverage.

A number of states have introduced similar measures to adjust their minimum liability coverage levels in recent years, and they have had varying levels of success.

This past summer, Wisconsin raised its minimum bodily injury liability limits from 25/50 to 50/100, putting it in the highest tier for minimum amounts of coverage. Other measures were introduced in 2010 to raise minimums in Pennsylvania and Ohio, but little action has been taken to advance those bills.

The changes that went into effect with the New Year place Texas and Maryland in the second-highest tier for coverage minimums. The majority of states require 25/50 bodily injury coverage.

Legislators who introduce bills to raise minimum limits usually cite rising medical costs as the reason that they’re needed.

According to data from the Insurance Information Institute, although the frequency of bodily injury claims fell between 2000 and 2009, the average cost of a claim rose considerably.

The numbers show bodily injury claims were filed in 2009 at a rate that was about 20 percent lower than in 2000.

But the average cost of a bodily injury claim rose by about 27 percent between 2000 and 2009.

Some sources have at least partially attributed the rise in medical-related claims costs to “hospital cost shifting.” This refers to a practice in which hospitals inflate auto injury claims costs in order to compensate for inadequate reimbursement rates from government-run health programs.

A study conducted by the Insurance Research Council showed that, in 2007, bodily injury claims in 38 states resulted in an estimated $1.2 billion in excess hospital charges.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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