A Senate committee will hear testimony on federal legislation to provide consumers with a choice of a lower-cost, no-fault auto insurance policy. According to the American Insurance Association, special interest pressure has hindered efforts at the state level to provide a more efficient and effective choices of auto insurance policy to consumers like Indiana auto insurance quote providers.

“Whole industries rely on being able to tap into the $120 billion auto insurance premium pool,” said David Snyder, AIA assistant general counsel. “These interests have successfully fought to preserve the status quo and protect their economic self-interest. The result of these realities is public unrest combined with legislative gridlock.”

The Senate Commerce Committee is exploring whether to advance “auto-choice” legislation, which would give consumers the opportunity to select a lower-cost, no-fault auto insurance policy.

Snyder added that to determine what policies are needed to improve auto insurance systems, elected officials should follow the money. “The principal factor in states with high-cost auto insurance is that a large portion of benefits that should be paid to injured victims are being lost to lawyers’ fees and other tort system related costs,” Snyder said.

He added that the overwhelming majority of premium dollars go to claims payments. According to industry data, these payments account for 78 cents of every premium dollar. While SR22 Insurance Quotes companies have reported healthy profits recently, the average rate of return over the past decade has hardly been spectacular compared to other industries. Auto insurers had a 10.2 percent rate-of-return from 1998-2007 compared to over 12 percent for other industries.

“Most state auto insurance systems are characterized by two fundamental elements — tort liability compensation rules imposed on consumers without choice and heavy government regulation of insurers, including price controls,” Snyder said. “Under tort liability auto insurance systems in many states, fraud and uninsured motorists are widespread; seriously injured people are under-compensated; minor or non-existent injuries are grossly overcompensated; and consumers have few meaningful choices.”

Snyder said some states have responded to tort liability problems. “New York and Michigan both have ‘no-fault’ systems that balance generous automatic payments with modest restraints on litigation, including recovering non-economic damages in serious injury cases.”

Beyond the guaranteed benefits that compensate more than 90 percent of losses quickly, the no-fault laws in New York and Michigan have reduced insurance costs by 20 percent from what they would have been under tort liability systems.

Snyder also said that while several industries have benefited from some type of deregulation, auto insurance still remains probably the most heavily regulated private product in America. “Many states still have the legal authority for, and waste significant resources on, price controls of private passenger auto insurance. This creates obstacles to innovation and the ability to adjust to market conditions, and leads to less competition and higher prices in auto insurance.”

The auto insurance bills now being considered by Congress have been attacked as not offering a true choice and infringing on states’ rights. However, Snyder said, “The bills increase consumer choice and potentially reduce costs in auto insurance.”