Drivers Left Financially Devastated by Cost of Collisions, Says New AAJ Research

Washington, DC — A new report released today by the American Association for Justice (AAJ) reveals a deep chasm between the rising costs of motor vehicle crashes and the required levels of auto insurance coverage. "The Case for Raising Auto Insurance Minimums," illustrates the impact that woefully outdated insurance minimums have on drivers, taxpayers, and the public, highlighting the billions of dollars left uncovered by insurance every year.
 
"When the average cost of a car was just $5,000, it made sense to set insurance minimums at $5,000 or $10,000. But cars don’t have 8-tracks anymore, and auto insurers should keep up with the times," said AAJ President Sean Domnick.
 
According to the new report, motor vehicle crash costs exceed $340 billion per year due to cars' increased complexity, rising repair costs, and skyrocketing medical expenses. But while medical care and vehicle repair have outpaced inflation over the last 25 years, minimum insurance levels have stagnated.
 
The report’s key findings reveal grounds for states to raise paltry minimums: Only 54% of collision costs are paid by insurance companies. Medical care and vehicle repair have outpaced inflation over the last 25 years, while minimum insurance levels have stagnated.  When auto insurance fails to cover property damage or medical bills, 23% of the costs are borne by the victims, and the rest falls to taxpayers, local government, health care providers, and even charities. Raising minimums does not lead to higher premiums for consumers. In fact, states that raised their minimums actually saw a lower increase in insurance cost – 1.47% on average – than the country as a whole at 1.95%. Raising minimums does not lead to more uninsured drivers. Data shows that states with higher minimum auto insurance levels have lower rates of uninsured drivers.
Auto insurance minimums dictate the lowest amount of coverage an insurer must provide to protect drivers and the public at large. Set by state law, many auto insurance minimums were established in the 1970s and have not been updated, leaving the amount abysmally inadequate for today’s needs.
 
For example, first established in 1974, Pennsylvania’s minimum covers only $5,000 of property damage in a car crash. If a person is injured or dies in a crash, the minimum amount covered is just $15,000. That amount rises to $30,000 if two or more people are injured or die.
 
By comparison, in 1974: a Hershey’s bar was 15 cents, a loaf of bread was 33 cents, the average car cost just under $5,000, and the average house just $36,000.
"When auto insurers only cover half of the expenses from car crashes, drivers and taxpayers are left holding the bag. To better protect consumers, we need to raise decades-old insurance minimums so that auto insurance can work better for all Americans," said Domnick.
 
Click  here  to read the full The Case for Raising Auto Insurance Minimums report.
 
 
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The  American Association for Justice  works to safeguard rights, promote fairness, and strengthen access to civil justice—even when it means taking on the most powerful corporations.
AAJ’s vision is justice for all.

CONTACT Heather K. Sager Email: Heather.Sager@justice.org Phone: (202) 579-1205