Insurance Facts

When did Colorado change types of auto insurance?
Colorado switched from a "No-Fault" system to a "tort" system of auto insurance on July 1, 2003.

What is "No-Fault"?
No-Fault is a system where every driver is covered for some amount of medical bills for their own accident-related injuries regardless of who is at fault for the system. Under this system an accident victim can receive medical care quickly, regardless of fault, without having to go to Court to litigate.

What is "Tort"?
Tort is a system where an accident victim must prove fault for a collision, advances their own medical costs and may get reimbursed (at least partially) by the at-fault driver's insurance company for some or all of their medical bills sometime within the statute of limitations. (i.e. 3 years in Colorado).

What the switch mean for coverage in Colorado?
The change meant the loss of $50,000 medical coverage, $50,000 rehabilitation, wage replacement benefits and essential services for the catastrophically injured. These benefits used to be included for every Colorado driver. We lost 77% of the value of the benefits in our policies.

Did coverage go down?

Yes, by 77%.

Did your premiums go down?

    (A) If you bought an equivalent level of coverage: NO. In fact they went up across all lines and carriers for equal coverage.

    (B) If you purchased the new minimum coverage, leaving yourself under-insured: Maybe, (but not if you consider your out of pocket costs or the cost of of not getting adequate treatment for injuries).

Did profits go up?

Yes.

FACT: Property and casualty companies, a group that includes State Farm, Chubb (Charts), and Travelers, tripled their profits to $65 billion in the past six years.
(SOURCE: Fortune Magazine Apr. 15, 2007)

FACT: Insurance companies are spending barely over half of the money from premiums collected on actual payment of claims or benefits. These are expressed as a ratio of funds received to funds paid out in claims. Colorado is faring worse than national average of value of our premium dollar.

Years                    Colorado        National
2004 – 2006         56%            59%
2006                     52%            58%
(SOURCE: J. Robert Hunter, Consumer Federation of America)

FACT: Insurance Companies are spending an estimated $98 Billion in excess administrative costs per year.
(SOURCE: McKinsey & Company Jan. 2007).

FACT: Insurance companies are spending $20 Billion Annually in claims denial software and procedures.
(SOURCE: Wall Street Journal 02/14/07 , Center for Information Technology Leadership)

FACT: The most profitable auto insurance companies in 2007 were:

Line of Insurance                 Revenue                     Profit
State Farm (Mutual)            $60,528,000,000        $5,316,000,000
Auto Owners Ins.                 $5,090,000,000         $634,000,000
Country Insurance & Fin      $3,101,000,000          $191,000,000
Sentry Insurance                $2,626,000,000           $262,000,000
Amica                                  $1,626,000,000          $257,000,000
TOTAL                                $72,971,000,000     $6,660,000,000
(SOURCE: Fortune Apr. 30, 2007, Fortune 1,000)

FACT: By 2004 Colorado was the most profitable state in the U.S. for the auto insurance industry, a mere year after the switch from No-Fault to tort. Coincidence?

SO WHAT ARE THE PROBLEMS WITH COLORADO'S CURRENT TORT SYSTEM?

Many people think they are covered for accident-related medical care if they are in a car accident -- and are NOT.
Medical Payments coverage is NOT included in your automobile coverage unless you ask for it and pay extra.
Health insurance is NOT a substitute for medical payments coverage because of caps, deductibles, co-pays and exclusions.
Health insurance does NOT cover your passengers in your car if you are involved in a collision.
Citizens were told that the at-fault party would pay in the tort system for medical expenses.
Citizens were NOT told that they may receive only partial reimbursement for some medical expenses and that they might have to litigate or go to trial to get those reimbursements.
Citizens were NOT told that the "reimbursement" process would could take as long as three (3) years [the statute of limitations]
Ambulance and emergency service providers, hospitals and medical providers have been expected to provide treatment but payment of those bills have been seriously delayed or never paid, driving up costs for providers and our health care system.
Costs are being shifted into your health insurance, adding an estimated 1.8% more into the cost of your health insurance premiums.
Colorado drivers lost 77% of the benefits previously covered in our minimum benefits package.
Premiums, however, have not gone down 77%.
In fact, we were promised rate reductions of over 30% by the insurance industry.
In the first 2 years after tort, carriers had only reduced an average of 13% among the largest carriers, 48 carriers made no reductions whatsoever and many actually filed rate increases.
It took nearly 5 years for some carriers to reduce rates 30%. Many have not.
Yet if a consumer were to purchase the equivalent level of coverage previously available, this change has been a dramatic and universal rate hike from every insurance company for all Colorado's drivers.
Premiums are only cheaper if a driver remains voluntarily under-insured (insufficient medical payments, liability, uninsured motorist protection). This dramatically increases personal exposure.
Insurance companies raised base rates on lines for liability, uninsured / underinsured, comp and collision.