tives; for example, that of its impact on the courts and the bar, that of the seriously or fatally injured victim, or that of the claimant who makes an insured tort claim. Others deal with specific aspects of the system such as rehabilitation, the accident repeater problem, accident causation and deterrence, the historical roots and rationale of the tort liability system, the hard-to-insure driver, et cetera. These research findings constitute the core of the study's work.

Of course, in grappling with important public policy issues, the piling up of facts, research findings, and expert opinions seldom leads automatically to easy solutions, and nowhere have I found this to be more true than in the matters we will discuss today-accidents, accident losses, and accident loss compensation. Motor vehicle accidents kill tens of thousands and injure millions of our citizens every year. Their immediate economic consequences run into the billions of dollars, as do both the benefits received by their victims and the costs of delivering those benefits.

In addition, these accidents involve great human and social costs, which are just as real, if more difficult to measure and comprehend, as their more direct economic consequences.

For society as a whole, these costs can be viewed as part of the price of the great freedom and flexibility that motor vehicle transportation gives both the individual and the economy. For the victim, however, his accident costs would often mean great economic hardship or even ruin if they had to be borne without help. For this help, the victim looks to the mechanism which society provides for compensating him for his losses-the motor vehicle accident compensation system.

The study indicates that the main problems currently afflicting this system stem basically from the legal rules governing reparations, from the operation of the insurance mechanism, and from the great and growing costs of the accidents themselves.

The spiraling costs of accidents, which auto insurance premiums partially reflect, should first be attacked directly by measures which stimulate safe driving behavior and which improve the driving environment and, thereby, work to reduce the frequency of accidents and the severity of the resulting losses. The discovery and promotion of such measures is a major continuing responsibility of our Department. Accident loss reduction efforts, however, while vitally important, cannot be viewed as the sole, or even the principal, answer to the problems of the compensation system. The Department knows from its work in the auto safety field that even assuming that the most optimistic predictions of future accident loss reduction prove justified, we must unfortunately expect that large numbers of people will continue to be injured and killed in automobiles accident and that damage to property, especially vehicles, will not soon be significantly curbed.

FACTUAL RESULTS

The operation of our present motor vehicle accident compensation system has been described and documented by commentators and scholars over the course of nearly a half a century. The legislative history of Public Law 90-313, itself, indicates clearly that the Congress was concerned about problems in the system, although better quantification and more detailed analysis were felt desirable.

The CHAIRMAN. I don't like to interrupt, but I want to suggest that no one has experimented more with the problem of automobile insurance and the things you talk about than the State of Massachusetts.

Secretary VOLPE. I am aware of that and was right in the middle of a good deal of that.

The CHAIRMAN. And Rhode Island and Connecticut, for some reason, they were busy with it all of the time. A lot of trial and error took place there, so you have a good background.

Secretary VOLPE. Just a little bit.

Senator PASTORE. And yet they haven't solved the problem. The CHAIRMAN. That is right. That is why we are here today. Senator PASTORE. It is a hot potato still today in Massachusetts, isn't it, John?

Secretary VOLPE. That is right.

(Continuing his prepared statement.) What the Department's study has done is try to look at the system from a national rather than a regional perspective, produce fresh and thorough quantitative data about the system's operation, and provide basic data upon which we will consider how the system might be improved or changed to better serve the needs of the American motoring public.

LIMITED SCOPE OF THE LIABILITY INSURANCE SYSTEM

Under the auto accident liability system, only those who can prove that others were at fault while they were without fault in an accident have a legal right to recover their losses.

One of the several studies conducted by the Department has shown that only 45 percent of those killed or seriously injured in auto accidents received benefits from the tort liability insurance system. One out of every 10 of these victims received nothing from any system of reparation.

Senator PASTORE. Is that 45 percent figure whether they were right or wrong?

Secretary VOLPE. Yes, sir.

Senator PASTORE. Even though they might have been in the right, it is only 45 percent?

Mr. WALSH. NO. This particular statistic includes all accident victims.

Senator PASTORE. All accident victims, whether they were right or or wrong?

Mr. WALSH. Yes, whether they were right or wrong.

Senator PASTORE. Thank you.

Secretary VOLPE (continuing his prepared statement).

THE RATIONAL ALLOCATION OF COMPENSATION RESOURCES

Despite the fact that it is generally the accident victim with the large economic losses who also suffers the large intangible losses, as the tort system works in practice, he has a far poorer chance of being fully compensated for his economic loss, let alone any intangible loss, than does the less seriously injured victim. For example, it was found in the study that only about half of the total compensable losses of seriously or fatally injured victims are compensated. For those victims

whose economic losses were more than $25,000, only about a third was usually recovered. Those with relatively small economic losses, by contrast, fared much better. If they recovered from tort and had losses less than $500, they recovered in total an average of four and a half times their economic loss.

EFFICIENCY

The tort liability insurance system as it operates for automobile accident victims has a very high cost/benefit ratio compared to any other major reparations system.

Senator COTTON. Can I interrupt for one question? I may be anticipating something which you cover later in your statement, Mr. Secretary, but has the study differentiated in this matter of uncovered losses as between personal injury and property?

In other words, many people carry a $50 or $100 deductible on their automobile insurance and get back everything except that, even if the other party is not insured.

But I wondered if somewhere along the line the study makes a distinction between those who suffered property loss and those who suffered loss from physical injuries?

Secretary VOLPE. It definitely has, Senator.

Senator COTTON. Does that come later in your statement?
Secretary VOLPE. Yes, sir.

Senator COTTON. Then, I am sorry and I beg your pardon for interrupting you.

Senator PASTORE. Isn't there another point here? Within this category aren't we talking about people who did not have insurance as against people who suffered damage and collected from the defendant? Secretary VOLPE. Yes, there are those two aspects, also.

Senator PASTORE. Is that going to be analyzed in the report? Because I can understand if you have insurance you recover-except for the $100 deductible-you don't have any trouble recovering in that case because you have insured yourself. Whether you are right or wrong, you collect.

But is there a distinction being made as against those who are not covered in that respect, but who are injured there through someone else's negligence and their recovery is less than $500?

Mr. WALSH. Sir, in our study of the fatally and seriously injured victims, we took account of all sorts of reparations, both the first and third party auto reparations and, in addition, all other reparations, i.e., social security, veterans' benefits, private loss insurance, life insurance, anything that might have gone into reparating the victims' losses. Those various kinds of compensation sources are differentiated in the two-volume study, "Economic Consequences of Automobile Injuries." Senator PASTORE. I was directing my question to what Mr. Volpe just said, in the instance where the damage is not in excess of $500, the recovery has been good. Now, are we talking about personal injuries or property damage?

Mr. WALSH. We are talking about all kinds of economic loss, both property damage and personal injury.

Senator PASTORE. Within that figure of $500?

Mr. WALSH. Yes, sir.

Senator PASTORE. Thank you.

Secretary VOLPE (continuing his prepared testimony). For every dollar of net benefits that it provides to victims, the study shows it consumes a dollar.

THE PROPER TIMING OF COMPENSATION BENEFITS

The tort liability system tends to apportion benefits rather unevenly, in some cases paying too late and in others too soon. Three different investigations by the Department have demonstrated that despite commendable efforts to introduce advance or partial payment techniques, the system is still often quite slow in providing benefit payments for even that limited class of victim that it claims to serve; moreover, the system can operate to discourage early rehabilitative efforts and places a premium upon their deferment beyond the time when they could be most effective. An industry study of some 35,000 personal injury claim files clearly establishes that the system pays most slowly in cases where the need for timely payment is greatest; that is, cases of permanent impairment and disfigurement.

REHABILITATION OF ACCIDENT VICTIMS

Closely related to the problem of delay in the payment of benefits is that of lost opportunities to minimize very large personal injury losses by the timely use of comprehensive rehabilitation programs for seriously injured accident victims. One study project indicated a disappointingly low utilization of rehabilitation even when it was recommended to the victim.

To achieve the maximum potential benefits from the rehabilitation process, the relationship between private insurance benefits and the various rehabilitation agencies, including local, State, and National agencies, must be consciously and explicitly coordinated and rationalized with the auto accident compensation system.

PROPERTY DAMAGE

The Department's study of the compensation system has focused principally on the fate of the bodily injured victim. I believe this was proper for at least four reasons.

First, people are more important than property. Second, the most serious accident losses are associated with people, not property. Third, the present compensation system is doing much better today with property losses than it is with people losses. Fourth, the problems of personal injury losses are far more complicated than those of property losses.

Nevertheless, property damage losses are important; they are very large in dollar value and they affect far more people than injury losses. In recent years, the cost of repairing vehicles has risen sharply with a consequent rise in the cost of insuring for that repair. Experts, many of them within the insurance industry, have rightly traced part of this rise to the designs of the vehicles themselves.

Unfortunately, there is no way for liability insurance to distinguish between damage-resistant vehicles and fragile vehicles, or between very expensive vehicles and those of less value since it is concerned solely with some other car owner's accident likelihood. Moreover, rating systems for collision insurance have only very recently begun

to take any consideration of the vehicle's damageability. Now that we have this clearer perception of the vehicle's contribution to crash. losses, we can hopefully expect some countervailing pressure by the insurance institution on car designers to help curb future crash losses.

STRAINS ON INSURANCE INSTITUTIONS

The accumulated problems of the tort liability insurance system. are now having their undeniable impact on the insurance industry itself. Underwriting profits have for many companies turned to underwriting losses. It has been alleged that capital may actually be withdrawing from the market; while the threat of such withdrawal is hardly of recent vintage, its actuality, on any large scale, would be new and would present a social problem of very serious proportions. According to the study, auto insurance today appears to be coming more and more difficult for some drivers to buy in the voluntary insurance market. Between 1966 and 1969 the number of motorists having to obtain their insurance from companies not of their own choosing through assigned risk plans grew from 2.6 to 3.2 million, or 23 percent.

The Federal Trade Commission, in part of its work for our study, estimated that 8 to 10 percent of all drivers are in the hard-to-place insurance market. This development comes at a time when their requirements for insurance, overall, are increasing if only because of rising medical and auto repair costs.

IMPACT ON OTHER PUBLIC INSTITUTIONS

Automobile accident disputes are currently placing severe strain on the Nation's judiciary, even as a multitude of other demands threaten to overburden it. According to the study, automobile accidents contribute more than 200,000 cases a year to the Nation's court load. Simply in terms of judge time alone, they absorb more than 17 percent of the country's total judicial resources and long delays-and I mean "long"-are not uncommon in jurisdictions with severely crowded court dockets, and that applies particularly to Massachusetts. Also, the motor vehicle accident tort liability insurance system has exerted great strains on the existing system of State regulation of insurance. The primary problem of insurer insolvencies has been concentrated among speciality auto insurers serving the high-risk market. The resulting problems for consumers, regulators, and the insurance institution in general have proved so resistant to solution that they threaten to lead to greater centralization and a consequent loss of local initiative and freedom in insurance regulation, to the great detriment of all concerned.

In summary, the existing system is not serving the accident victim, the insuring public, and society as well as it should. We should seek to improve its performance.

APPROACHES TO A BETTER COMPENSATION SYSTEM

The factual findings of the Department's study of the motor vehicle accident compensation system makes it evident to me that improvements can be made in a way to redress losses sustained in auto