Questions remain over new insurance system

Colorado drivers who cause an accident will be responsible for their victim's medical bills starting July 1, a big change from the no-fault insurance laws that made each driver responsible for his or her own medical bills.

The change, effective when Colorado's legislative session ended without an alternative to reverting from 30 years of no-fault insurance to a tort system, is expected to save drivers 25 to 30 percent on their annual automobile insurance premiums, but could increase the cost of medical insurance.

"It's typical bureaucracy they never thought out," insurance agent Marv Draper said. "There's going to be some cost shifting somewhere. I don't think it's a good thing for Colorado because, when all is said and done, it's going to cost more somewhere."

That "somewhere" is likely to be medical insurance premiums, which have the potential to increase more than drivers may save on their automobile insurance, Draper said.

An independent commission made up of a mixture of health and insurance industry officials conducted a study that showed the cost savings of reverting to a tort system could be as high as 30 percent. But Draper estimates it will only be 10 to 15 percent -- $10 a month on a $1,200-a-year policy.

"There's going to be a wide variety depending on the coverage chosen, policy and insurance agent," said Kelly Campbell, spokeswoman for All-State Insurance Agency. "At this point, insurance companies haven't released their rates."

Draper said he expects high-risk drivers, whose personal injury premiums are higher than average, will save more.

"The average good driver isn't going to save that much," he said.

What a tort system does is give customers more choices on their insurance coverage, Campbell said.

"The problem in Colorado is the benefits package of the medical portion of your insurance coverage was mandated to be very generous. You have to have $130,000 worth of coverage," she said. "With a tort system, you have a little more control on what your premium looks like based on the options chosen."

Under a no-fault system, all drivers were required to have liability and personal injury protection insurance. Under a tort system, drivers are only required to have liability protection. Personal injury protection is optional.

All vehicle damage claims remain the same under either system.

Insurance agents will be the first to admit the concept is a new one and they don't have all the answers, Campbell said.

"People need to be patient with their agents. A lot of them have never worked in a tort system, so they're learning right along with the policy holder," she said.

Draper said he doesn't know what to expect under the new system, but said he will know much more when he returns from training at the end of June.

Policyholders still will have the option to purchase personal injury protection coverage, probably a good idea for those without health insurance, Campbell said.

Draper said people's rates won't drop automatically when the tort system goes into effect July 1. They will have to call and request that it be dropped or make that call when they renew their policy.

Colorado adopted a no-fault system in 1974 to get accident victims' bills paid quickly and because it was believed the system would lower the cost of automobile insurance by cutting down on the number of lawsuits. Colorado is one of 13 states with no-fault automobile insurance.

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