Printer Friendly

AMERICAN INSURANCE ASSOCIATION ISSUES STATEMENT ON PROPOSED 'PAY-AT-THE-GAS-PUMP' NO-FAULT AUTO INSURANCE SYSTEM

 AMERICAN INSURANCE ASSOCIATION ISSUES STATEMENT


ON PROPOSED 'PAY-AT-THE-GAS-PUMP' NO-FAULT AUTO INSURANCE SYSTEM
 WASHINGTON, May 18 /PRNewswire/ -- The American Insurance Association (AIA) issued the following statement in response to the "pay-at-the-gas-pump" no-fault auto insurance system proposed by author Andrew Tobias and National Insurance Consumer Organization President Robert Hunter:
 The real savings in the "pay-at-the-gas-pump" proposal comes from its no-fault auto insurance system. Under no-fault, accident victims are paid automatically without having to go to court, and most lawsuits are eliminated.
 AIA member companies have long been advocates of effective no- fault systems that provide better benefits, quicker, to more accident victims than lawsuit-based liability systems. An effective no-fault system can guarantee lower insurance rates without the effects of a pay-at-the-pump system that replaces the private sector with big government, inefficiency, bureaucracy and deficits.
 Although there may have been some surface appeal for the insurance proposal in Tobias' 1982 book "The Invisible Bankers," we question public acceptance of the huge add-on to the price of each gallon of gasoline for "pay-at-the-gas-pump" insurance.
 With today's federal, state and local budget problems, even a few pennies of additional gas taxes for highway construction and maintenance are bitterly opposed by consumers. Gas purchasers surely will resist the huge surcharge for insurance. Also, the inevitable consumer cutbacks in gas purchases will hinder raising additional revenues for critically needed highway construction and repair.
 With insurance costs almost totally dependent on a vehicle's miles-per-gallon range, there could be a move to smaller fuel- efficient cars and a deterioration in highway safety. Safe small-car design is possible, but current small cars have much higher death and injury rates than big cars. Also, basing insurance on gas mileage is a regressive tax that discriminates against low-income drivers with older, less-fuel-efficient cars.
 The proposal also raises serious fraud and enforcement issues. Almost any state or group of states attempting this plan would lose its retail fuel industry and millions of dollars in tax revenue, when residents flee to out-of-state pumps where fuel could cost as much as one-third less. With a full tank, a motorist could claim insurance coverage and pay little or nothing additional for it. So, it is possible that there would be even more uninsured drivers.
 The proposed system is a prescription for long-term financial crisis and will result in less competition. Despite its trappings, this proposal puts the government squarely in the insurance business. Intense political pressure will force government to arbitrarily suppress the price of the per-gallon insurance coverage charge. This will, in turn, create massive deficits and lead to a savings-and- loan-style taxpayer bailout.
 Any pay-at-the-pump insurance rating system would be far less accurate and fair than current private insurance systems, which base rates on proven factors such as driving experience, repairability of the car and where the car is driven.
 Any administrative cost savings in the proposal would come primarily from the elimination of insurance agents and commissions. However, agents advise clients on types and amounts of coverage needed to meet particular circumstances; they help with proper rating; they assist in claims handling; and they fight fraud. No one would provide this advice and counsel function for the basic coverage with a pay-at-the-pump proposal. The results, under this proposal, would be less-informed and less-beneficial insurance decisions, no rating accuracy checks and no fraud prevention. Removing agents also limits personal contact with claimants, resulting in less-efficient claims handling.
 If cost savings is the goal of a pay-at-the-pump system, it is possible to establish a no-fault system and realize savings, while not expanding the government's role in the administration of the system. The "pay-at-the-gas-pump" proposal risks the creation of a system that is far less safe, less efficient, less fair and less financially sound than today's private auto insurance.
 The American Insurance Association represents more than 240 property-casualty insurance companies, which employ more than 150,000 people, and pay nearly $2 billion in state taxes and licensing fees each year. The AIA is headquartered in Washington and has representatives in every state.
 -0- 5/18/92
 /CONTACT: Ken Hacker or David Snyder of the American Insurance Association, 202-828-7100/ CO: American Insurance Association ST: District of Columbia IN: INS AUT SU:


MH-DC -- DC025 -- 1434 05/18/92 15:25 EDT
COPYRIGHT 1992 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:May 18, 1992
Words:703
Previous Article:FREEPORT-MCMORAN ANNOUNCES MAY DISTRIBUTION
Next Article:PACIFIC MEDIA VENTURES ANNOUNCES MICHAEL ANDRETTI CITY-BY-CITY PROMOTIONAL TOUR AND NATIONAL SWEEPSTAKES
Topics:


Related Articles
Auto insurance industry turns up heat on government plan.
SURVEY FINDS OPPOSITION TO NO-FAULT AUTO INSURANCE
'HIT ME I NEED THE MONEY' AND OTHER REASONS TO REFORM AUTO INSURANCE
ACCIDENT RATES DOWN, BUT SPRAINS AND STRAINS DRIVING UP AUTO INSURANCE COSTS, ACCORDING TO NEW STUDY
Alliance of American Insurers Says Governor Whitman's Auto Insurance Reform Plan Must Be Closely Examined for Long-Term Impact

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters