Wrong direction on auto policies

Lawmakers mull costly insurance mandates

Published February 3, 2006 at midnight

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Have Democrats in the state legislature forgotten how it came about that Colorado reverted to the tort model for auto insurance after nearly 30 years' experience with no-fault? You might think so, given several bills they're sponsoring this session.

Before it reached its inglorious end in 2003, the no-fault law had become so weighted down with bloated mandates and costs that it embodied all the worst features of both systems.

Under no-fault, each driver buys insurance for his own medical expenses, regardless of who is at fault; under a tort system, the insurance policy of the driver who was at fault pays.

In practice, there is very little difference in how promptly claims are paid, and indeed customer complaints (not to mention premiums) have dropped significantly since Colorado changed over.

But it seems legislators have forgotten, because there are at least six bills that would bring back some of the worst features of the old days.

Under that system, auto insurance had to include medical coverage even if the purchaser already had another medical plan. By the time no-fault expired, the amount of insurance mandated by law ballooned to $130,000 worth of "personal injury protection" (PIP).

Inevitably, some drivers who would have bought a policy with reduced coverage couldn't afford to buy insurance at all. Sure enough, the percentage of uninsured drivers has dropped since the change to a tort system.

A second problem was that the benefits provided by PIP were far more generous than those provided by most health insurance plans. And providers often charged far more for treatment under PIP than for the same treatment under ordinary health insurance.

The providers who flourished under no-fault naturally would like to enjoy such prosperous times again, but that does not explain why legislators are so eager to accommodate them at the expense of the public.

For example, Senate Bill 19 mandates $40,000 worth of coverage for all accident-related emergency care, even though many people already have other coverage. That could cost a family hundreds of dollars a year for coverage they don't need.

House Bill 1044 provides that once an insurance company has paid a property damage claim, it must also pay any claims for bodily injury under threat of huge penalties. But it is entirely possible for the property claims to be legitimate while the injury claims are not. If this passes, companies will be slower in settling property damage claims.

One proposal does make sense: HB 1041, which would adjust the state's prompt payment laws to apply to the tort system. Lawmakers should pass it, but scrap the rest.

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