The high price of auto insurance.

• Author: Gordon, Diana
• Position: Automobile insurance

Legislatures are in the unenviable position of trying to keep everybody happy - taxpayers, accident victims, insurance companies and even lawyers.

Most taxpayers know only two things about auto insurance: Forty-four states say they have to have it, and it costs too much.

Americans paid an estimated $142 billion for auto insurance in 1997. The average policy cost $757 in 1995, and a study by Consumer Reports showed that the average cost to insure a vehicle rose 44 percent between 1987 and 1994, nearly one and a half times the rate of inflation.

Massachusetts was the first state to require drivers to carry auto liability insurance, in 1927. Today, all states have financial responsibility laws that require drivers to show proof of their ability to pay after an accident, and 44 say you must have insurance if you drive.

Over the years, the states that require insurance have come up with a number of plans they hope will be more equitable for insured drivers, accident victims and insurance companies. Unfortunately, auto insurance has come to be viewed as a no-win predicament: Drivers don't want to pay high premiums, victims want compensation commensurate with injuries, insurance companies combatively protect the bottom line, and lawyers are involved in all aspects of the dilemma.

Why are the costs so high?

Many continue to point their fingers at lawyers. A 1990 study by the California Department of Insurance states that 40 cents of every premium dollar paid for bodily injury liability and uninsured motorist coverage goes to attorneys. It's a vicious cycle: Accident victims pay for legal representation and insurance carriers hire their own lawyers.

Not so fast, says a spokesman for the Association of Trial Lawyers of America (ATLA). "Many of your state legislators know the truth is basically that insurance companies and regulators are the problem." He added that insurance companies made more than $18 billion just on auto insurance last year.

ALLEVIATING THE FAULT?

So, if there were fewer lawsuits, rates would go down. Correct?

Fifteen states worked out legislation along those lines and created no-fault insurance. If a driver is in an accident, her insurance company pays her bills. No fuss, no muss, no having to hire a lawyer and prove who was at fault to determine who pays what.

However, trying to pass legislation opposed by the strength of the trial lawyers association led to compromises - after a certain point depending on the specific state statute, people can still file lawsuits against the "at-fault" driver. No-fault was essentially defeated by the leeway given for lawsuits.

The plan seems to be working best in Michigan. Bob Hunter of the Consumer Federation of America points to Michigan no-fault as the best approach to auto insurance.

"Michigan is simple, straightforward no-fault," he explains. "For giving up your right to sue, you have unlimited medical care and rehabilitation services. It's the only state in the...