Garamendi Urges ‘Pay at Pump’ Car Insurance : Liability: No-fault plan envisions a 40-cent-a-gallon charge to provide universal coverage and replace current premiums. Critics say consumers would more likely pay up to $1 per gallon.

State Insurance Commissioner John Garamendi on Tuesday embraced a revolutionary “pay at the pump” method of financing no-fault automobile insurance that would cover all motorists, including currently uninsured drivers.

Garamendi estimated that the proposal could save consumers about $4 billion a year in insurance company sales, underwriting, administrative and legal costs associated with the current system of paying for private coverage through premium charges.

“If California consumers are to throw off the unbearable burden of auto insurance costs, it is time to move to a different system,” Garamendi said at a news conference. He is scheduled to testify today on the issue at a statewide televised hearing of the Senate Insurance Committee.

Garamendi, a potential Democratic candidate for governor next year, said that such a plan had a “good opportunity” for enactment into law in spite of no-fault provisions that have been rejected by the Legislature for decades. He contends that the burden of insurance coverage has become so heavy that drivers will demand enactment of such a plan.

But the proposal drew fire from a top-level insurance industry executive who labeled it a gas tax and from a consumer activist who deplored it as a “heavy hit” on low- and middle-income Californians.

Pay at the pump, advanced by business writer Andrew Tobias, would require California drivers to pay about 40 cents per gallon in additional charges on gasoline to finance a no-fault system of no-frills car insurance. Motorists also would pay surcharges on driver’s licenses, car registration renewals and traffic citations.

The plan would eliminate traditional insurance premiums. Tobias estimates that most motorists currently spend the equivalent of about 85 cents per gallon for insurance.

A comparable “pay as you drive” plan was introduced in the Legislature in 1975 and killed. Among other things, it envisioned a 6% increase in the gasoline tax along with higher driver’s license and registration fees. The bill, however, did not propose no-fault.

In no-fault systems, motorists are compensated for their own losses no matter who causes an accident. No-fault insurance is favored by the insurance industry, but it is fiercely opposed by personal injury attorneys.

The plan essentially would eliminate the problem of uninsured drivers. Garamendi estimated that as many as 30% of California drivers are not insured, including 50% in some inner-city areas.

Advanced in the Legislature by Sen. Art Torres (D-Los Angeles), chairman of the Insurance Committee and a possible future contender for insurance commissioner, pay at the pump is not yet in bill form.

Even so, the proposal was criticized by Thomas F. Coneely, president of the Assn. of California Insurance Cos., an influential trade association, and by Harvey Rosenfield, who wrote the Proposition 103 insurance reform initiative approved in 1988.

“The big problem with this proposal is that while the sponsors are claiming (insurance) will cost somewhere between 20 and 50 cents a gallon, more realistically it will be closer to $1 a gallon,” Rosenfield said. “That is just untenable for low- and middle-income motorists.”

Coneely urged a “careful reading of the fine print” because “this plan is not as pure as it first appears.” Though careful to avoid trampling on its no-fault provisions, he too suspected the additional charge might reach $1 per gallon.