The adoption of no-fault insurance, whether it is optional or mandatory, is neither the reasonable nor responsible way to reduce and stabilize auto insurance premiums.
The bill, known as the Citizen Choice Auto Insurance Act of 1991, is an optional no-fault measure, which would allow drivers to remain in the present liability system or toenter the new no-fault system.
No-fault insurance policies pay medical costs and lost wages, butdeny drivers the right to bring suit for damages, including compensation for pain and suffering in accidents that do not result in severedamages, permanent disabilities, disfigurement or death.
In return for giving up one's right to sue, no-fault reduces insurance premiums.
Michigan has had a no-fault system for nearly 20 years. That system pays all medical, hospital and rehabilitations and up to $100 aweek in lost wages for one year. Federal studies show policy holderssave 17 percent on their premiums.
The no-fault measure being considered by the General Assembly mandates a 25 percent reduction in premiums for those who buy the basic benefit package, which is $20,000 per person in personal injury protection.
It should be noted that $20,000 coverage is the minimum state requirement at this time. That sum wouldn't even begin to cover serious injuries with prolonged rehabilitation.
Indeed, the greatest premium savings will be realized by those who carry the bare minimum coverage of $20,000. As the policy coverage increases, that premium savings will decrease. The measureallows for lost wages to be paid in an amount not to exceed $250 a week.
Claiming that an excessive number of lawsuits is the cause ofexorbitant premiums, the insurance industry favors no-fault. And that is certainly understandable. No-fault is a painless way for the industry to reduce premiums. All the pain is borne by the policy holders.
Ralph Nader and many consumer groups are overwhelming in their opposition to no-fault. They claim that it is not the excessive numberoflawsuits, but rather the insurance industry's greed that is responsible for soaring premiums.
Opponents of no-fault point out that in the 15 no-fault states in 1989, the average premium was $428.15, while the traditional liability or tort state had average premiums of$401.08.
From 1984 through 1989, no-fault premiums increased at arate of 31.1 percent, as compared to a 29.5 percent increase in the tort states.
The Department of Legislative Reference report on no-fault further states that the average claim settlement in no-fault states was $4,976.08, while it was $4,086.43 in tort states.
According to these figures, the advantage of adopting no-fault is greatly exaggerated.
At first, the Governor's Special Commission on Insurance took no position on no-fault insurance. Toward the end of February,however, the commission endorsed it as the answer to our high insurance premiums. This help appears to be too little, too late.
Even if no-fault won the approval of the House of Delegates, it probably would not win Senate approval.
I would be insincere if I claimed that the damages-based system we have now is the best system possible. There are abuses of thatsystem. Suits are filed in fender-bender accidents, and inappropriate sums are often awarded in these accidents in settlement or in court.
In no way do I condone the abuses under the present system. But, as I see it, asking drivers to give up their right to sue in exchange for lower premiums is tantamount to throwing the baby out with the bath water.
In 1990, Marylanders bore the 10th-highest auto insurance premiums in the nation. It is interesting to note that of the nine states whose citizens bore higher premium costs, four of these statesare no-fault states: New Jersey, Connecticut,Pennsylvania and Massachusetts.
We need relief from excessively high premiums. However, we should not have to pay an excessively high price for that relief.
According to the figures, no-fault does notoffer tremendous relief. Even if it did, giving up our right to sue is too high a price to pay for premium relief.
There is something inherently unfair about making the policy holder bear the responsibility for lowering auto insurance premiums. At the very least, that responsibility should be shared by the insurance industry and the policyholder.