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San Diego Had Uninsured Motorist Rates In Excess Of 90 Percent Injured In Single-Car Accidents
The problem of uninsured motorists is well documented in California. A 1995 zip code level survey by the California Department of Insurance found that 28 percent of drivers in that state were uninsured, totaling roughly 5.8 million vehicles statewide.61 In Los Angeles County, the figure was 37 percent, and in San Francisco it was nearly 33 percent. Certain zip codes had exceptionally high-uninsured motorist rates. Some areas of Oakland and south central Los Angeles, for instance, had an uninsured motorist rate over 60 percent, while other zip codes in Los Angeles and San Diego had rates in excess of 90 percent. The consequences of high rates of uninsured motorists are significant. The California study
revealed that the state’s insured drivers pay more than $1 billion a year in added premiums to protect themselves from uninsured motorists.62 The overall premium effect of uninsured motorists, however, is significantly greater than just the cost of UM policies. As Eric Smith and Randall Wright explain in their 1992 American Economic Review article, “although the entire [insurance] package may be actuarially fair, the individual components are not.”Investigators often note that ethnic groups are targeted to serve as “stuffers,” the persons who ride in the cars and cause the accidents. In southern California and Texas, for instance, lowincome Hispanic immigrants are routinely used as the “victims” in staged accidents. Other staged-accident rings have involved African-American, Filipino, Armenian and Korean groups in
Los Angeles; Vietnamese in Orange County, California; Russian-Jews and Eastern Europeans in Pittsburgh and New York; and Haitians and Jamaicans in Florida.43 Although the injuries that stuffers are instructed to claim are supposed to be fake, staged accidents have resulted in death or serious injury to stuffers and innocent drivers alike.44 Ironically, these low-income stuffers are paid as little as $50 or $100 to risk their lives, even as the lawyers and doctors involved can bring in tens of thousands of dollars per accident.The shortcomings of the auto insurance system are clearly evident in their deleterious impact on the poor. Indeed, perhaps the most manifestly inequitable aspect of the current tort liability
system is its regressivity. Families at the bottom end of the income scale have very little disposable income, and every dollar spent on premiums for auto insurance represents money that could be spent on other essentials, such as food, shelter and health care. As previously indicated, owning a car can be extremely important in terms of finding and holding down a job.107 In addition to the effect on employment and wages, the current system’s deficiencies adversely impact low-income families in a number of ways. First, the tort litigation system best compensates those people who can wait out a protracted and costly legal process. However, such a process typically requires retaining a lawyer, which generally increases the length of time a claimant has to wait for payment.108 However, low-income families by definition lack the
necessary resources to wait for an inefficient tort system to provide compensation. Such families, therefore, must often settle for a smaller amount rather than hold out for a larger award. Second, as suggested above, insurance in a third-party liability system provides compensation not to the owner of the policy but to an unknown third-party whose losses – unlike the insured himself – cannot be predicted before the accident. Since premiums are based on the expected cost to compensate the “average” third-party claimant, low-income drivers (who by definition have below average economic losses) are forced to subsidize the premiums of highincome drivers (who have above average economic losses). In fact, liability insurance itself is designed to protect the assets of the policyholder from lawsuits – a service of limited value to
someone who has no assets. Since the poor generally have little in the way of assets, liability insurance affords them little protection. This type of system by its very nature provides no compensation to policyholders injured in single-car accidents, in an accident for which they are held responsible, or by uninsured drivers. |
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