Commentary: Leave Auto Insurance To The States Not Bob Dole

On the face of it, Bob Dole's proposal to overhaul auto insurance looks like a sure winner. The plan promises to cut an average of $221 from each car's annual insurance bill by putting the brakes on auto-injury lawsuits.

But Dole's overhaul is politics masquerading as policy--and bad policy to boot. The scheme, included in the candidate's economic plan, is an easy slap at the nation's trial lawyers--some of President Clinton's most generous contributors--for their part in driving up car insurance rates. That may play well with voters. But it is highly hypocritical. Dole is pushing for a bigger federal role in auto insurance, even as his party pushes for less federal involvement on just about every other issue. "This ought to be determined at the state level rather than with a one-size-fits-all federal solution," contends John C. Lobert, senior vice-president for government relations at the National Association of Independent Insurers.

Several states have been experimenting for years with auto insurance reform. But the Dole proposal is more radical than any of their efforts. Under the Dole plan, car drivers around the country would have two options:

They could buy a low-cost auto policy--covering medical outlays, lost wages, and other "economic costs"--that resembles the no-fault policies which are offered in some states. If they were hit by someone else and the associated costs exceeded their insurance coverage, they could then sue the other driver to recover the excess expenses. But only in rare circumstances--when the other driver was using drugs or alcohol or intended to hurt them--could they sue for pain and suffering.

The second choice would be a more expensive policy, a traditional-insurance-style plan that would allow recovery of money for pain and suffering. But victims would collect from their insurer, not the other driver's. Drivers without this broader coverage couldn't sue or be sued for more than the direct cost of an accident they caused.

Proponents of the Dole plan claim that this would slash the number of auto injury lawsuits, and they predict the resulting savings would be passed on to consumers in the form of lower insurance premiums. "The pain-and-suffering money recovery is largely cash that goes into the lawyer's pocket," explains the Hudson Institute's Michael Horowitz, an architect of the plan.

Sounds good. But in reality, many states don't need relief. Most rural states aren't plagued by excessive auto injury suits because costs at rural hospitals tend to be lower and rural drivers tend to be less litigious. And while Dole's plan would give states the right to repeal or alter the federal law, it would create a logistical headache that many would rather avoid. "The system we have works," says Darla L. Lyon, director of the South Dakota Insurance Div. "This has the potential of making things worse for us."

What's more, states such as Maryland, Pennsylvania, and New Jersey have already implemented insurance reforms. For instance, New Jersey offers drivers the choice between policies with full legal rights and those with restrictions on lawsuits. In Pennsylvania, a similar scheme caused car insurance rates to rise only 3.3% from 1990 to 1994, compared with a 12.6% increase for the nation. It makes more sense to learn what works from such experiments than to plunge ahead with an untried national system. "There is no system exactly like the Dole plan, so there just isn't a track record for it," worries David F. Snyder, assistant general counsel for the American Insurance Assn.

THIN SUPPORT. Of course, the plan may simply be an attempt by Dole to needle Clinton about the help he gets from trial lawyers. The Dole camp has done little to line up support for the proposal. The plan also has powerful opponents. For example, the Consumer Federation of America argues that it would allow negligent drivers to avoid responsibility for the injuries they cause. Most insurance companies are also loath to endorse it, fearing loss of the clout that they wield in state legislatures. "The federal government just isn't close enough to the disparate needs of the states," says a spokesman for Nationwide Mutual Insurance Co., the nation's fourth-largest auto insurer.

Dole may be at least partly hoping that the mere existence of the proposal and its attack on ambulance-chasing lawyers will be another boost to his campaign. But it will be tough for him to get much mileage out of this one.

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