Reality of insurance reform:
It's possible that many auto premiums will riseDrivers who have more than minimum coverage will see less savings and may even pay more
By Rob Perez
Star-BulletinDespite the recent barrage of publicity about Hawaii's falling auto insurance rates, many motorists are only now discovering they're paying less largely because they're getting less. Some car owners even face paying more.
And many aren't seeing the 20 percent to 35 percent reductions in basic rates that state officials trumpeted right before a new insurance law took effect Jan. 1.
That's because many of the tens of thousands of Hawaii policyholders have more than the state-mandated minimum coverage - what the basic rates are pegged to.
For those people, the decreases generally will be much smaller, and some won't see their bills drop at all, according to insurance industry executives.
"If you have additional coverages and higher liabilities (than the mandated minimums), your rates could go up," said Bob Quigley, regional underwriting manager for Allstate Insurance Co., one of Hawaii's largest issuers of auto policies.
One insurance agency, Finance Insurance Ltd., was concerned enough about inflated expectations stemming from the recent publicity that the company included this line in a Dec. 30 letter to customers:
"Contrary to what you've heard, your insurance premiums MAY BE GOING UP!" the letter said.
Any increase likely would come as a surprise to people who last month heard or read about Gov. Ben Cayetano and Insurance Commissioner Rey Graulty touting the reductions in basic rates.
Though both officials stressed the actual impact would differ from policy to policy, depending on a variety of factors, their general message was one of savings - and that people should shop around. It was a welcome message for drivers accustomed to paying the second-highest rates in the country.
"If people will choose wisely, everyone should see savings," Graulty said.
"Consumers will save $100 to $950 a year for basic coverage," Cayetano said. "I'm elated at this good news for consumers."
'Wry amusement'
The news hasn't been so good for policyholders seeing no decreases or facing higher premiums.
Take the case of Honolulu resident John Roberts, who said he hasn't had any accidents or traffic infractions that would push up the rates for him and his wife.
Yet, he was surprised when their six-month renewal notice from Allstate Insurance Co. arrived last month with a preliminary bill 10 percent over what they paid six months earlier.
Part of the reason for the increase was that Allstate added uninsured and underinsured motorists coverage to the Roberts' policy even though they hadn't requested it.
Allstate explained in several letters that it added the coverage because of the new law, and the company gave the couple ample opportunity to decline the coverage, Roberts said.
The company also raised their premiums for liability insurance - the nuts and bolts of auto coverage - and lowered the discounts they received for such things as renewing the policies and insuring multiple cars.
Roberts was particularly surprised to see the roughly 17 percent hikes in liability premiums for their two cars.
"One gets a wry amusement on how that can happen xxx in spite of all the recent publicity," he said.
Quigley, the Allstate executive, said he couldn't comment on individual policies.
But the company has spent countless hours ensuring it complies with the new law and is making valid renewal offers to policyholders, he said. He also noted that Allstate has lowered its basic rates by 35 percent to comply with the legislative mandate.
Pay less, get less
The new law, which made numerous changes that insurers still are trying to cope with, reduces basic rates in part by reducing the minimum amount of coverage people must purchase.
Wage-loss protection, for instance, no longer is part of a bare-bones policy. The minimum amount of personal injury protection one is required to purchase was reduced. Limits on certain benefits were set where none previously existed.
"You pay less, but you get less," said Carolyn Fujioka, public affairs director for State Farm Insurance, the largest issuer of auto policies in Hawaii.
The new law, combined with general rate reductions that insurers implemented last year because the Hawaii market has become so profitable, should mean savings for many - if not most - policyholders, insurers say.
But people shouldn't be surprised that they're getting less coverage or paying more for comparable coverage, because that's what the industry warned would happen if the law was passed, insurance executives said.
"That was exactly the argument," said Tim Dayton, Hawaii branch manager for Government Employees Insurance Co., better known as GEICO.
Proponents of the new law say some of the once-mandated coverages that are now optional weren't necessary or needed by all policyholders.
Retirees, for example, usually don't need wage-loss protection because they no longer earn a wage. And people already covered by health insurance typically don't need the extra medical coverage required under the old auto-insurance law.
Because auto policies typically are renewed every six months, many policyholders have yet to get notices from their carriers asking for selections on coverages made optional as of Jan. 1.
'Implementation nightmare'
But the notices that have gone out - and the changes they detail - already have sparked numerous calls from confused customers, agents say.
Some agents say they are spending as much as 45 minutes with each client explaining what all the changes mean.
"It's an implementation nightmare," said Neal Nakashima, president of the Hawaii Independent Insurance Agents Association, which has 3,000 members statewide.
"Probably 80 percent of the population, probably higher than that, is confused by the changes."
Nakashima and others worry that policyholders, once they get their notices, will discard or ignore them.
"When anybody normally gets an insurance form, they throw it in the trash can because it's so complicated," Nakashima said.
But the biggest danger of ignoring the forms is that policyholders might not get coverage they need or thought they had, Nakashima said.
Another possibility: they could end up paying for coverage they didn't request.
Policies differ from insurer to insurer on what happens if a form isn't signed and returned. Some carriers, though, automatically set such policies at default levels - often minimum coverage - upon renewal, Nakashima said.
And those drivers typically don't learn they have less coverage until they get into an accident and need the extra protection, Nakashima said.
"By then, it's too late."
Jargon ahead. Look over that policy; it could save you money
If you haven't already received a packet from your auto insurance carrier explaining new choices you must make about your policy, be prepared for some confusion.
The forms that carriers are sending to policyholders as their six-month renewal dates approach aren't easy to understand.
But a word of advice: Take the extra time to figure what all that jargon means. Or consult with your carrier.
It could save you money or prevent you from getting inadequate coverage.
The documents ask policyholders to make coverage choices that arose from a new state law.
Some of the choices policyholders face:
n Standard personal injury protection (PIP) or a managed-
care option.
The new law that took effect Jan. 1 lowers the standard protection from $20,000 to $10,000. That pays for auto-accident related injuries for you or your passengers regardless of fault. The care would be provided by the injured person's physician.
But if you pick the managed-
care option, you can save money - the amount depends on the carrier. The catch: You must use physician networks approved by your carrier.
Additional savings are available if you agree to pay a deductible.
Also, some carriers offer savings if you agree to pay a set fee (called a co-payment) for each medical visit.
Getting coverage beyond the minimum $10,000 costs extra, but the state says that isn't necessary if you have health insurance.
Wage-loss benefits. This provides a wage if you or your family member can't work due to an injury sustained in an accident covered under your policy.
Until the new law took effect, this benefit was automatically included in the standard PIP.
Now you must pay for it. The cost depends on how much coverage you want.
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