UNDERSTANDING UNDERINSURED MOTORIST COVERAGE
May 4, 2022
Commissioner Troy Downing
Deputy Insurance Commissioner Bob Biskupiak
Policyholder Services Bureau Chief Sharon Richetti
Commissioner Downing: Welcome, this is Troy Downing. I’m the Montana Commissioner of Securities and Insurance. I’m sitting here with Deputy Insurance Commissioner Bob Biskupiak and Bureau Chief for Policyholder Services Sharon Richetti, and we’re going to be talking a little about an often-misunderstood issue with auto insurance. We’re going to be talking about concerns with underinsured and uninsured motorist coverage, so Bob and Sharon welcome.
Commissioner Downing: So, first of all, just get some definitions out of the way, so Sharon or Bob, what is underinsured coverage in auto insurance?
Sharon Richetti: Well underinsured motorist protects you as a driver in case you’re injured by somebody who doesn’t have enough insurance to cover the bills for your injuries, you know, as opposed to uninsured motorist, which is somebody that might cause an accident, which you might be injured in who doesn’t carry any insurance at all. These people who are underinsured may carry the state minimum required limits which is $25000 per person, up to $50000 per accident for bodily injury coverage and that might not be enough to pay all the medical bills for even a moderate injury.
Commissioner Downing: Right, and you mentioned bodily injury, so we have insurance for actual damage and bodily injuries, so there are different amounts of coverage for those in general.
Sharon Richetti: Correct, it’s usually a split limit, so you might see it written on your policy as 25/50/20, and that’s the minimum required limits in Montana and what that means is it would pay for injuries or medical bills up to $25000 for anyone single person that might be injured up to a total of $50000 for all people that might be injured in the accident and up to 25 and up to $20000 for property damage coverage, which is damage to your vehicle.
Commissioner Downing: Right, and generally, what happens if the damage or the bodily injury exceeds those coverage amounts?
Sharon Richetti: Well, if your injuries exceed somebody’s liability limit coverage amounts, then it would be up to you to pay the balance that would fall to either your under-insured motorist coverage or your private health insurance, you know, so a lot of people choose to have higher than the minimum limits for underinsured motorists because we all know twenty-five thousand dollars when you go up if you have to go to the hospital doesn’t go very far so you would need a way to protect yourself and protect your assets from the devastating cost of a really high hospital stay.
Commissioner Downing: Alright, Bob do you have anything to add to that?
Bob Biskupiak: In addition to that, and if you’re relying on health insurance, most health insurance plans have gone to high deductibles, high co-pays, so really you’re risking your financial stability by relying on just that, so having the coverage to protect yourself and your family is very important.
Commissioner Downing: Right, what would you estimate in Montana the percentage of uninsured motorists are out there?
Bob Biskupiak: What I’ve read in different insurance trades is the estimate up to 14 percent of drivers on the road are uninsured, right, that puts everybody on the road at risk.
Commissioner Downing: Sharon, you spoke briefly about the Montana limits. Where does Montana compare with other states?
Sharon Richetti: I think we’re probably right about the middle of the pack. There are a few states out there with considerably lower limits of liability that are required, and there are states that have higher liability limits required, and to what Bob said earlier, with the percentage of people that are uninsured, we think most likely the percentage of people who might be underinsured is tremendously higher. You know there’s a lot of people out there with the minimum required limits you know that’s all the law requires so that’s all I’m gonna have, but you do have the opportunity to purchase coverage to protect yourself from those people in the event that you’re involved in an accident where they don’t have limits sufficient to cover your injuries
Commissioner Downing: Right, independent of what is required by law, which what is statutorily required the minimum coverage amounts, I would say are the minimums. Do you Bob or Sharon do you think that the minimum amounts that we require are reasonable for the average driver?
Bob Biskupiak: I’ll take that, Troy. You know I don’t think they are at all, again, I think one of the problems that we run into is that insurance companies through marketing, through branding, through commercials it’s really about you know name your own price what’s cheap, what’s affordable, and I don’t think people understand that they need to buy value with that as well and with those limits again if you’re in an accident and you’ve got minimum limits and the person is underinsured, and you’ve got a family of four think about how the medical bills could rack up in a heartbeat.
Commissioner Downing: Yeah, that’s a good point. You know one of the things that a lot of our listeners may not understand is insurance is regulated at the state level, so every state has its different rules, its different laws, different limits, so speaking of that, obviously, in Montana, we have drivers coming here from other states and also obviously sometimes Montanans drive into other states. So, what are the implications of those, what’s the risk look like say if somebody with very low limits like say from California or somebody else comes into Montana and you have an issue with them?
Sharon Richetti: Well, it depends on which state because every state or most states, I should say, have a version of a model law, it’s called conformity with statutes, which says no matter where I drive as a Montanan if I go into any of the other states, my insurance policy will automatically conform to the laws of those states so some states, however, have different versions of that clause and may not increase their liability limits for drivers driving in Montana so yeah it’s a scary thing because you never know when you’re going to have an accident. That’s why they call them accidents and you don’t get to pick who you have an accident with so it’s better to be prepared than to end up owing huge balances on a medical bill that you can’t pay.
Commissioner Downing: Right, and Bob, maybe you could expand a little bit on our financial responsibility laws?
Bob Biskupiak: With the financial responsibility laws, we talked about the limits I could speak a little bit to how the insurance agents out there really deal with this. Many insurance agencies, if not all insurance agencies, they will have a standard set within their agency as far as what they will sell and usually that’s the 100 to 300 split limits or sometimes it’s a single limit and one agency that I used to work with they had a three hundred thousand dollar signal limit minimum and if the customer wanted to have something lower than that they would have to sign off on that and acknowledge that they are choosing lesser than what was recommended. The concern that I have that we have is that more people are being driven to the internet to purchase insurance is more of a commodity a transaction, versus a relationship with an insurance professional and with that being said you know they may not be aware of what they really need to do they’re looking to pay the least amount that they can, that’s what they’re going to get.
Commissioner Downing: Right you touched upon something that is you know really interesting to me right now and I think should be interesting to a lot of us is we’re entering into this brave new world where you can do virtually anything in life from a cell phone including buying insurance and we see all of these ads all the time about going online and checking for rates and filling out applications and applying for insurance but what happens in a lot of these cases as you lose that contact with a professional and sometimes these questions that you may be thinking about you know am I adequately covered is this appropriate for me all these questions that you have it’s not always as easy as it should be asking that question through an app. So, there’s one thing that I personally lament is that personal connection of talking to a human who can listen to your questions your concerns and answer them adequately. I’m really curious where this ends up going as we continue to move to more and more of an online platform and have less of that human interaction.
Bob Biskupiak: With all the transactions that we all do on our phones and with apps, you know how many times we have just checked off the I agree without reading the fine print right, and again that’s a concern.
Commissioner Downing: Right, and one of the things I think is important for people to understand is a lot of times we are, I’ll say value shoppers, you know we look to see what we can the cheapest price we can find for things and one of the things that concerns me is especially if you’re not talking to a professional the cheapest price is not always the best option for you know bob maybe you can talk a little bit about that of you know quality versus price?
Bob Biskupiak: Certainly, you know I can relate to my personal insurance-buying decisions is. Again my confidence level that people are carrying insurance is low sadly, it’s even worse that people are not carrying adequate limits so I feel it’s my personal responsibility to protect myself and my family through having higher limits of the underinsured, uninsured motors coverage and that even goes to the level of many people will consider buying a personal umbrella which is an additional layer of coverage that provides added protection and one of the most important buying decisions that I make is what are my limits for underinsured and uninsured motorists on my personal umbrella that’s very important to me.
Commissioner Downing: Right well, that’s interesting, so you’re looking at what those limits are and making sure that you’re additionally protecting yourself in case you have liability there, yeah, and that is not something I think most of us would see on an app?
Bob Biskupiak: That’s correct.
Commissioner Downing: Yeah, and again you know the importance of talking to a professional, so one of the things that concerns me is it’s easy to make a product cheaper by taking coverages out or limiting coverages, and so when I see advertisements sometimes as you know lower and lower and lower prices my question is always what are you giving up, and that concerns me, and so one of the things that you can do to lower is to lower your coverage. We talked about whether this minimum coverage for uninsured and underinsured motorists was reasonable for most people so the minimums may not be, but that does make the price cheaper but really understanding as a consumer that relationship and understanding may be right for you in your situation but understanding really what you’re purchasing and what you’re not is important.
Sharon Richetti: Well, I think Troy also it’s important to remember why we buy insurance in the first place you know there’s the school of thought that I buy car insurance because I have to by law right I’m required to but that shouldn’t be our motivation. Why we buy insurance is to protect our assets against loss if we are at fault for an auto accident and as I said earlier we don’t get to pick when that accident might happen so you need to be prepared and people need to think about you know what is at risk if I don’t carry sufficient limits because if I carry the minimum liability requirements, I’m involved in an accident where somebody is seriously injured, they’re going to turn around and sue me for their damages that are in excess of my insurance limits you know my insurance company would happily write that $25000 check to that injured person but they may have half a million dollars in medical bills so they’re going to come back to me for the rest which puts my house, my retirement savings, everything I have at risk so that’s the reason that most people should think of when you’re looking at insurance. What do I need, what are my assets, what am I trying to protect by buying insurance and then make that purchase accordingly.
Commissioner Downing: Right, I appreciate your insight there
Bob Biskupiak: Yeah, I think you know, and Sharon said it very well. You know it’s not just about buying insurance. It’s about managing risk, and you have to look at the big picture and evaluate your exposures
Commissioner Downing: Right, well, I appreciate that, and for those in the audience, I’m surrounded by giants here. Sharon’s department is the first line of defense in this agency when people have problems with their insurance, and her team answers those calls and listens to those stories and helps solve those solutions, and Bob has been in the PNC arena now is on the regulator side for almost 40 years maybe more than 40 years now so a lot of experience in this room. I’m, like I said, surrounded by giants, and I really appreciate your insights and your experience in this so before we wrap up, I’ll start with Sharon anything else you think we should talk about that would be interesting to this audience.
Sharon Richetti: No, I think it’s important to remember when you’re talking back again about uninsured or underinsured motorist, uninsured motorist is required by law to be offered to you, so if you choose not to take it, you’re going to have to sign a release or a waiver or some kind of a statement that says you’re choosing not to purchase uninsured motorist coverage. There’s no such requirement for underinsured you can choose it or not choose it not have any restrictions on it but again just consider what you’re trying to accomplish by purchasing insurance in the first place when you try and decide what kind of limits on your policy you want to put all right
Commissioner Downing: Any closing remarks, Bob?
Bob Biskupiak: I guess I’d like to add is that you know, I really encourage people to rely on insurance professionals for guidance and counsel. Again, it’s not just a commodity. It’s your financial viability.
Commissioner Downing: Right well, that’s good advice, so thank you for listening hopefully, this was helpful. We’re here to answer questions if you have any concerns, complaints, questions about insurance. Sharon’s team is answering the phones and very helpful, and if you need more information, you can find us at csimt.gov [csimt.gov], and our phone number is 406-444-2040.