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CALIFORNIANS, HERE IT COMES: PAY-AT-THE-PUMP INSURANCE
It's one of those things Californians dread. Getting involved in a car accident invariably means hefty bills and months of legal wrangling, not to mention the near-certainty of higher auto insurance premiums. Now, faster than you can say "fill 'er up," the nation's most populous state is looking at universal auto insurance by hitting the insured where they are weakest: at the pump.
It's still a long way from becoming law, but if a growing group of California politicians has its way, the state could become the nation's first to force motorists to finance their auto insurance with a stiff new tax on gasoline. Proponents claim that the new pay-at-the-pump insurance would save California drivers as much as $4 billion annually by stripping away unnecessary administrative and legal costs. It would also protect Californians from uninsured motorists, now one in every four state drivers. And, like auto-emission standards and skateboards, it could catch the fancy of such states as New Jersey and Massachusetts, which also are at odds over how to rein in their soaring insurance costs.
By early March, Democratic State Senator Art Torres plans to submit legislation asking for a 30 -a-gallon tax on gasoline, plus variable driver's-license and car-registration fees that reflect the driver's age and experience and the safety record of the vehicle. Typically, a good driver would pay a $195 surcharge on registration fees. In return, motorists would receive unlimited medical benefits, reimbursed wages up to $25,000 a year, and $5,000 in property-damage coverage on their cars (table).
BORDER STATES. Because pay-at-the-pump is a no-fault scheme, liability insurance is not necessary: Drivers could not be sued. "The current system is terribly inhumane, unless you're hit by someone who's rich and at fault, and you can prove it," says Andrew Tobias, the financial columnist and author who promotes the concept in his new book, Auto Insurance Alert! "And it's inefficient. Americans spend $100 billion a year on auto insurance, and about $50 million is wasted on lawyers and sales commissions." Torres, chairman of the California Senate's Insurance, Claims & Corporations Committee, got the idea for his bill from Tobias' 106-page paperback.
Torres' staff has fielded inquiries from legislators in a dozen other states, including New Jersey, Maryland, and the three states bordering California--Arizona, Nevada, and Oregon. That's important because having similar insurance schemes in neighboring states would solve some nagging problems. For one thing, drivers wouldn't be able to slip across the state line to gas up at bargain prices. That's not an insurmountable snag in California, where 98% of the population lives too far from the border to justify out-of-state gas runs. But it could be daunting for smaller Eastern states, say Torres aides.
Torres' biggest obstacle is the perception that premiums-at-the-pump are just another tax foisted on a recession-weary California. In 1990, the state doubled its gasoline tax, to 18 by next year, to raise funds for mass transit and highway construction. And if President Clinton has his way, his just-announced tax increase would hike fuel taxes by 7.5 . Adding in other state and federal levies, Californians would pay a hefty 80 a gallon in taxes.
SWITCHING SIDES. Opponents already are lined up to attack the measure. Trial lawyers have blocked every earlier attempt by the state to change to even less radical no-fault insurance schemes. And insurance companies, which usually side with the state against the attorneys, have switched their allegiance this time. "Going to no-fault would cut insurance costs enormously in California," says David L. Hill, counsel for State Farm Insurance Cos. in Sacramento. "On the other hand, we're not convinced that collecting premiums at the pump would do anything to cut costs on the delivery-system side of the equation."
But, like Clinton, Torres plans to take his appeal directly to the people. In early February, he televised the first legislative hearings on his plan and invited viewers to phone in opinions. Two more TV hearings are planned for March. "Lots of people will realize this is not a tax, but a different way to pay for insurance that will reduce their premiums by as much as 50%." That may be so, but he still has to convince car-happy Californians that raising the price of a gallon of gas is good for them.POLICY DIFFERENCES
How pay-at-the-pump car insurance stacks up against a conventional policy for a
30-year-old Los Angeles motorist with no moving violations who drives 12,000
miles a year in a car that gets 18 miles a gallon
Conventional policy Pay-at-the-pump
COST $968 $395
BODILY-INJURY $15,000 per person See medical coverage
COVERAGE $30,000 per accident
PROPERTY-DAMAGE $5,000 $5,000
COVERAGE MEDICAL COVERAGE
MEDICAL COVERAGE $2,000 Unlimited, plus up to
$25,000 in lost wages
Provisions for uninsured drivers
BODILY INJURY $15,000 per person All state drivers would
$30,000 per accident be insured
PROPERTY DAMAGE $35,000 Not applicable
DATA: CALIFORNIA STATE ASSEMBLY, CALIFORNIA INSURANCE DEPT.
Larry Armstrong in Los Angeles