5 minute read
Driving Without a "Seatbelt
Protect Your Customers and Your Agency by Offering UM/UIM written by James Redeker, Swiss Re
As many as 13% of all U.S. drivers are uninsured, according to the Insurance Research Council. That percentage varies state by state, with the highest percentage of uninsured drivers found in Florida where 26% of driver are uninsured (the most recent numbers for Tennessee suggest 20% of drivers are uninsured 1 ).
Often, it is the worst drivers who are uninsured because their driving record pushes their premiums to levels they cannot afford. Uninsured drivers put the livelihood and financial stability of law-abiding citizens at risk. The solution is uninsured motorist coverage.
What Do Most States Require?
All states but New Hampshire have a minimum required amount of coverage a driver must carry to legally operate an automobile. However, these minimum limits have not kept pace with the rising cost of inflation.
Florida, for instance, only requires $10,000 of coverage for property damage and $10,000 of coverage for personal injury. Meanwhile, California requires $15,000 in coverage for personal injury and only $5,000 for property damage. These state-mandated limits are not nearly enough to cover a serious auto accident (Tennessee requires 25/50/15).
Roughly, 40% of states allow drivers to stack uninsured/underinsured motorist coverages (Tennessee does not allow stacked limits). In those states, a policyholder can multiply their UM/UIM coverage by the number of autos they insure, which is an important feature of the auto policy in states that allow stacking. However, except in Rhode Island, insurance carriers are allowed to prohibit stacking policies and agents need to make sure they are offering a stackable policy if the state allows.
What About Property Damage?
Another twist is uninsured motorist property Damage (UMPD), which is available in 15 states. An additional eight states require it. Traditional UM/UIM coverage includes medical bills, pain and suffering, and lost income damages to a driver and their family members in their auto or another auto, as well as passengers in the covered auto. UM/UIM coverage does not cover damage to your auto. UMPD coverage will pay for uninsured or underinsured property damage resulting from an accident.
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While many see UMPD as a duplication of collision coverage, it is much cheaper than collision coverage and usually carries a lower deductible. UMPD is an excellent alternative for older or lower value autos, especially if the customer wants to drop their collision coverage.
Avoiding the E&O Exposures
Agents should always offer limits that match the liability limits of the customer. In fact, some states require a customer to sign a rejection form if they choose less coverage than the liability limits they carry. Moreover, don't forget the umbrella coverage. Make sure to offer matching UM/UIM limits on any umbrella policies you place.
UM/UIM limits will never be an E&O issue until you have a customer who is badly injured in an auto accident. That is why it's best to make sure you document that you offered the coverage and note any higher limits that are rejected by the customer to protect your agency from an E&O claim.
Per Big "I" Professional Liability, and as seen in the chart below, almost 15% of the total E&O claim count comes from Personal Auto coverage claims.
1-per "Facts + Statistics: Uninsured motorists" by the Insurance Information Institute at https://www.iii.org/fact-statistic/facts-statistics-uninsured-motorists
About the Author James Redeker is vice president and claims manager at Swiss Re Corporate Solutions and works out of the office in Kansas City, Missouri. He may be contacted at James_Redeker@swissre.com.
This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this article do not necessarily represent the views of the Swiss Re Group ("Swiss Re") and/or its subsidiaries and/or management and/or shareholders. Copyright © 2018, Big "I" Advantage, Inc. and Westport Insurance Corporation. All rights reserved. No part of this material may be used or reproduced in any manner without the prior written permission from Big "I" Advantage. For permission or further information, contact Agency E&O Risk Manager, 127 South Peyton Street, Alexandria, VA 22314 or email at eo@iiaba.net. u
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