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Pay-at-the-Pump Doesn't Make Sense

April 25, 1993

I'm writing regarding Daniel Akst's article "Paying at the Pump Makes Sense" (April 6).

Paying for auto insurance at the gasoline pump is a novelty attracting lots of attention. But consumers should read the warning label: Paying at the pump provides only bare-minimum protection, contains hidden costs, promises more than it can deliver and makes bureaucracy a key player.

The major savings from pay-at-the-pump are derived from its no-fault provisions and mandatory coverage of uninsured motorists. The Assn. of California Insurance Cos. agrees that no-fault will go a long way toward controlling the underlying costs of insurance.

But using gas stations as collection agents for insurance raises lots of problems. Look at the cost to consumers. Neither financial writer Andrew Tobias nor the California Department of Insurance has provided support for their estimate of 30 to 40 cents per gallon. The true cost even for a minimal program is likely to be much higher.

What is clear is that the tax at the pump is only the beginning. One version of the bill pending in Sacramento has numerous surcharges on vehicle registration and driver's license fees--including a charge for being a good driver. Drivers with a few tickets could pay as much as $1,000 extra for minimal coverage.

And what do you get for your money? Repaired cars with dents still in the fenders and non-matching paint. Coverage that doesn't include theft or windshield replacement. Deductibles tagged at 5% of the car's value (that's $750 on a $15,000 car). Secondary health coverage, forcing you to use up your health benefits at work for accidents, and perhaps forcing a premium hike at the same time.

This is the same pay-at-the-pump idea that first surfaced in California 20 years ago. Once you look at the details, it becomes obvious why it never became more than a novelty.



The writer is senior vice president of the Assn. of California Insurance Cos.

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