The D.C. City Council gave final approval yesterday to a measure scrapping the city's requirement that all District motorists carry no-fault car insurance, despite an intense lobbying effort by the insurance industry to block the action.

The council voted 7 to 5 to amend the two-year-old no-fault insurance law after a two-hour debate over the wisdom of changing a program that some members, consumers and insurance industry representatives argued was working.

The vote was a victory for Mayor Marion Barry, who had proposed the changes, and the city's trial lawyers. Council member Carol Schwartz (R-At Large), who had voted in favor of the amendments two weeks ago, changed her mind and tried unsuccessfully to table the bill yesterday and then voted present on the final vote.

Under the new legislation, consumers can choose between standard liability insurance and no-fault coverage, which allows motorists to be compensated by their own insurance companies regardless of who is at fault. The legislation also eliminates a prohibition against suing for pain and suffering unless an accident victim incurs $5,000 in medical bills or suffers disfigurement, disability or death. Insurance coverage would remain mandatory for all motorists.

Insurance industry officials predict that insurance premiums will increase by 11 to 60 percent as a result of the action, while supporters of the change say it will give consumers more options and will preserve their right to sue for damages.

In other action,the council adopted emergency legislation authorizing the council to vote on a controversial salary increase for police officers that Barry has attempted to block, and another emergency measure to permit NS&T Bankshares Inc. and United Virginia Bankshares Inc. to complete a proposed merger by the end of the year.

The amendments to the insurance law must be signed by the mayor and undergo a 30-day congressional review period before becoming law.

Those voting in favor of the changes were Frank Smith (D-Ward 1), John Wilson (D-Ward 2), Charlene Drew Jarvis (D-Ward 4), William Spaulding (D-Ward 5), Nadine Winter (D-Ward 6), Wilhelmina Rolark (D-Ward 8) and John Ray (D-At Large).

Opposing the measure were council Chairman David A. Clarke and members Polly Shackleton (D-Ward 3), H.R. Crawford (D-Ward 7), Betty Ann Kane (D-At Large) and Hilda Mason (Statehood-At Large).

The council had been lobbied intensively by trial lawyers, who handle cases for accident victims and stand to benefit from the changes, and the insurance industry, which argued that the changes would mean that consumers would get less coverage for more money. Insurance officials also warned that the amendments would create a technical nightmare for insurance companies, which will have to explain the various rates available to the public.

Representatives for HALT, a consumer advocacy group, had asked the council to consider a substitute bill that would limit policyholders to two options: liability insurance with no restriction on lawsuits, or no-fault coverage as defined by the current law. But the council did not consider those proposed changes.

Council members took turns yesterday giving long speeches defending their positions on the insurance amendments, while a standing-room-only crowd looked on and occasionally responded with laughter or applause.

Winter, a former no-fault supporter who surprised her colleagues and insurance representatives two weeks ago when she announced support for the amendments, said that the council had all the facts it needed to justify changing the no-fault system.

Winter, who played a key role in changing the no-fault legislation, complained that insurance companies have tried to intimidate consumers with "erroneous" information about possible rate increases.

"I stand to be corrected when proven wrong, but to this date no one has proven me wrong," Winter said.

Schwartz, who initially supported the amendments, had promised to reconsider her vote if the insurance industry could demonstate that any insurance premium had decreased under the no-fault law.

Schwartz said yesterday that Mason and Kane had shown her that their car insurance premiums had decreased. She said the council appeared to be rushing to act before receiving a report from a special commission appointed to study the effect of the no-fault law.

Schwartz had received at least 900 telephone calls from her constituents after the insurance industry sent 21,000 registered Republicans letters that said insurance premiums would increase because of Schwartz's action.

"I am not known for ducking tough issues or for bowing to pressure," Schwartz said before voting "present" on the issue.

Crawford argued that changing the law would be "counterproductive" at this point. "There is no adequate justification for any significant change," Crawford said.

But Jarvis said that no branch of government should deprive citizens of the right to sue.