50 Cents on the Dollar Is Not Reform : Prop. 103: Rebates are not the way to go, and the prolonged battle over them only masks the need and efforts for real change.

Auto insurance rebates mandated by Proposition 103--resolved Aug. 18 by the state Supreme Court in the 20th Century Insurance Co. case--are a costly smoke screen that for too long has concealed the escalating need for genuine reform.

Insurance Commissioner John Garamendi, in October, 1991, set the total rebate liability at $2.5 billion, including $1 billion due from 10 large carriers. This would provide, he calculated with political windage, an average of $100 per motorist.

Nearly three years later, the 10 insurers have paid $500 million in rebates. This means, according to Department of Insurance figures, the commissioner accepted about 50 cents on the dollar. This is an indication of how Proposition 103 continues to be oversold to the voters.

No wonder Harry Snyder of Consumers Union called the rebates “close to false advertising.” A $50-rebate check does not add up to real, long-term auto insurance reform for either consumers or insurers.

Californians desperately need a low-cost liability policy affordable to every driver. In 1993, insurers supported Assembly Bill 456, which provided a $250 basic policy for good drivers.

“A dignity bill,” John Gamboa, Latino Issues Forum leader, said of the concept. Low-cost liability coverage would stop making “insurance criminals” of millions of Californians and solve the uninsured motorist crisis.

Cheap, no-frills coverage is just the first step. We need to focus on the costs of insurance instead of the price; in particular, medical and legal costs, which continue to increase.

Medical costs can be controlled through case management and fee structures similar to those accepted by workers’ compensation physicians.

Legal costs can be controlled by legislation requiring insurers to pay to consumers within 30 days of a minor accident the actual damage costs in return for the driver’s agreement not to file suit.

Actual costs include auto repairs, medical expenses and lost wages. A minor accident--90% of all claims--has economic damages of less than $15,000, according to the Insurance Research Council.

These reforms are neither radical nor new. New York has had this type of no-fault system for 15 years. Consider one statistic: For every 100 property-damage accidents, New Yorkers file 11 bodily injury claims; Californians file 56.

The alternative is to keep trying to fix Proposition 103, which the state Supreme Court has had to review a second time because it is so badly flawed. Perhaps insurance consumers and companies need their own version of a “three strikes and you’re out” law.