For All Victims

Under the U.S. auto-insurance system, at least 55% of the premium dollar should go to compensate traffic victims. There is a widespread feeling that this is not enough, and there are complaints about soaring rates, controversial policy cancellations and slow payment of claims. Some critics demand more federal regulation, along with a radical overhaul of the whole system. A Senate subcommittee has started a root-andbranch investigation of auto insurers; President Johnson has ordered the Department of Transportation to make a two-year probe of its own.

Cutting Red Taoe. Mostly in response to public indignation, early this month ten major insurance firms began testing a new claim-settling method intended to cut red tape and avoid costly litigation. It is also hoped that the new system will save money for the companies. In seven counties around Chicago, they will immediately offer an injured accident victim up to $5,000 for medical expenses. If the victim, who must be a resident of the area, agrees not to sue for more, the participating companies will also provide up to another $7,500 in quick cash to cover lost wages, disfigurement, inconvenience, suffering and permanent disability. Alternatively, an injured person can reject the offer and press his claim in the traditional way.

Because 95% of auto-accident in juries are ultimately settled for $10,000 or less, the companies figure that if only 30% of those offered fast payoffs accepted them, the experiment would cost insurers nothing extra. In the unlikely event that every victim took them up on their offer, the companies estimate that their claims costs, now inflated by legal fees and court awards for pain and suffering, would fall by at least 20%.

The plan--the industry's first major attempt to mollify its critics -- was devised during six years of research by the American Mutual Insurance Alliance, a 122-member trade group. Ex plains President Paul S. Wise: "As conceived more than half a century ago, an auto-liability policy was designed to protect the driver of a car against law suits, not to compensate the accident victim. Legally, this is still so. But public expectations have shifted toward protecting the injured." Though the alliance carefully calls its plan" Guaranteed Benefits," the guarantee does not cover property damage; it applies only to injured persons whom the insurers deem to have a valid liability claim because they were not at fault in the accident.

All but the Flagrant Few. the The insurers' plan thus differs from the widely discussed reforms proposed by Law Professors Robert Keeton of Harvard and Jeffrey O'Connell of the University of Illinois. In most accident cases, their "Basic Protection" scheme calls for a motorist's own insurance company to pay him, his passengers and any pedestrians he hits, regardless of who was to blame for an accident. "We don't think it would be fair to eliminate the idea of fault completely," says the Alliance's Wise, "and require injured persons to insure themselves."

Still, the trend is in that general direction. "Our ultimate plan," says Wise, "is to develop a system that would pay all auto-accident victims except a few flagrant violators, such as hit-and-run drivers."

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