While insurance carriers continue to stonewall efforts at any meaningful overhaul of the insurance system in our country, columnists in The Times are presenting analyses that fall short of meaningful reform.
In his column on Feb. 22, "Liability Suit System Needs an Overhaul," John F. Lawrence posited that our present system of adjudicating fault and damages through the court system is inefficient, therefore significant steps should be made to overhaul the liability suit system.
Before undertaking an analysis of that theory, one must understand a few basic truths.
First, our society has always operated on the principle that one who wrongfully causes injury should pay for the damage.
An innocent victim should not be required to insure himself against wrongful conduct by another, whether that wrongful conduct expresses itself in the negligent operation of a motor vehicle by a drunken driver or through a defective product designed and marketed for use by members of the public. Second, many of the administrative costs in the insurance claims arena are created by the insurance carriers themselves.
Health insurers, life insurers and disability insurers are able to operate with lower administrative overhead expenses because of a simple fact: Most of the claims are liquidated claims--that is, a claim is presented for a specific amount of money based upon a specific bill or event.
When dealing with injury claims, which include compensation for medical expenses, loss of earnings, future expenses for these economic losses and general damages, insurers have taken much longer to pay and have spent large sums questioning the allegations.
A simple solution to dealing with lawyers in the insurance claims arena would be for insurance carriers to settle claims quickly, fairly and adequately.
If the public trusted the insurance companies to do this, they would not hire lawyers. Not only would the legal expense of the claimant be saved, but the insurance carriers would save the legal expense and administrative overhead associated with handling claims over a four- or five-year period.
One might ask why the insurance companies have not thought of this themselves. They probably have.
The reasons why they haven't implemented such claims practices are rooted in the history of the insurance industry and in the greed of the executives who run the industry.
Insurance has traditionally operated on the premise that dollars paid in are ultimately going to be paid out in claims and expenses; in other words, there is generally very little underwriting profit. The industry makes its money by investing the premiums it receives.
Lawrence's hypothesis is flawed in two basic ways: First, the suggestion that individuals insure themselves against damages caused by the wrongful conduct of others raises fundamental questions of fairness. Second, until the insurance industry can demonstrate that it can be trusted to pay claims promptly, fairly and without aggravation caused to almost any claimant, consumers and premium payers should not be exposed to the risk that an insurance industry unpoliced by trial lawyers will run amok.
THOMAS G. STOLPMAN