Minnesota bill would establish low-cost insurance program for low-income drivers
A proposal in the Minnesota Legislature would create a special car insurance program for low-income drivers who can't afford coverage, which they're required to have to get behind the wheel.
To qualify for the "Minnesota Lifeline Insurance Program," drivers would need to make under 300% of the federal poverty level and have a license for three years and a clean driving record in that same time period.
Premiums in Minnesota soared 58% last year, according to one estimate, marking one of the sharpest increases of any state in the country. As many as 360,000 Minnesotans are driving without insurance, Mid-Minnesota Legal Aid wrote in a letter to the House Commerce Committee Wednesday, which the group called "alarming."
"Uninsured drivers are a hazard to all Minnesotans. Reducing the number of uninsured drivers on the road is good for everybody," Rep. Athena Hollins, DFL-St. Paul, who is authoring the bill, said. "It creates safer roads for all drivers and fewer tickets for uninsured driving reduces the burden on policy, courts and families"
Under the proposal, the state would be divided up into three regions to determine premiums to reflect loss costs in that area, but no one region could have prices 25% higher than another. There would be a $0.10 surcharge on each insurance plan in the state to fund outreach — whether a person qualifies or not.
Mid-Minnesota Legal Aid added that socio-economic factors like a person's zip code, marital status, occupation and credit score impact auto insurance rates more than a driver's record. It cited the Consumer Federation of America, which found in an analysis nine years ago that drivers with higher incomes with DWIs often paid less than drivers with modest means who had no accidents or tickets on their record.
But opponents told the panel the proposal would drive up costs for other drivers who have insurance and wouldn't qualify for the program.
"Subsidized rates for one group of policyholders will lead to higher premiums for other insured drivers. That's not good policy and it's surely not good for the 90% of drivers who have insurance now," said Aaron Cocking, CEO of the Insurance Federation of Minnesota.
Insurify reported that a big driver of Minnesota's stark nearly 60% increase in premiums last year was several severe storms that produced heavy rainfall and hail, which raises the risk for insurers. Cocking said addressing risky driving behavior and high vehicle repair costs would better address expensive premiums.
"What we're trying to do is fill in a gap in a market sorely lacking," Hollins said.
California, Hawaii and New Jersey have similar low-cost auto insurance programs, according to Mid-Minnesota Legal Aid. But it's unclear if Minnesota will actually join them this year.
Any bill that passes will need bipartisan support to pass a divided legislature. The House is tied and Republicans and Democrats are switching off leading committees, which vet bills before they're voted on by the full chamber.
This system allows for each caucus to bring forward their priority measures, but no legislation will get to a vote on the floor without bipartisan support.
