Ohio Bill Raising Insurance Liability Limits Clears Legislature

Senators in Ohio passed a bill Thursday raising the state’s relatively low minimum liability limits.

The legislation was approved with a unanimous 33-0 vote after lawmakers added amendments that include establishing a committee to study reporting procedures between insurers and the state Registrar of Motor Vehicles (RMV).

Regulations on territorial rating will also be loosened if the bill becomes law.

A concurrence vote between both chambers occurred that same day senators approved the bill, pushing it out of the state Legislature and toward Gov. John Kasich’s desk for final approval; the state House approved the bill in an 85-7 vote last week.

Bill Addresses Ohio’s Relatively Low Liability Limits

The bill, HB 278, seeks to double bodily injury liability minimums and more than triple property damage liability minimums. If signed into law, the following changes would be applied to the state’s required liability structure:
–The minimum per-person bodily injury liability limit would go from $12,500 to $25,000.
–The minimum per-accident bodily injury liability limit would go from $25,000 to $50,000.
–The minimum property damage liability limit would go from $7,500 to $25,000.

Auto liability coverage is a required form of insurance that pays for other people’s injuries that were caused by the policyholder. Property damage liability does the same but for property damage.

Ohio is one of the states with lowest minimum liability insurance minimums in the country. Only Florida has a lower bodily injury liability minimum than Ohio. Also, the Buckeye State’s property damage liability minimum is lower than those in 45 states and Washington D.C.

Rep. Gerald Stebelton (R-Lancaster), one of the bill’s main sponsors, had made repeated efforts to raise those limits in past legislative sessions, including one in 2010. Stebelton’s most recent bill received support from the Ohio Insurance Institute (OII), which had previously not lent support to such efforts.

State Trade Group Says Insurers Benefit from Revision of Territorial Ratings

The OII backed HB 278 in part because of a provision allowing insurers more flexibility in rating policyholders within the same city, according to Dan Kelso, the state trade group’s president.

Under the current system, insurers must have the same pricing structure within a single city, a method that Kelso said has proved burdensome to coverage providers.

“It’s been a regulatory nightmare for companies because cities continually change their municipal boundaries and carriers simply can’t keep up with that since it’s difficult for them to monitor each city council meeting,” Kelso said in an interview with Online Auto Insurance News.

According to Kelso, the bill will allow insurers to price policies more accurately by getting rid of the current regulation and allowing them to break up cities into smaller rating territories.

“The way it stands now is that if you live in far east Cleveland, you’d pay the same rate as far west Cleveland,” Kelso said. “Without that municipal requirement, insurers can more accurately rate customers within the same municipality.”

The one-territory-per-municipality rule will be replaced by a clauses stating that “it is an unfair and deceptive act or practice in the business of insurance to charge premium rates that are excessive, inadequate or unfairly discriminatory based solely on the location of the residence of the insured.”

After Bill Takes Effect, Policyholders Could See New Rates

The raised minimums take effect nine months after the effective date of the bill. Kelso said consumers would have to wait until then to see the impact this bill would have, though he added that the varying effects would differ by insurer and policyholder.

“Obviously, if somebody at present has a policy that is a minimum limit policy, at the renewal period the insurer will only be able to offer the new limits stated under the bill,” he said. “So there will be a premium impact that will be different for each policyholder and the insurance company they have.”

Study Committee Established by Amendment to Bill

Amendments were tacked onto the bill during discussions in the state Senate, including one that establishes a “study committee.” Committee members would be charged with duties including exploration of a possible reporting process requiring insurers to relay all policy renewals, cancellations and lapses to the RMV.

According to Kelso, the OII supports a current Bureau of Motor Vehicles (BMV) program that randomly selects policyholders for insurance verification. The bill’s recent amendment reflects a desire to address verification through a different method, he said.

“We’re a firm believer in the verification program and how it enforces liability laws,” he said.

The Random Selection Program, instated by the BMV in 1998, pulls registered vehicle information from a database randomly and requires car owners to provide proof of auto insurance or face license and registration suspensions.

The program has faced scrutiny before. In early 2011, Rep. Matt Huffman (R-Lima) sought to scrap the state-administered program, which he said yields unintended consequences, including license suspensions of motorists who move out of state shortly and return to find that they had received several notices to furnish proof. The problem of temporary out-of-state motorists is exacerbated by the poor economy and low employment numbers, he said.

The Insurance Research Council reports that, in 2009, Ohio had the 12th-highest rate of uninsured drivers, with about 15.7 percent of drivers on the road without the proper coverage. The nationwide average at the time was 13.8 percent.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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