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Senate Bill 1281 — Underinsured vehicle coverage

Senate Bill 1281 — Underinsured vehicle coverage

Parrish Miller
February 11, 2022

Bill Description: Senate Bill 1281 would impose new regulations on vehicle insurance providers for a type of insurance known as "underinsured motor vehicle coverage."

Rating: -1

Analyst Note: Senate Bill 1281 is a less onerous alternative to Senate Bill 1269, but it still imposes new regulations, which will increase consumer costs and impair freedom of contract. Maintaining the status quo is preferable to adopting either of these proposals. 

Does it give government any new, additional, or expanded power to prohibit, restrict, or regulate activities in the free market? Conversely, does it eliminate or reduce government intervention in the market?

Senate Bill 1281 would amend Section 41-2503, Idaho Code, by adding a new subsection requiring that, for "policies issued or renewed on or after January 1, 2023, any underinsured motor vehicle coverage with limits of liability less than two (2) times the minimum limits for bodily injury or death specified in section 49-117(20), Idaho Code, shall be construed to provide coverage in excess of the liability coverage of any underinsured motor vehicle involved in the accident."

Underinsured motor vehicle coverage covers a driver who is hurt in a motor vehicle accident by an at-fault driver whose liability insurance is insufficient to cover the damages caused. 

Under current law, an insurance provider's contract may specify that the total amount of the underinsured motor vehicle coverage takes the insurance coverage of the at-fault driver into account. Say for example, that the at-fault driver carries $25,000 in coverage and you have $50,000 in underinsured motor vehicle coverage. The most you would get paid for expenses is $50,000, with half that coming from the at-fault driver's insurance policy. 

Senate Bill 1281 would forbid such contracts whenever the underinsured motor vehicle coverage is below a certain threshold. In such cases, this new regulation would require that all the coverage of the underinsured motor vehicle policy apply after the coverage carried by the at-fault driver. In the above example, the insurance company offering the $50,000 policy would be required to pay up to the entire $50,000 in addition to the $25,000 paid by the at-fault driver's insurance. 

This change will increase the exposure of vehicle insurance companies and will likely result in higher premiums for insurance customers.


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