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Among the many momentous issues before this session of our General Assembly is auto-insurance reform. Various analysts have pointed out that the quirks in our no-fault system have caused rates to rise.
But the problem is bigger than that. The higher that
rates go, the fewer people who can afford auto insurance,
and so the number of uninsured motorists rises, which
raises rates, which means fewer people buy insurance -- you
get the idea. In the utility industry, it's called a
death spiral.
One current estimate has it that a
third of Colorado's motorists go without insurance -- even
though the law requires it.
Let's look at a different approach. First, though, let me point out that the figures at hand are dated and lack precision.
In 1999, there were about 3.9 million registered vehicles in Colorado. If a third of them were not insured, then we had 2.6 million insured vehicles, each paying an average of $744 per year for insurance. Since they're also carrying the uninsured motorists through additional premiums, we can figure that Coloradans spend $1.9 billion a year on auto insurance.
This cost is not allocated fairly, of course, since
there are 1.3 million freeloaders. So one vital reform is
to reduce the number of parasites, and fortunately, there's
an easy way to do this. It's called pay at the pump
auto insurance.
On an average day, Colorado consumes 5.5 million gallons of gasoline and 1.9 million gallons of diesel fuel, which works out to 2.7 billion gallons a year. Divide that into the $1.9 billion we spend on auto insurance, and we come up with a tax of about 70 cents a gallon that would go to insurance.
There's no reason for the state to go into the auto-insurance business; instead, the state could just solicit bids from carriers, and the low bidder (or a consortium of bidders) could handle claims, payments and the like for basic liability insurance for all Colorado motorists.
For those of us who remember gas wars and signs that
touted 22.9,
gasoline seems to cost plenty now, at
about $1.60 a gallon, and $2.30 a gallon looks pretty
steep.
But the overall cost of driving would be less for law-abiding motorists. As it is, we responsible people who buy insurance have to pay the costs of uninsured motorists. With pay-at-the-pump, those freeloaders would have to pay their own way every time they filled their tanks.
Another benefit would be a reduction in paperwork. There
are forms to provide when you register a car now, along
with the requirement to tote around a proof of
insurance
card. If we automatically had insurance
because we bought fuel, we wouldn't need that
paperwork.
There are social benefits, too. The more that gasoline costs, the less people drive. The less that people drive, the fewer highways we need to build and maintain. Public transportation starts to make more sense, and so our roads aren't as crowded and parking isn't so big a problem. Less driving also means cleaner air and reduced emissions of greenhouse gases.
Lower consumption also means lower imports, which keeps
more wealth in our country and reduces the amount of money
that can flow to certain terrorists. It reduces the
temptation to invade fuel-rich places like Iraq. That means
a smaller defense
budget and a reduced federal
deficit.
Granted, people who live near Colorado's borders could evade the tax by filling up in Wyoming or Kansas. But it wouldn't pay for most people. Assume you live 30 miles from the state line (i.e., Fort Collins). You'd have to spend an hour round-trip for the cheaper gas, and cover about $20 in other driving costs, to save $14 on a 20-gallon fill-up.
There's also the problem of teen-aged drivers, who get in more accidents and probably should pay more for insurance. We could charge them more for driving licenses, and if we can require a photo ID when a youthful-looking person buys cigarettes, we can require a driver's license for gasoline purchases.
As for out-of-state drivers, the long-haul cross-country types would go through Wyoming or New Mexico. We could let our neighbors worry about overweight trucks and defective brakes on pup trailers. When it comes to tourists, $2.30 gas means we'd get the ones who really wanted to spend some time and money in Colorado -- quality instead of quantity.
I asked an insurance agent how this would affect his business, and he said he'd do fine, selling supplemental collision coverage and the like.
So, here's some real reform. It would reduce costs for responsible drivers while eliminating some red tape and paperwork (Republicans should like that), and provide important social and environmental benefits (for the Democrats). It makes so much sense, in fact, that it's safe to predict that this will never be considered by our legislature.
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