IRC: Insufficient Auto Insurance Coverage Is a National Problem

By Max Dorfman, Research Writer, Triple-I

Nearly 16 percent (15.7) of U.S. drivers in 2022 had auto liability insurance limits that were too low to pay for damages or injuries they caused, according to new research from the Insurance Research Council (IRC), a division of The Institutes. 

The IRC report found that the underinsured motorist (UIM) rate increased from 12.6 percent in 2017, to a peak in 2020 at 16 percent, and remained elevated in 2021 and 2022. The 2022 rates, however, varied widely across the country, from 5.6 percent in the District of Columbia to 40.9 percent in Colorado. Other states with high UIM rates in 2022 included Nevada (39.4 percent), Georgia (37.3 percent), Louisiana (35.6 percent), and Kentucky (32.0 percent).

The IRC 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.

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.

Once it is determined that the at-fault driver’s insurance will not fully cover damages, the accident victim files a claim with their own insurance company under their UM/UIM coverage.

“At the start of the pandemic, UIM frequency dropped as the shutdowns dramatically curtailed driving,” said Dale Porfilio, FCAS, MAAA, president of the IRC. “However, UIM frequency dropped less than BI. But by 2022, UIM claim frequency had returned to its 2019 level while BI claim frequency was still below pre-pandemic levels.”

Porfilio, who is also chief insurance officer for Triple-I, noted that, 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,” Porfilio added.

Learn More:

Background on Compulsory Auto /Uninsured Motorists

Uninsured Driving Dipped in 2022 After Pandemic Spurred a Multi-Year Risk