Ohio’s Minimum Insurance Liability Limit Law Partly in Effect

A bill passed last winter in Ohio goes partly into effect Friday, reshaping the way the state’s auto insurers are allowed to price policies and putting more power in the hands of those companies to cancel policies they find to contain false information.

Distinct Rating System Found ‘Burdensome,’ Swapped for Territorial Pricing

One of the now-active provisions under HB 278 rids the state of a rating system that restricted auto insurers’ ability to rate policies based on territory to only municipalities.

Previously, all drivers in the same city had to have the same territorial rating factor.

Basing prices on municipalities, instead of the looser territorial rating systems widely used across the U.S., posed an inextricably confusing situation for insurers who saw 750 boundary changes in Ohio between 2007 and 2011, according to representatives from the industry.

“It’s virtually impossible to predict when a municipality may annex an area and to develop insurance rating models that are able to keep up,” the Ohio Insurance Institute (OII) said in a statement about the bill.

OII President Dan Kelso told Online Auto Insurance News that this provision was key in the group’s support for the proposal from Rep. Gerald Stebelton (R-Lancanster), who had repeatedly pursued efforts to increase liability limits in recent years.

Ohio’s now-defunct, municipality-based system was not only a “regulatory nightmare” for car insurance companies, but also unfair to drivers, according to the OII, with some paying rates that weren’t applicable to the risks where their vehicle was garaged.

“If you live in far east Cleveland, you’d pay the same rate as far west Cleveland,” said Kelso.

Ohio was the only state in the nation to enforce such a rating system. Now, according to Kelso, insurers “will be able to rate auto insurance risks better.”

“That’s what they’re in the business to do,” he said.

Other Provisions Also Active

Several of the bill’s other provisions also are in effect.

One further expands the circumstances under which an insurer can cancel a policy, allowing them to do so upon discovery of false information submitted by a policyholder, fraudulent activity and if the policyholder’s driver’s license is revoked.

Another provision lifts restrictions on all Ohio auto policies that previously denied wrongful death claims between family members. While most policies had no such restrictions, the few that did enforced them to “prevent family members from colluding to fabricate or exaggerate intra-family injury claims to insurers,” according to the OII.

“However in wrongful death claims the injury is clear and cannot be exaggerated,” the OII said.

Now, insurers aren’t allowed to deny coverage in an intra-family auto claim of wrongful death, according to HB 278.

Another of the bill’s provisions that goes into effect allows insurers to handle salvage certificates of vehicle titles on their own, bypassing claimants who are often “unresponsive to their auto insurance company’s request for paperwork” when the insurer needs a title transferred.

Under HB 278, insurers can “better manage total loss auto claims by allowing a more timely title transfer in order to dispose of the damaged vehicle to a junkyard or auto recycler,” according to the OII.

Minimums to Increase in December

HB 278 would increase the current minimum liability limits for Ohio auto insurance coverage, which are currently some of the lowest in the nation, but those limits would not rise until Dec. 22 under the bill.

On Dec. 22, the following changes would occur:
–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 property damage liability limit would go from $7,500 to $25,000.

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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