EDITORS:  Estimates for your state are included.

STATE-BY-STATE STUDY SHOWS OPTIONAL NO-FAULT AUTO INSURANCE WOULD
RESULT IN SUBSTANTIAL SAVINGS
FOR DRIVERS WHO CHOOSE IT

	CHARLOTTESVILLE, Va., March 29 -- A proposed modification in
the no-fault auto insurance concept that would make it optional
rather than mandatory in a state would increase its appeal and could
result in up to $14 billion in savings in insurance premiums
nationwide, according to a study by a University of Virginia law
professor with researchers at the RAND Corp. and the Hudson
Institute.
	The suggested change would give motorists the
premium-reducing option of foregoing pain-and-suffering claims based
on fault.  It wouldn't require all insured drivers to participate,
as they must now in states that have no-fault plans, according to
professor Jeffrey O'Connell, co-author of the work that originally
proposed no-fault auto insurance.
	In a forthcoming law review article that includes model
legislation for the proposed elective method and estimated savings
for drivers in 35 states that don't have no-fault laws, O'Connell
and co-researchers say that current no-fault laws in many states
have been increasingly ineffective because the system is being used
in ways that weren't intended.
	The original hope was that no-fault would provide
compensation to many more accident victims than are paid under
traditional fault-based liability systems, and with faster payments
and far lower lawyers' and adjusters' fees.  No-fault benefits pay
for medical bills and wage loss but not for non-economic costs of
pain and suffering, whereas fault-based claims seek both types of
remuneration.
	But the original concept has been "undermined" in many
current no-fault states because the system is being used more and
more frequently to incur enough health-care costs to allow motorists
both to collect no-fault benefits and to trigger a built-in right to
sue based on fault, O'Connell said.
	The proposed change would give drivers the choice of
purchasing low-cost coverage called Personal Injury Protection
(PIP), payable to them no matter who was at fault.  The coverage
would be only for medical bills and wage loss and would be set at
the minimum level a state requires for fault-based liability for
bodily injury.  Drivers would also have to purchase fault-based
property-damage insurance.
	Persons electing such PIP coverage could neither sue nor be
sued for pain and suffering in accidents.  They would be allowed a
fault-based claim against another motorist only for economic loss in
excess of their coverage.  (If an injury were caused by alcohol or
drug abuse, there would be no restriction on the right to sue.)
  	In accidents between those covered by PIP and those electing
to stay under a fault-based system, the latter would make a claim
against their own insurer, just as they would today under their
uninsured motorists' coverage.  Claims for economic loss in excess
of that level of payment would also be allowed against PIP-holders.
	PIP payments would not be made if there were other sources
of compensation, such as health or disability insurance, that
covered the costs.
	Estimates by the private research organization RAND in the
35 states currently without no-fault laws show substantial savings
for motorists, according to the study to appear in the University of
Maryland Law Review (volume 54, issue 2, scheduled for publication
in early April).  The average estimated minimum savings on their
total premiums for motorists who choose PIP in 35 states would be 31
percent.  [See table 1, column 2 for minimum savings estimates for
each state.]
	Costs for motorists who elect to remain with fault-based
coverage would be affected only minimally in all 35 states by the
adoption of a choice plan, O'Connell said.  In most states there
would be a slight savings in fault-based coverage too, while in some
states there would be a slight increase in fault-based costs. [See
table 2, column 6 for figures for each state.]
	If 100 percent of insured drivers switched to PIP coverage
in 35 states, annual premium savings would total more than $14
billion. [See table 1, column 3 for savings figures for each state.]
	The savings would be impressive for all motorists who choose
it but represent an even greater savings for less affluent persons,
O'Connell said.  That is because it would free PIP-holders from any
obligation to buy supplementary bodily-injury fault-based insurance,
and low-income motorists with few assets to protect would buy only
mandatory coverage.  [See table 1, column 1 for savings figures for
each state.]
	Federal legislation requiring that states make the PIP plan
available is expected to be introduced in Congress by Rep. David
McIntosh (R-Ind.) some time this year, according to O'Connell.
	"The merits of allowing all motorists -- rich and poor and
neither -- to opt out of claiming for non-economic loss, in return
for lower costs and prompt and sure receipt of benefits for economic
loss, are worthy of serious consideration," O'Connell said.
###
March 28, 1995
	For interviews or additional information Jeffrey O'Connell
may be reached at (804) 924-7809.  [From March 30 to April 3 he may
be reached at (508) 945-2838.]

	Stephen Carroll, senior economist at RAND, may be reached at
(310) 393-0411, ext. 7141.