The District's no-fault insurance law, which took effect two years ago after a bitter fight, is once again the subject of controversy as a City Council committee prepares today to act on a bill calling for major changes in the law.

The insurance industry, which has consistently supported no-fault, argues that the changes proposed by Mayor Marion Barry would essentially gut the current law. District trial lawyers, who just as consistently have opposed no-fault, contend that the mayor's changes will mean lower insurance costs for the consumer.

The mayor's proposed changes are scheduled to be considered today by the council's Consumer and Regulatory Affairs committee. If they are approved they will be sent to the full council for consideration.

Barry's proposal would make no-fault coverage, formally known as personal injury protection (PIP), optional. Under the current law, PIP coverage is mandatory. Under this coverage, motorists are compensated by their own insurance companies for injuries suffered in an accident, regardless of who is at fault. Local insurance firms see this as the heart of the no-fault law.

Motorists now must carry PIP coverage of $100,000 for medical and rehabilitative benefits, $24,000 for wage loss and $2,000 for funeral expenses. Under Barry's proposal, motorists would be able to elect to have no-fault PIP coverage in those amounts, or a new PIP package cutting the medical and wage-loss coverage amounts in half.

Under the proposal, motorists who did not elect to have any no-fault coverage would still have to carry mandatory liability insurance, as well as increased protection against being hit by uninsured drivers.

In addition, the proposal would eliminate a restriction against suing for nonmedical pain and suffering unless the accident victim had received at least $5,000 in medical bills or had suffered disfigurement, disability or death. Under the current no-fault law, victims must collect from their own insurance companies for bills up to $5,000, regardless of fault.

The no-fault law was adopted because of concern that District motorists were not adequtely protected and were unlikely to recover the amount of actual losses from auto accidents because of a large number of uninsured motorists on the District's streets and limitations of personal injury coverage.

Barry's proposal "takes the heart right out of the bill," said August P. Aleggi, vice president of Government Employees Insurance Co., the biggest auto insurer in Washington. "They are starting the fight all over again for no good reason."

But representatives for D.C. trial lawyers say that the proposed changes would benefit consumers. Edward L. Norwind, who represents the Association of Plaintiffs Trial Attorneys, said no-fault coverage has duplicated coverage provided in health insurance plans and resulted in unnecessary costs.

HALT, Inc., a Washington-based organization that advocates for better legal services, has formed a consumer coalition with some local groups, including the D.C. Federation of Civic Associations and the Gray Panthers, to support the current no-fault law. The coalition has called Barry's amendments an attempt to weaken the law, and has asked why the council should consider the changes before a commission assigned to study the law's impact has issued a report.

"There is simply no reason to rush into ill-informed decision making," the consumer coalition wrote in response to the proposed bill, "unless someone is afraid of what the numbers, once obtained, will show."

In citing reasons for his proposed changes, Barry pointed out that a study done by the District insurance administration found that there were fewer uninsured motorists in the District than believed and that no-fault had not produced large reductions in insurance premiums.

At a public hearing on the amendments, Marguerite Stokes, superintendent of the D.C. Insurance Administration, testified that the cost of minimum mandatory automobile insurance in the District has increased by an average of 8 percent since October 1983, the effective date of the no-fault law.