[Congressional Record Volume 144, Number 141 (Friday, October 9, 1998)]
[Senate]
[Page S12229]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       THE AUTO CHOICE REFORM ACT

 Mr. ALLARD. Mr. President, I rise to make a few remarks 
concerning the Auto Choice Reform Act. I am a co-sponsor of this 
legislation.
  The Auto Choice Act proposes the development of a ``no fault 
compensation system'' to provide an option to drivers who do not want 
to pay for services they do not want and will not use. This legislation 
would allow for the recovery of economic losses, but not for the 
recovery of non-economic damages like pain and suffering. Those who 
choose to stay insured under the tort system would retain the right to 
sue and be sued for economic and non-economic losses, while those who 
choose the ``no fault'' system would be able to sue or be sued for 
economic damages only. And that is what the Auto Choice Act is really 
about, Mr. President. Choice for the driving public.
  All drivers are currently insured through a system that requires them 
to pay for insurance on the assumption that if they are involved in an 
accident then they will sue or be sued for more than economic damages. 
The majority of drivers are never involved in a suit for pain and 
suffering, yet they pay for this coverage every single month.
  Between 1987 and 1994 the cost of automobile insurance increased by 
44%. This extraordinary increase was due in large part to excessive 
claims made by accident victims for pain and suffering, that is, for 
compensation beyond the costs of automobile damages and medical bills. 
For every $1 in actual economic loss generated by this system, $3 are 
paid out for non-economic damages. Rampant abuse of the insurance 
industry attempts to turn people's misfortune into a sweepstakes.
  This sweepstakes is particularly beneficial for attorneys who collect 
40 cents of every dollar paid for bodily injury. Twenty-eight cents 
from every premium dollar goes to attorneys. According to the Joint 
Economic Committee, lawyers earn between $15 and $17 billion a year 
under the current tort system and lawyers on both sides of a dispute 
make almost two times the amount of money that injured parties receive 
for actual economic loss. This is abuse of a system that exists to 
protect people from the genuine financial costs of misfortune and 
tragedy.
  The Federal Bureau of Investigation estimates that such excessive 
legal and medical claims, combined with outright fraudulent claims, 
have added $200 in unnecessary premiums for every household in America. 
That's a $200 increase for every family--regardless of what type of 
coverage that family may want. That's $200 that will not be spent on 
groceries, clothing for children, or tucked away into savings for 
education.
  This system becomes more inequitable when the burden on low-income 
and urban drivers is considered. These drivers pay a disproportionate 
amount of their income for auto insurance. In my home state of Colorado 
we have the 14th highest insurance rates in the nation. The effects of 
the high cost of driving in Colorado are particularly noticeable along 
the more densely populated front range. Last week Denver Mayor 
Wellington Webb testified before the Senate Commerce Committee 
concerning the effects of high premium costs on a large urban 
population. Mayor Webb testified that not only do the urban poor pay a 
premium disproportionate to their income, but high premium costs can 
also deter drivers from purchasing insurance at all. Dr. Robert Lee 
Maril testified to the disproportionate cost of insurance stating that 
nationally households spend 2% of their annual income on automobile 
insurance. The upper 50% of people living below the poverty line, 
however, spend a staggering 14% of their income on automobile 
insurance.
  Mayor Webb also testified that this is not just an issue for the 
poor. Middle-income families spend on average 150% more on auto 
insurance than they do on education, and in the City of Denver alone 
residents would see their premiums reduced by as much as 40%.
  In July the Joint Economic Committee released a report that 
demonstrates the benefits of Auto Choice for businesses. In addition to 
the relief this bill provides for individual drivers, the JEC reports 
that nearly 40% of all tort cases against businesses are auto-related. 
The incentives that drive the tort system increase the cost of doing 
business. In 1994 businesses spent $21 billion on auto liability 
insurance. Just as families are forced to spend money on high premiums 
that could be better spent on food or education, businesses are forced 
to dedicate resources to liability insurance instead of payroll and 
capital investments. The JEC report concluded that the Auto Choice Act 
would result in an average 27% savings on commercial auto insurance, 
potentially saving American businesses $41 billion over five years.
  The Insurance Commissioner from my state of Colorado has endorsed 
this legislation, however, I realize that in spite of the expected 
benefits of this legislation, some states prefer their current system. 
Therefore, this bill provides a choice for the individual states. Under 
this legislation, state legislatures are able to opt-out of Auto Choice 
for any reason. Furthermore, the bill clearly states that it will not 
preclude a State or State Official from fully exercising their 
regulatory authority concerning policy rates, consumer protection or 
carrying out the requirements of this act. The Auto Choice Reform Act 
will leave the ultimate regulation of auto insurance to the states.
  The implementation of The Auto Choice Act would cause the average 
insurance policy to decrease by $243 annually, saving drivers an 
estimated $45 billion nationwide. By providing greater choice to the 
driving public, without cost to the government, the driving public 
would save $246 billion over five years. That's an enormous savings for 
simply providing an option to the consumer. This is a bill about 
choice, it is a bill about savings, and it is a bill about equitable 
compensation for the American driver.

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