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Predicting the future here is easy. Whatever happens in California will happen later in Colorado, from getting in touch with yourself to adopting official English.
The California Supreme Court has just upheld Proposition 103, a referendum passed by Golden State voters last fall. Auto insurance premiums must be cut by 20 percent for all drivers, and another 20 percent for those with good driving records.
This assault on premiums has already spread to Arizona and New Mexico, so Colorado's day is coming.
At first, this looks like a great idea. I live in a little town, have a clean driving record, and drive all of 7,000 miles a year. I'll pay an outrageous $453.20 this year for car insurance, which is more than I will spend on gasoline.
That's just the start of it. If premiums do not rise (an event that is about as probable as the state meeting its lottery income projections), then I'll spend $2,642.04 on various varieties of insurance this year. The average American household devotes an annual $4,128.72 to insurance.
Then there are the hidden costs of insurance. How much more does medical insurance cost, so that physicians can pay their malpractice insurance premiums? How much more do groceries cost to cover a lawsuit if someone slips while buying lettuce?
How much does the American economy suffer by having so much capital controlled up by insurers' reserve funds? Of their $1.21 trillion in financial assets, 34.1 percent is in corporate securities and 23.9 percent is in government paper. Conservatives are fond of reminding us that governments do not create wealth, and it is a fact that the new jobs in America come from small businesses, which do not attract investments from insurance companies, rather than the big businesses which do.
Even more dismaying is what I hear from friends who have filed insurance claims lately. The companies demand four or five inspections and estimates. So that the insurers can continue to keep the money earning money for them, they continue the delay process by requiring form after form. People tell me that their insurers seem intent on never paying out anything.
So if the insurance company won't pay claims, why bother having it? Well, there's a state law that requires car insurance. The hospital won't let you in unless you have medical insurance. Lenders insist that houses be insured.
Given all that, here's a way Colorado could take the lead in insurance reform.
We will establish the Schamm Insurance Co., which offers a full line of auto, health and homeowner coverage.
Like any real insurance company, Schamm will provide you with what you really want from your insurer -- not payment of claims, but proof of coverage. You'll get a wallet card for the hospital admissions clerk who'll calmly watch you bleed to death if you don't have one, a copy of the homeowner policy for the mortgage lender who wants to make sure he gets paid first if you have a disaster, a certificate for your glove box so that you won't get a ticket for failure to carry auto liability insurance.
These proofs of coverage would cost a nominal fee, perhaps $25 a year apiece.
Why so cheap? Because Schamm will function like every other insurance company in another important regard -- it won't pay out anything. All potential claims will be met with demands for more documentation and with explanations of how earlier forms were not filled out properly. No matter how just the claim, Schamm Insurance will find some plausible reason to delay settlement.
Expenses will be quite low, since two or three people who know how to make computers generate confusing form letters could handle all of Schamm's business.
With Schamm Insurance, we consumers would have what we want at a reasonable price, without the bother of going through a California-style initiative. It's time for Colorado to quit being a follower and to become a leader.
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