Pay at Pump, Ease Gridlock on Reform : Auto Insurance: Assessing premiums at gas stations would cover all, end lawsuits and uninsured motorist problems.
For the past five years, the California Legislature has gridlocked on developing a fair and equitable policy for auto insurance. Big players--including trial lawyers (who favor the present liability system) and insurers (who prefer exclusionary underwriting practices)--have used legislative allies to put a lid on any significant reform.
Consumers, meanwhile, simmer in the wake of outrageous premium rates, often as high as $1,500 for drivers with near-perfect driving records. A large percentage of people--up to 50% in some urban areas--simply choose to drive without insurance.
Andrew Tobias, a financial adviser and author of a newly published book “Auto Insurance Alert” is attempting to bring to the public forefront a common-sense, rational and environmentally smart approach to auto insurance known as Pay-at-the-Pump Private, No-Fault (PPN).
Under PPN, drivers would pay for their insurance premiums when they purchase gas. Accordingly, anyone who drives would be automatically insured. Tobias and various academics, including UC Berkeley law professor Steve Sugarman, estimate that the average driver would pay between 30 to 40 cents per gallon for this form of “pure no-fault” insurance. California drivers now pay the equivalent of 85 cents per gallon for auto insurance. The common experience under PPN would mean a driver would pay between $300 to $600, depending on how much one drives.
The savings, estimated in the hundreds of millions of dollars, would come from the elimination of all sales and underwriting costs (15 cents on every premium dollar), the elimination of lawsuits and the uninsured-motorists problem, and a reduction in the paperwork and time spent shopping for policies.
A basic PPN policy--which provides more coverage than many drivers now enjoy--would provide every driver with unlimited medical coverage, lost wages up to $25,000 a year and a modest schedule for pain and suffering. Additional coverage would be optional, depending on consumer preference. The basic policy would preclude the need for liability coverage by eliminating all lawsuits.
Much like group health insurance, Pay at the Pump insurance would still be provided by private insurance carriers. It would not be run by the state. The state would merely collect the premium--just as it does with the gas tax--and disburse it to private insurance companies and other institutions that would provide the claims services.
As outlined by Tobias, the issue of good versus bad, or young versus old drivers could be dealt with when drivers register their car. A driver with a bad record, for example, might pay twice as much as, say, a driver with a perfect record.
Any sweeping proposal of this magnitude will naturally invite many questions. Mindful of this, the Senate Insurance Committee is sponsoring a special hearing on the proposal today from 1 to 4 p.m. The hearing will be broadcast live on the California Channel on cable stations statewide. To maximize public input, viewers may call in testimony or ask questions during the last hour by calling (800) 773-2568.
Pay-at-the-Pump undoubtedly will be contested by just about everyone with a vested interest in the status quo. Litigious lawyers will bemoan the no-fault provision. Insurance agents will decry the loss of individual policy sales. Gas station owners will oppose it because higher gas prices encourage conservation (environmentalists, for this reason, may support the proposal).
But absent any effort by these parties to work toward genuine reform in Sacramento, Pay-at-the-Pump is worth exploring and pursuing. If anything, the concept alone--and the debate it undoubtedly will generate--may well prod legislators into finally taking action on an issue of urgent importance. Consumers deserve no less.
