PRESS RELEASE
AIA Welcomes Debate on Costs and Wastes of Tort System
20 March 1997
AIA Calls Federal Auto Insurance Choice Plan a 'Start Toward Reform'; Legislation Demonstrates Costs and Wastes of Tort System
WASHINGTON, March 19 -- The American Insurance Association
said today that debate on a federal choice auto insurance proposal highlights
the millions of dollars of waste and fraud that are part of the lawsuit based
auto liability compensation systems in many states. Congress' Joint Economic
Committee held a hearing today on reducing costs in auto insurance systems.
"AIA welcomes the opportunity to bring auto insurance reform to a national
debate," said David F. Snyder, AIA assistant general counsel. "All but a
dozen states have tort liability auto insurance systems. Under tort liability
systems, injured victims lose 40 percent or more of their recoveries to
lawyers' fees and court costs and often have to wait years for compensation.
"Non-lawsuit based auto insurance systems can, if well designed, provide
more prompt and generous benefits for accident victims, reduce costs
15 percent or more and still allow for litigation if the injury is serious or
caused by a bad actor such as a drunk driver," said Snyder. "Michigan and New
York have such systems and New Jersey's choice system is the best of its kind
in the country."
Last year, a Senate bill (S. 1860) was introduced to establish a national
standard for state auto accident compensation systems from which the states
could opt out. Snyder said that last year's measure was a start toward reform
because it demonstrated the costs and wastes of tort liability systems, which
are inefficient, are characterized by economic incentives to commit fraud,
artificially inflate claims by over utilization of health care and are
unaffordable for many low income and urban consumers.
"Reform efforts to provide alternatives to the lawsuit based auto
insurance laws are usually thwarted by entrenched interests profiting from
existing litigation based compensation systems," Snyder said.
"We cannot confirm the savings projections of the supporters of last
year's federal choice auto insurance system because they do not include the
additional insurer expenses arising out of administering the dual system and
because some of the savings may actually shift costs to health insurance,
employers and government," Snyder said. "Last year's bill would have shifted
billions of dollars of health care costs from motor vehicle insurance to
already strained and expensive private and government health insurance
programs, such as Medicaid and Medicare. This cost shifting is bad public
policy and could render some of the bill's projected savings illusory.
"We are anxious to participate in the process and to offer suggestions for
improvements to last year's legislation," Snyder said. "However, the cost
savings for S.1860 should be reviewed. AIA is not convinced that all relevant
factors have been considered."
The American Insurance Association is a trade association representing
more than 300 of the major insurance companies which provide all lines of
property/casualty insurance. AIA companies write more than $61 billion in
premiums annually. AIA's headquarters is in Washington, DC and the
association has representatives in every state.
SOURCE American Insurance Association
CONTACT: Dan Zielinski of the American Insurance Association, 202-828-7494,
or e-mail, dzielinski@aiadc.org