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PERSPECTIVE ON AUTO INSURANCE : Is No-Fault What California Needs? : YES: Consumers, not lawyers or the industry, would triumph with this basic, low-cost policy.

May 26, 1991|HARRY SNYDER and JUDITH BELL | Harry Snyder is director of the West Coast regional office of Consumers Union. Judith Bell is director of special projects

In the 1970s, if you went into a body and fender shop, the first thing the guy asked was, "When do you need it by?" not, "Is this an insurance case?" In the 1970s you didn't wonder whether the next driver was insured, because the price of insurance was not an issue. In the 1970s, not only was there less traffic, there were no billboards for attorneys seeking whiplash victims.

We're in dire need of changes in auto insurance. We can't afford a system that produces bumper stickers saying, "Hit me, I need the money."

The solution already exists, and needs only to be enacted into law. Its foundation is a $220 no-frills policy for any good driver, anywhere in the state. It would mean savings of hundreds of dollars for almost every good driver in the Los Angeles metropolitan area; it would also mean an insurance system that allows almost all drivers to be covered, and that would pay almost all claims within 30 days of an accident.

This proposal, known as the Johnson bill after its sponsor, state Sen. Patrick Johnson (D-Stockton), was drafted by California consumer and minority groups, and is based on similar plans in other states. The first vote in the Legislature is scheduled for Tuesday.

Here's how the plan works:

Anyone involved in an accident, regardless of who is at fault, files a claim with his or her own insurance company. The basic policy would provide for payment of up to $15,000 for health care and wage losses of each occupant of each car. That's more coverage for actual losses than the current basic liability policy provides, since the plan covers all accidents and doesn't have today's per-accident limit.

Insurance companies would have to pay claims within 30 days or face interest and damage penalties. The bill would also require all drivers to prove that they are insured when they register their cars.

These benefits would be made possible by eliminating the costs of unnecessary lawsuits and the so-called "pain and suffering" awards now sought in minor accidents with no serious or permanent injuries. To get the price down to $220, the basic, no-frills policy does not include coverage for property damage. Consumers would still purchase additions to the no-frills policy, just as most now buy much more than the basic, required policy. For most drivers, the added coverage would cost less because there would be savings for everyone in the reduction of lawsuits, in prompt claims handling and in drastic reduction of uninsured motorists.

Most consumer, minority and low-income groups support the Johnson bill, as do Gov. Wilson and editorial boards that opposed the 1988 insurance company no-fault plan, Proposition 104. The difference is that this time, the right to sue for pain and suffering for any serious or permanent injury, even a broken pinky, is preserved. So is the right to sue any reckless or drunk driver.

Some opponents argue that we should be able to sue for every accident, no matter how minor. But we propose giving up only a very small part of access to our courts in order to eliminate fruadulent and inflated claims. These savings would be passed on to consumers. Future increases would have to be based on actual, provable costs to the companies and approved by the elected insurance commissioner. Proposition 103 and new Department of Insurance regulations would cap insurance-company profits.

The politics of auto insurance is not a battle between insurance companies and trial lawyers. This is a battle between consumers and both of these groups. Consumers have been caught between the industry and the lawyers, each making deals with the other and with the Legislature, deals that only benefited attorneys and insurance companies.

A system of affordable, cost-contained auto insurance is one thing government can achieve, and at no additional taxpayer cost.

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