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Zeal to Solve Auto Insurance Could Affect the Bottom Line

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By Lowell L. Kalapa

Although lawmakers promised to deal with the BIG THREE major issues left uncompleted from last session, it seems all THREE continue to languish as they head into the homestretch.

Among the big three issues which will probably have the greatest financial impact on taxpayers and consumers is the reform of the automobile insurance system in Hawaii. It appears that the two sides of the issue encompass whether or not the no-fault system be retained in favor of a pure tort system where drivers would have to litigate in order to be compensated should an accident occur.

However, negotiations don’t seem to be going too well. The sticking point is how to deal with uninsured drivers. As a result an old idea is getting some attention and taxpayers should be concerned. This is the concept of paying for automobile insurance every time you purchase gas for your car. The strategy is called “pay at the pump” and it would mean a dramatic increase in the cost of every gallon of gas you purchase.

Supporters of the concept believe that this is the only way to go to make sure everyone pays for automobile insurance as the theory is that one can’t drive a car without gasoline so why not make the driver pay for insurance coverage every time they purchase fuel. Sounds like a pretty good idea until you dissect what is going on here.

First, the gas tax is regressive, that is it bears more heavily upon those in lower income brackets as more than likely the poor do not usually live in the expensive urban areas of our communities. Thus the poor tend to consume more fuel driving the longer distances to their jobs. Second, while the “pay at the pump” would catch every single driver, who says everybody drives the same way. In other words, the pay at the pump approach does not distinguish between good drivers and reckless drivers, yet in consuming the same number of gallons, the two would be paying the same price for their insurance.

Finally, some argue that they don’t care how much gas will cost, as long as everyone is required to pay for car insurance. Well, that cost could add anywhere from $1.80 to $2.35 per gallon putting the price of gasoline at $4 or more per gallon. Again, the proponents argue that the high cost of gasoline will force people to reduce their driving, car pool, or use mass transportation.

Those reasons may be appropriate for concentrated populations like Honolulu where it is more than likely that people can find others to pool their transportation needs or a bus system is available, but what about the rural areas of our state? Not only that, do the supporters have a response to the fact that nearly everything we consume in this state must be transported from the docks and airports to the neighborhood grocery store?

It is this latter consideration that proponents tend to ignore. Because transportation fuels are an underlying cost of doing business in this state, any increase in the price of those fuels merely gets shifted forward to the goods and services that need that transportation. Imagine what the bag of rice or the can of beans will cost should fuel costs double or triple. An increase in the cost of fuel affects everything, from the grocery store to the cost of building a home.

Finally, what will happen when the fuel tax needs to be increased so that the highway department has enough money to fill the potholes and construct new highways? With gasoline selling at three or four dollars a gallon, there is no doubt that highway users will dig their tires into the road and resist any more increases in the fuel tax.

So fair is fair. Should lawmakers adopt the pay at the pump approach? You be the judge of that, especially the next time you fill up or stop by your local grocery store and imagine what you will be paying for gas or a can of beans should that proposal be adopted.

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