State Farm Credits Change to Tort System in Colo. for Lower Rates

Colorado’s largest automobile insurance provider plans to cut rates an average of 7.5 percent this month, saying the state’s switch from a no-fault to a tort insurance system is reducing costs.

The expected cut of $42.9 million in premiums will average about $50 a year for State Farm Mutual Automobile Insurance Co.’s 858,000 policies in Colorado, company officials said.

Since the switch from no-fault was made in July 2003, State Farm’s auto-insurance rates have dropped 35.9 percent, the company said.

“We have taken abuse, misuse and overuse out of the system,” said company spokeswoman Teresa Tuschhoff.

Critics said auto insurance has become cheaper because the tort system shifts costs to the health care system, delaying payouts to accident victims and reducing benefits to policy holders.

“You are overpaying for what you are getting,” said state Rep. Morgan Carroll, D-Aurora. “Benefits have been gutted tremendously.”

Carroll said some insurers haven’t reduced rates.

Under the old no-fault system, each party’s insurer paid for damages and injuries regardless of who was at fault in the accident. Under the tort system, the insurer of the driver found to be responsible pays.

Since the change, premium decreases have exceeded predictions, said Carole Walker, executive director of the Rocky Mountain Insurance Information Association.

“Three years ago, we were talking about double-digit rate increases,” she said. “We are now talking about double-digit rate decreases.”

Other insurers also have cut premiums and plan further reductions.

USAA, one of the state’s top five insurers, said rates would drop an average of 14.8 percent in Colorado Springs and 18.5 percent in the Denver-Boulder area, said spokesman John Henry. He said since July 2003, USAA rates in the state have dropped 51 percent.

Colorado’s third-largest provider, American Family Insurance, cut rates 10.7 percent in January and expects further cuts when it sets rates early next year, said spokesman Ken Muth. He estimated the company’s auto premiums have dropped 39 percent since the switch.