Insufficient Auto Insurance Coverage: A Growing National Concern

Rising Underinsured Motorist Rates Across the U.S.

According to recent research by the Insurance Research Council (IRC), a division of The Institutes, nearly 16 percent (15.7) of U.S. drivers in 2022 had auto liability insurance limits that were too low to cover damages or injuries they caused. This underinsured motorist (UIM) rate has been increasing steadily, from 12.6 percent in 2017 to a peak in 2020 at 16 percent, and remained elevated in 2021 and 2022. The 2022 rates varied widely across the country, with the highest UIM rates found in Colorado (40.9 percent), Nevada (39.4 percent), Georgia (37.3 percent), Louisiana (35.6 percent), and Kentucky (32.0 percent).

Impact of Pandemic on UIM and BI Claim Frequencies

The IRC's estimates are based on UIM and bodily injury (BI) liability exposure and claim count data collected from 10 major insurers representing approximately half of the U.S. private passenger auto insurance market. The ratio of UIM-to-BI claim frequencies yields a reasonable estimate of the proportion of injury-producing accidents in which the accident victim's expenses exceeded the at-fault driver's liability limits. During the pandemic, UIM frequency dropped as the shutdowns dramatically curtailed driving, but by 2022, UIM claim frequency had returned to its 2019 level while BI claim frequency was still below pre-pandemic levels.

The Importance of Adequate Insurance Coverage

Auto insurers offer two types of coverage to protect policyholders: uninsured motorists (UM) coverage, which compensates accident victims for injuries or damage caused by a driver without liability insurance or from a hit-and-run driver; and underinsured motorists (UIM), which compensates the injured party for costs associated with injuries or property damage that exceed the at-fault driver's liability coverage. In today's litigious society, having state minimum levels on uninsured motorist and underinsured motorist insurance does not provide adequate financial protection. Riskier behaviors like speeding and distracted driving, in combination with legal system abuse and economic inflation, all contribute to elevated UIM rates.

For readers, it is crucial to reassess their auto insurance coverage regularly to ensure it adequately protects them against potential financial losses. Comparing rates and coverage options from multiple insurers can help in finding the best policy for individual needs.