Bills to sharply increase the legally required minimum auto insurance coverage for Hawaii motorists are rapidly moving through the Legislature, but the auto insurance industry is warning lawmakers that mandating more coverage will mean higher premiums for many low-income families.

The insurance industry also predicts an increase in the price of the minimum required coverage will result in more uninsured motorists on the road. This is the second consecutive year the Hawaii Insurers Council has opposed plans to dramatically increase the minimum coverages.

State Insurance Commissioner Gordon Ito estimates the latest proposals to boost the minimum required bodily injury liability coverage would immediately add anywhere from 11% to 70% to the cost of those premiums, and would then further increase the price of coverage in 2027.

The range varies dramatically because individual premiums are based on a variety of factors, including a driver’s age and driving record.

Also in the works is a proposal to increase the minimum required property damage coverage, which would add 10% to 20% to the cost of premiums for that coverage, Ito said in written testimony.

Hawaii Association for Justice, formerly known as Consumer Lawyers of Hawaii, is pressing lawmakers to increase those coverages. They point out that state lawmakers set the current minimums more than 25 years ago, and the cost of medical care and auto repairs have soared since then.

Evan Oue, executive director of the Hawaii Association for Justice, told the Senate Transportation and Culture and the Arts Committee that “the substantial increase in consumer protection by raising the minimums far outweighs the minimal premium cost increases associated with it.”

“Ultimately we believe driving is a privilege, and the accident victims currently pay the price for Hawaii’s unreasonably low minimum policies at this time,” he told the committee.

Lawyers And Insurers Disagree On Impact

Hawaii is one of only six states that require minimum bodily injury coverage of $20,000 per person or less, Oue told lawmakers. He said medical bills in auto accidents of even “moderate severity” often exceed $50,000, “leaving our residents insufficiently protected.”

But Michael Onofrietti, an actuary and chairman of the auto policy committee for the Hawaii Insurers Council, warns that if lawmakers increase the minimum required coverages, economics will dictate what happens next.

“People who are buying the minimum, they’re doing so because they can’t afford to buy more,” Onofrietti said in an interview. “If you’re telling them that it’s going to get more expensive, some of them are going to make that very difficult economic decision to not buy coverage at all.”

Even without the extra coverage that would be required by House Bill 1539 and Senate Bill 2342, auto insurance premiums have been escalating because of the rising cost of repairs to increasingly complex and sophisticated cars, Onofrietti said.

The Insurance Research Council estimates that nearly 11% of Hawaii motorists already drive without the minimum legally required insurance, according to Michael Barry, chief communications officer for the Insurance Information Institute. That is a bit lower than the national average of 14%.

Lawmakers deliberately lowered the mandatory minimum auto insurance coverages in Hawaii in the 1990s in an effort to reduce the cost, and also reduce the number of uninsured motorists on the road. At the time, some estimates were that as many as 30% of Hawaii drivers were uninsured.

But today the Hawaii Association for Justice cites national research that suggests reversing course and increasing liability coverage will not cause large increases in premiums and uninsured rates.

Oue argued in written testimony to lawmakers that “while Hawaii consumers and the State suffer, Hawaii has been the most profitable state for automobile insurers for over 25 years. The proposed increase will impose no unfair burden on them.”

As for consumers, Oue contends that based on the current rates filed with the Department of Commerce and Consumer Affairs, an increase of $50,000 in coverage will likely equate to approximately $10 to $15 per month in premium cost increases.

Onofrietti told lawmakers that his own research shows increasing bodily injury coverage to $50,000 would cause a 69% increase in bodily injury premiums — which is comparable to the estimate by Insurance Commissioner Ito.

But Onofrietti said in his written testimony it is difficult to estimate how much that would cost individual consumers in dollars because of the many factors involved in setting insurance rates for each individual driver.

It is also unclear how many Hawaii motorists today buy the minimum required package of coverages, and would therefore be forced to pay higher premiums if one of the bills passes. Many motorists buy considerably more coverage than the minimums.

Ito did not respond to a request for an interview, and HAJ said it is still waiting to hear from the Department of Commerce and Consumer Affairs on how many Hawaii drivers take the minimum allowed coverage.

‘Trying To Make Our Roads Safer’

The proposals to mandate that motorists carry more insurance coverage have so far generated little public debate in a series of public hearings this year.

Rep. Scott Nishimoto, who sponsored HB 1539, pointed out the House and Senate bills proposing increases in mandated insurance coverage would also increase penalties for some traffic offenses, including reckless driving, excessive speeding and driving without insurance.

He described the bills as “a comprehensive look at trying to make our roads safer and our pedestrians safer.”

As for warnings that the bills would increase the cost of insurance for some, “to me, it’s are we going to protect consumers, or are we going to protect insurance companies? I don’t know whether its certain that rates will go up,” he said. “It’s not clear to me that rates should go up.”

The bills as originally introduced would more than triple the minimum required bodily injury and property damage liability coverages in a two-step process.

In the early weeks of this year’s session, lawmakers revised both bills by removing the specific amounts of coverage that would be required, a standard procedure that suggests the exact amounts of the increases are still subject to negotiation.

The original bills called for increasing the required liability coverage for bodily injury from the current $20,000 per person to $50,000 per person, and increasing the minimum required property damage liability coverage from the current $10,000 to $20,000 per accident.

The early version of the House and Senate bills then called for a second increase in those minimum coverages in 2027. That second increase would boost the minimum required bodily injury coverage to $75,000 per person and the minimum required property damage coverage to $40,000.

The Senate approved SB 2342 in a 23-2 vote, with only Republican Sens. Kurt Fevella and Brenton Awa voting against it.

The House passed a nearly identical version of the bill in HB 1539 on a 43-5 vote. Republican Reps. Diamond Garcia and Elijah Pierick and Democrats Natalia Hussey-Burdick, Jeanne Kapela and Amy Perruso voted against it. Reps. Elle Cochran, Sean Quinlan and Justin Woodson were absent for that vote.

The Senate bill has now passed to the House for further consideration, and the House bill has now moved to the Senate.

The Senate Transportation and Culture and the Arts Committee has scheduled a public hearing on HB 1539 for 3 p.m. on Thursday.

“Struggling To Get By” is part of our series on “Hawaii’s Changing Economy” which is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.