Efforts by state governments to raise auto insurance minimums continue to be a recurring problem for insurers and consumers in many states. Ohio legislators are now beginning to discuss a hike but are facing opposition from the insurance industry. These laws are usually passed in an effort to solve the free rider problem, where some people who drive without insurance and get into accidents cannot afford to pay for the damages they’ve caused. In theory, mandating at least a minimum level of coverage could solve this problem. As a result, few people object to such mandates in principle. All 50 states currently have some sort of automobile insurance or “financial responsibility” mandate.
I’ve discussed this issue in the past; auto mandates have not been effective in eliminating uninsured drivers and forced drivers to pay more for insurance. Ironically in many cases the rate increases have led to drivers forgoing insurance, worsening the uninsured driver problem that the state was trying to avoid. When a similar effort was passed by Gov. Jim Doyle in Wisconsin in 2009 insurers argued that the changes would force families to pay at least 33 percent more for auto insurance.
While common and politically popular in many states, compulsory auto insurance mandates have failed to achieve their stated goal, reducing the number of uninsured drivers. Creating stricter mandates will not solve the free rider problem, but make worse, Ohioans should say no to the hikes.
