Wednesday, May 12, 2004

Auto insurance dilemma

our views

The state's new emphasis on compliance with the mandatory motor vehicle financial responsibility law is certainly welcome. While the original law has been on the books for years, it has been largely unenforceable on a statewide scale because of a lack of tools.

Now those tools are available. As a result, the state is in the process of sending out tens of thousands of notifications to owners of vehicles for whom there is no record of liability insurance or a financial responsibility deposit statement. Owners will have to provide proof of compliance or the state will pull the registrations for those vehicles.

For those who have dutifully paid the increasingly high rates for auto insurance in New Mexico, especially those who have also been the victims of uninsured drivers, this is — or should be — doubly good news.

Since the financially responsibility law was passed, between a third and a half of all vehicles on the state's roads have been driven uninsured. The burden of that lack of compliance has been placed squarely on the wallets of those who do comply.

The reality has been that for a state with a mandatory insurance law, auto insurance is pretty expensive in New Mexico-- especially, ironically enough, for uninsured motorist coverage.

The major insurance carriers have repeatedly pointed to the low compliance rates to justify the high premiums. And they have promised that if compliance is raised, rates would be lowered.

We hope the state holds them to that promise as more drivers and vehicles are brought into the system under this new initiative.

It should be noted that the insurance companies themselves have been somewhat to blame for the lack of compliance. In New Mexico, insurers are allowed to charge high-risk rates to anyone who has not had insurance for the previous 30 days. It does not matter if the person has a spotless driving record. It doesn't matter if it is their first car. It doesn't matter why they were without insurance. They all are automatically classified high risk.

And since they have to pay at least six months at a time because of that, this practice virtually prices the poor out of the insurance market or forces them to go to high-risk carriers where they pay as much as double in order to get monthly payments.

It is a classic Catch-22: those who can least afford insurance are the ones being charged the most for it. And there are a lot of poor people in New Mexico for whom those high-risk rates are simply impossible.

That is a situation the state and the insurance companies need to correct if we are ever to have broad compliance. Rates should be based on relevant data such as driving record and applied fairly and equitably.

Otherwise we'll just a lot of people driving without insurance OR registration.

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