Containing Car Insurance Costs

Los Angeles Superior Court Judge Jack Tenner wrote in The Times that insurance companies in California should be treated like a telephone company or any other public utility (“Logic Could Go a Long Way in Auto Insurance Dispute,” Op-Ed Page, Dec. 27).

Judge Tenner appears to be advocating a system that would require a state agency similar to the Public Utilities Commission to guarantee insurance company profits just as public utilities are guaranteed profits.

His proposal, unfortunately, is misguided and fails to attack the underlying problem of California’s auto insurance woes and voter outrage at premiums--skyrocketing claims costs.

Even if insurance companies were treated like other utilities, as Judge Tenner advocates, the regulating body still would have to hike rates (at the expense of consumers) provided cost increases were left unchecked.

Why is it so expensive to provide auto insurance in California?

Some examples:

- Hospital and medical care payments in auto accident cases are 72% higher in California than other similar states. And, those payments--mostly paid by insurance companies--continue to escalate.

- Auto insurance fraud--which is 83% higher here than New York--is rampant in California, costing consumers an estimated $500 million to $1.5 billion annually.

- Costs associated with unusually large numbers of lawsuits are exorbitant.

Unfortunately, Judge Tenner and the trial lawyers of this state also miss the mark at the expense of consumers when they call for a hands-off policy on California’s tort, or civil justice system.

Statistics clearly show that our existing legal system for dealing with auto accident cases is abused and overloaded with frivolous cases. And where does that leave the accidents victims? Not as the ultimate financial winners one might imagine.

The RAND Corp.’s Institute for Civil Justice stated in a 1986 report that tort victims received only about 46 cents for each dollar awarded them for their injuries.

Trial lawyers may receive up to 40% of those damage awards, which is the reason they so strenuously oppose any meaningful reforms of the claims-handling system.

EDWARD LEVY

General Manager

Association of California

Insurance Companies

Sacramento