It might seem impossible for anyone to devise an auto-insurance plan more fouled up than the one now actually in effect in the U.S. Under the present system, drivers pay high premiums, insurers incur heavy losses, and the nation's accident victims recover only about a fifth of the $5.1 billion a year in medical expenses, loss of income and other tangible damage that they suffer. Massachusetts politicians, however, have almost succeeded in producing something even worse. They have taken a highly promising plan for reform and turned it into a hash that, unless quickly amended, could prevent many Bay State drivers from being able to buy insurance at any price.
The original plan, carefully drawn by Governor Francis W. Sargent in consultation with insurance-industry leaders, would have provided the first clear-cut test in any state of the "no-fault" principle of auto insurance. At present, a person injured in an auto crash must prove that the accident was someone else's fault before he can collect any insurance award. Many accident victims—35% in Massachusetts—are unable to prove fault and never get a penny; others overload the courts and the insurers' investigative machinery with claims that take up to four years to settle.
Sargent proposed instead that an auto driver, his passengers and any pedestrians struck by the car be entitled to collect up to $2,000 for accident injuries from the driver's insurance company without attempting to prove who was at fault. The bill also ordered a 15% cut in premiums on bodily injury insurance. The companies figured that they could afford the lower rates because of prospective slashes in their investigative, administrative and legal expenses. Massachusetts drivers could use the reduction; they pay the highest average premiums in the country. The minimum liability insurance required by law in Massachusetts costs $128.37 v. a national average of $89.
The Democratic-controlled legislature passed the bill, but not before attaching amendments that threaten to wreck the Republican Governor's plan. One amendment extends the compulsory 15% rate cut to all sectors of auto insurance, including collision, fire and theft, without any change in the coverage to justify the reduction. Another forces insurers, with few exceptions, to guarantee lifetime renewal of liability policies. Says Sargent's legislative assistant, Christopher Armstrong: "I can be convicted of manslaughter, be caught speeding ten times in one year, get in seven serious accidents resulting in claims of $125,000, and the company still has to renew my policy." Insurers protest that writing policies under those conditions would be economic suicide. Five large companies, including Travelers Corp., the largest writer of auto policies in Massachusetts, and Aetna Casualty, the third largest, insist that they will pull out of the auto-insurance business in the state completely if these provisions remain in the law.
Falling Dominoes. Lobbyists for the influential American Trial Lawyers Association pushed the amendments that make no-fault insurance unworkable. If the plan fails, the lawyers will keep collecting the fees they now get for representing accident victims, who must prove fault. Some legislators probably also hoped to embarrass Sargent in his re-election campaign. Sargent signed the bill to avoid handing the Democrats an issue.