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WEEKEND EDITION

August 21 - 22, 2004

Hal Nelson and his wife know all about sticker shock, thanks to the money they must shell out to insure their 1999 Jeep Cherokee and 2001 Chevrolet S10 pickup truck.

When they moved last year from Washington state to Pahrump their combined auto insurance shot up from $1,200 a year to $1,800. As if that 50 percent increase wasn't enough, they got another jolt in June when they moved to Las Vegas. They now pay $2,700 a year.

"It just blew me away," Nelson, state field director for the environmental group Citizen Alert, said. "When we got that huge increase between Pahrump and here I thought it was unfair and that we were overpaying. But I also understand it's because of the difficult traffic situation here."

The Nelsons aren't the only Nevadans feeling sticker shock. That's because Nevada has the sixth most expensive automobile insurance among the 50 states, according to the National Association of Insurance Commissioners in Kansas City, Mo., which represents the nation's state insurance regulators.

Nevadans on average paid $851 a year per vehicle for auto insurance in 2001, the latest year national figures are available. That's $134 more than the national average. Only five East Coast states -- New Jersey, New York, Massachusetts, Connecticut and Rhode Island -- were more expensive.

Figures for 2002 are due out later this year, but don't expect much change where Nevada is concerned. The state has been ranked among the 10 most expensive for auto insurance for more than a decade.

These are some reasons insurance industry representatives cite for the high rates, supported by the latest statistics available:

Nevadans rank fourth in the number of bodily injury claims filed per 100 insured vehicles.

Nevada has the nation's second-highest auto theft rate.

Nevada is tied for the seventh-highest traffic fatality rate, based on miles driven.

Nevada ranks second in the rate of traffic fatalities caused by running red lights.

Nevada has the nation's heaviest traffic on urban freeways and expressways other than interstates.

Nevada is among the seven states with the shortest period of time young drivers are required to hold learner's permits before they can get a driver's license.

Nevada has the nation's second-highest hospital charges per admission.

Mark Savage, a senior Consumers Union attorney in San Francisco, said insurers often overcharge consumers based on factors that have nothing to do with an individual's driving record. Consumers Union publishes Consumer Reports magazine,

"Premiums should be based on a person's driving record, annual mileage and driving experience, in that order," Savage said. "But I can tell you that in California they look at ZIP code, then gender, then marital status, in that order.

"We find that insurers will lower rates in some areas and raise them in others, all based on territory. Many of the highest rates are in the low-income neighborhoods. And many low-income residents say they cannot afford to file claims for fear of losing their insurance."

Insurers in Nevada say they calculate their rates by multiplying the number of bodily injury and property damage claims that motorists have filed by the amount of money those claims cost the companies.

Prices for individual policies are then established based on a variety of factors, including the driver's age, gender, driving record, credit history, ZIP code, marital status, type of car driven, distance driven each year, distance driven to work each day and whether the driver owns a home.

Still, consumers say they are confused by how insurers set rates because the companies are not required to reveal the precise formulas they use to determine the prices charged for auto insurance premiums.

It's a major reason a new group called People for a Better Nevada, which is backed by trial attorneys and organized labor, is sponsoring a November general-election ballot measure to lower insurance costs.

"It's outrageous, the rates being charged," spokeswoman Carmen Cashman of Las Vegas said. "Everybody is tired of the insurance industry. They operate at will and charge whatever they want and they don't tell us why they raise rates. It's time we put a stop to it."

The proposed state constitutional amendment -- which must also pass in November 2006 -- would roll back auto insurance and other forms of insurance to their rates as of Dec. 1, 2005. It would then reduce those rates by at least 20 percent as long as the company is still making a profit. Good drivers would be eligible for another 20 percent discount.

The amendment is being opposed by insurers and other businesses under the banner Nevadans Against Fraud and Higher Insurance Costs. Spokesman Jim Denton of Las Vegas said that while Nevada auto insurers made 5.4 percent profit in 2002, according to the latest statistics available, sharp rate rollbacks would have a detrimental effect on consumers and the industry.

"This measure will encourage insurers to leave Nevada, just like the medical malpractice insurers did, and it will leave consumers with fewer choices," Denton said. "That would ultimately lead to higher prices."

The initiative also faces stiff opposition from doctors because it would eliminate existing caps on damages for pain and suffering caused by medical malpractice.

Proponents say the caps instituted by law in 2002 would remain intact if it can be proven that the caps have lowered malpractice insurance costs paid by doctors. So far, those costs have not been reduced, and doctors view the initiative as a veiled attempt by trial attorneys to remove the caps, using the auto insurance rate rollback as cover.

But Savage said that California's Proposition 103 -- which passed in 1988 and is the inspiration behind the Nevada initiative -- has been good for consumers in that state.

"Billions of dollars have been returned to ratepayers in California, and yet there's still so much money to be made by insurance companies," he said. "Their profit margins are higher now than they have been for several years, but they don't always lower their rates when their profits go up."

The Nevada measure also would remove insurers' exemption from state antitrust laws, which is what occurred in California. Nevada's exemption allows insurers to swap information about claims and other factors to help them set rates.

"With our initiative there will be true competition rather than legalized collusion," Cashman said.

Opponents argue that there is no collusion when it comes to rates since many larger companies have their own data-research departments, eliminating the need to seek information from competitors.

"There's no evidence of price fixing by insurers because the Legislature and the Nevada Insurance Division would surely have done something about that," Denton said.

Car owners must rely on the insurance division, the state agency that approves rates, as a safety net.

"We have to make sure the rates in Nevada are proper for the risks the insurers are incurring," spokeswoman Peggy Dehl said. "Under state law, rates cannot be excessive, inadequate or unduly discriminatory."

But Bob Hunter, insurance director for the nonprofit Consumer Federation of America in Washington, said state insurance divisions are often reluctant to take on insurers because the companies wield plenty of political clout.

"In most states the scrutiny of the industry is inadequate," Hunter said. "Sometimes it's because the insurance commissioner comes from the industry and then returns to the industry. In many states the path of least resistance is to not take on insurance companies so that the governor doesn't get phone calls."

In Nevada, though, consumers have passed up chances to complain to the division about rate increases, Charles Knaus, the agency's lead actuary, said.

"We haven't had a rate hearing in many years because we found that people weren't showing up," Knaus said.

Retired Chef Shel Berlatsky, a resident of The Lakes, would certainly like to see more relief for good drivers with clean records such as himself. He's at a loss to explain why his insurance went up within the past year from $89 a month to $130 a month for his 2001 Pontiac Grand Prix.

"I don't know why it took a jump," he said. "I live in the same place and drive the same car. And I have no tickets. I called my agent and found out he wasn't my agent any more. Then I talked to a girl who said there were various reasons for the increase, but she was very vague about it."

If Berlatsky had his way, insurers would be required to reveal how they set prices for individual policies and publish maps showing various rates depending on ZIP codes.

"They want to know about your credit, and I have good credit," Berlatsky said. "But if I'm paying my premium and have no tickets, what does my credit have to do with it? They ask you if you smoke, but not if you drink, and I think that's crazy. The insurance company ends up doing what it wants to do."

Claims happy

Insurers say the major reasons Nevadans pay high rates are because of the number of claims motorists file for bodily injury and the amount of money being paid per claim for injuries and car damage.

The Property Casualty Insurers Association of America, based in Des Plains, Ill., found in 2003 that Nevada:

Ranked fourth with 1.56 bodily injury claims per 100 insured vehicles, compared to the national rate of 1.14.

Ranked 10th in the amount of money insurers paid for bodily injury claims -- an average of $11,721 -- compared to the national average of $9,475.

Ranked third in the amount of money insurers paid for car damage claims -- an average of $2,730 -- compared to the national average of $2,485.

Robert Feldman, secretary/treasurer of the Nevada Insurance Council -- whose members write 80 percent of the insurance premiums in the state -- said much of the blame for the high rate of bodily injury claims should be placed on attorneys, chiropractors and physical therapists.

That's because it is easy in Nevada to file claims that stand up in court for "soft tissue" injuries such as strains and sprains without needing to be treated by a medical doctor, he said.

"We have too many lawyers and too many chiropractors and physical therapy mills," Feldman said. "We believe there are mills throughout the state making excessive and fraudulent claims.

"We have more of a lottery mentality here than anywhere else, which translates to people in fender benders who have minor injuries who are trying to hit the jackpot. It's a 'fast buck' environment here."

The high rate of insurance claims also doesn't surprise Joe Gacioch, Phoenix-based spokesman for Allstate Insurance Co.'s Southwest region.

"Every time I go to Las Vegas and turn on the TV, I see a high percentage of lawyer ads encouraging people to call a lawyer," Gacioch said.

In a prepared statement, the Nevada Chiropractic Association denied that attorney/chiropractic "mills" were contributing to bodily injury claims. It stated that such an allegation "grossly simplifies the issue" because of all the variables that go into insurance rates.

"In Nevada, chiropractors are licensed as primary-care physicians and as such treat people injured in motor vehicle accidents," the association stated.

"If you ask most insurance companies why the auto insurance rates are higher in Nevada compared to most other states, we are confident that most would attribute this to higher rates of alcohol consumption in Nevada and less aggressive programs targeting the youth driver."

Prominent Las Vegas lawyer Jim Crockett, who has taken an active role in numerous legislative battles on behalf of trial attorneys, said getting an insurance claim to court is far more difficult than insurers make it out to be.

"It takes two to three years to get a case into court for most car accidents," he said. It's a long, drawn-out process. They don't get filed until the negotiations break down between the injured party and the insurance company."

Crockett also said insurers will attempt to "wear down" injured motorists in a way that discourages many from pursuing litigation.

"They know that very few people are willing to go through the rigors of court," he said.

Auto theft

Another reason given for Nevada's high auto insurance rates is because it is a leading target of vehicle theft.

Nevada had the nation's second highest automobile theft rate in 2002, the most recent year figures were available from the FBI. At 804.5 auto thefts per 100,000 residents -- which translated to 17,486 vehicles -- Nevada trailed only Arizona (1,056.9) and was victimized at nearly twice the national rate of 432.1. Top on the list for Nevada thieves are the Honda Accord, Toyota Camry and Honda Civic.

Although law enforcement has broken up auto-theft rings in Las Vegas, Metro Lt. Larry Spinosa, who oversees the property crimes unit, said auto theft remains a crime that is difficult to pinpoint.

"It might be because we're very transient," Spinosa said. "We've got a lot of new people moving here."

Stolen cars and auto parts from Nevada are thought to be smuggled into Mexico or shipped to Asia.

"There are things we're trying to do because the auto-theft rate is so high, but we can't put a finger on it," Spinosa said.

But not all auto-theft claims are legitimate as the Nevada attorney general's office knows. Its insurance-fraud unit, which netted 200 convictions and $3.58 million in restitution and fines from fiscal 1997 through fiscal 2004, sees more auto-insurance fraud than any other type of scam.

"They might be upside down on their car payment, and they get a buddy to burn their car or they take the parts out," Senior Deputy Attorney General Thom Gover, who runs the unit, said. "The parts can be sold in the used-parts market, and the rest of the car is pushed off a cliff.

"It's a function of a lot of people buying more vehicle than they should. Then they'll call the police and say their car is gone."

Deadly outcomes

Insurers say rates are also influenced by Nevada being one of the deadliest places to drive, based on miles traveled.

With 381 traffic-related deaths in 2002, Nevada had 2.12 fatalities for every 100 million vehicle-miles traveled, tied for seventh highest in the nation with South Dakota, according to the National Highway Traffic Safety Administration. The national average was 1.5 fatalities.

"You are a 24/7 town and you can walk on the street with a beer," Gus Miranda, spokesman for State Farm Mutual Automobile Insurance Co.'s Western region, said. "Think about the Strip. That's four miles of partying. That's a long stretch of a party.

"Where can you go in California or Arizona where you have a four-mile party?"

Nevada is one of only seven states that does not have any laws or court cases that make sellers of alcoholic beverages or social hosts responsible for civil damages related to injuries or property damage caused by drunken drivers.

"We have a higher percentage of accidents that involve alcohol because alcohol is readily available in this state," said Chuck Abbott, highway safety coordinator for the Nevada Office of Traffic Safety. "If we could get drivers to wear seat belts and get impaired drivers off the road, we could reduce our fatalities by two-thirds."

Speeding accounted for 35 percent of Nevada's fatal crashes in 2002, compared with 31 percent nationally.

"In Las Vegas speeding seems to happen because of the design of the roadways," said Kelly Anrig, the Transportation Department's chief safety engineer. "There are six-lane arterials with signals every half-mile, so people seem comfortable driving faster."

Nevadans are also notorious for running red lights. A 2000 study by the Insurance Institute for Highway Safety in Arlington, Va., ranked Nevada second in the rate of deaths per 100,000 residents -- 3.9 versus 2.3 nationally -- caused by red light violations from 1992 through 1998. Las Vegas ranked 12th among cities with at least 200,000 people, with a rate of 5.7.

Heavy traffic

One characteristic shared by the states with the most expensive auto insurance is that they have the nation's highest percentage of residents living in metropolitan areas, which translates to heavier traffic and more accidents. Nevada ranks second to New Jersey with 92 percent of its residents living in cities, according to the 2000 Census.

Retired businessman Bill Berko of Las Vegas is one of the few people who can claim that his insurance decreased when he moved here in 1987. That's because he came from New Jersey, the nation's most expensive state to insure a vehicle. But the money that the 65-year-old man saved in insurance has been offset by Nevada's higher vehicle-registration fees, he said.

He now pays $2,400 to insure two vehicles, $700 more than when he first moved to Las Vegas.

"Everything keeps going up in price," Berko, who lives on a fixed income, said. "There's no way I can afford my insurance if it keeps going up unless I get a job.

"I've heard many people complain about the insurance rates here, particularly people who came from the Midwest. I believe that if they capped the insurance awards for auto accidents, it would drop the insurance rates."

The insurance industry says that 80 percent of traffic accidents occur in cities, with one major cause being heavy traffic. And Nevada has worse urban traffic than most states, according to 2002 data from the Federal Highway Administration that was based on the average number of vehicles per lane per day on major roadways.

"We have a lot of road construction going on," Susan Bithell, Nevada Insurance Council president, said. "Every time you drive home there are more orange cones out there. We have a lot of taxicabs on the road, and they're always in a hurry. You just have additional cars you wouldn't have in other cities."

Nevada in 2002 had the nation's heaviest traffic -- 17,338 vehicles per lane per day -- on urban freeways and expressways such as U.S. 95 that are not interstates, the highway administration reported. The national average for these roads was 10,886 vehicles per lane.

For all principal urban arterials combined, Nevada ranked 10th with 9,462 vehicles per lane, considerably above the national average of 7,955.

"Because we have a large number of visitors we have a lot of people driving who are unfamiliar with the roads," Bithell said. "We also have a lot of people moving in from all over the United States, and they're not used to the streets and they have a lot of different driving styles. I call this the Wild West of driving."

Young drivers

If one way to lower insurance rates is to reduce the number of accidents, it certainly doesn't help that Nevada has relatively lax laws when it comes to teens who are learning to drive.

There are 43 states that require young drivers to go through longer learning periods than the three months maximum required in Nevada, according to the Insurance Information Institute. There are also 36 states that have nighttime restrictions for young drivers, but Nevada is not one of them.

If Sen. Barbara Cegavske, R-Las Vegas, has her way, the Nevada Legislature next year would pass tougher permit and driving restrictions for teens.

Cegavske began pursuing this as an assemblywoman in 1997. That year she met a teenage girl from Northern Nevada who caused an accident because of speeding that killed one of her passengers. Cegavske said the teenager wished she had had more driving experience before getting her license.

"The No. 1 killer of our kids is teen crashes," Cegavske said. "Police and Highway Patrol officers cite the lack of experience behind the wheel over and over again."

She wants to extend the learner's permit period to six months and restrict the number of passengers a young motorist can have.

"The goal is to get them more experience behind the wheel without distractions," she said.

As it is, drivers in their teens and 20s generally pay much higher auto insurance rates than older motorists. But Bob Nard, secretary/treasurer of both the Southern Nevada Building and Construction Trades Council and the Southern Nevada Central Labor Council, said that isn't always fair to young motorists.

His college-educated 27-year-old daughter, who drives a compact Chevrolet and has a clean driving record, pays $170 a month for insurance. That's only slightly less than the $198 a month combined that Nard and his wife pay to insure a 2003 GMC pickup truck and a 2001 Oldsmobile.

"Her rates should be lower," Nard said of his daughter. "Maybe it's because of her age, but she's not an aggressive driver.

"I feel sorry for the people who also pay the insurance for their children because the cost might be astronomical, which increases the chance that we might have more uninsured motorists in the valley."

Hospital costs

Insurers cite Nevada hospital costs as another reason auto-insurance rates are so high. The correlation is that injured motorists often rack up lengthy hospital stays, which figure into the cost of bodily injury coverage.

Insurers point to a Mutual of Omaha Insurance Co. study, based on 2003 charges paid by its customers, that ranked Nevada as having the second highest total hospital charges per admission among 40 states surveyed at $25,627, or $6,503 more than the national average. Nevada also ranked fourth in daily inpatient costs.

But Bill Welch, Nevada Hospital Association president, said the study was skewed because local hospitals, on average, treat patients who are older and who have more acute ailments than most other states.

"What most of these hospital studies don't do is account for the acuity of the patients," Welch said. "Nevada is often No. 1 when it comes to health risks. So the types of patients we get will be sicker.

"Nevada has higher ages than average and seniors take a big bite of the health care dollar. We also have a high percentage of teen pregnancies, so we have more high-risk births. They have more complications and that costs more money.

"We also don't have the population pool to spread these costs. And we have a crisis with medical malpractice insurance. Don't you think that affects health care costs?"