More drivers are uninsured as recession grows deeper

DES MOINES, Iowa | Chances are increasing that the next fender bender you’re involved in could be with someone without car insurance. As the recession leaves millions of workers unemployed and pressures family budgets, one place many are cutting is their insurance coverage.

The Insurance Research Council (IRC) estimates that by next year nearly one in six motorists may be driving without insurance. That’s 3 million more uninsured drivers than just five years ago.

“We can’t explain why people drive uninsured. We just know that a certain percentage of people do, and it does change with economic conditions like unemployment,” said IRC Vice President David Corum.

For every 1 percent increase in unemployment nationwide, the percentage of uninsured motorists increases three-quarters of a percentage point, Mr. Corum said. That could result in a total of 16.1 percent by next year, an all-time high. The rate was 13.8 percent in 2007.

The group examined data collected from nine insurance companies, representing about 50 percent of the U.S. private passenger auto insurance market.

Travelers Cos. Inc. reports that it has seen a slight increase recently in uninsured claims and warns against dropping insurance as a way to save money.

“Not having auto coverage could mean financial ruin if you are in an accident where property is damaged or individuals are injured,” said William Pearse, the St. Paul, Minn., company’s vice president of product strategy and design.

Mr. Pearse notes that it’s equally important to carry liability insurance that covers people in the other car and to have uninsured motorist coverage on your policy, which protects you if the other car isn’t insured.

The average cost for liability insurance in the United States is about $40 to $50 a month. Although costs can vary, uninsured motorist coverage typically adds from 7 percent to 10 percent to an insurance premium.

Drivers without at least liability insurance are breaking the law in all but two states.

Wisconsin and New Hampshire only require motorists to provide proof that they can pay minimal levels of damage, according to the Insurance Information Institute. Proof may include a surety bond or a certificate of self-insurance, which is often purchased through the state’s motor vehicle agency or a certificate of deposit.

Bloomington, Ill.-based State Farm Insurance Cos. is already seeing an increase in the number of accidents involving uninsured drivers.

The average payment on claims in accidents involving an uninsured driver is about $11,000, according to the most recent IRC information.

The insurance industry also is watching the level of underinsured drivers — those carrying too little liability insurance — and has concerns that this number also will spike as people seek to cut insurance costs.

More uninsured drivers also means more people will be forced to take legal action to recover damages. Many will never be fully compensated for car damage and injuries in serious accidents, said Jim Quilty, an attorney with the Crawford Quilty Law Firm in Des Moines, Iowa.

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