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demand take care of them. The Board of Insurance Commissioners operates on the theory that what is best for this big industry which is vital to the economy of our state is best for the people of our state.” It is believed by some that the judge was leaving the door open for an appeal of his decision to a higher court; others say, however, that he felt the prerogative of altering insurance regulation in Texas belongs not to the courts, but to the legislature. Insurance Companies Prefer That The States Do the Regulating Insurance companies, Keeton and O’Connell relate, are exempt from federal anti-trust prosecutions because regulation by the individual states has historically been permitted to predominate. This situation was threatened by a federal court decision that held that insurance companies are subject to federal regulation under the commerce clause of the U.S. Constitution. However, Congress in 1945 passed a statute to preserve the states’ dominance in this matter, contingent on the state legislatures’ occupying the field of insurance regulation more completely. Under pressure from the insurance industry, anxious to avoid federal regulation, all of the states by 1950 had broadened their statutes \( particularly relating to rate reg”Under the prevailing pattern,” Keeton and O’Connell go on, “rates are set by the industry, through the rating organizations, subject to regulation by state officials. Two states, Massachusetts and Texas, follow a wholly different pattern of rating for at least the most basic auto tort liability insurance coverage; rates there are prescribed in the first instance by an agency of the state,” based, as has been noted for Texas, largely on data collected and processed by the rating agencies. The Texas rates, as established by the S.B.I., are computed by the agency, its chief actuary, Joe Eddins, tells the Obse,rver. \(In this context, to compute, of course, computations follow a formula; when the ratio of loss \(claims paid out by the compremiums collected from state motorists, then a rate increase is indicated. If, on the other hand, Eddins says, the loss ratio is below 63.16% of premiums for a year, then a rate reduction will follow. The formula assumes that 36.84% of premiums are needed by companies to cover operating costs \( 20% for production costs, including agents’ commissions; 5.87% for general operation; 1.09% for inspections, audits, and premium discounts; and 4.88% plus a profit of 5%. Rates are set for the state based on data provided to the S.B.I. by, primarily, three major statistical or rating agencies that are supported by the insurance companies. Operating in Texas are the National Bureau of Casualty Underwriters 4 The Texas Observer tual Insurance Rating Bureau \( for mution of Independent Insurers. Some companies, such as State Farm Mutual, do their own statistical work. The data covers premium and loss experience for the group of companies subscribing to each rating agency. Mauzy, the newly-elected state senator from Dallas, believes that the data filed with the S.B.I. should come directly from the companies, rather than being processed and then provided by their rating agencies; thus the state officials would not have to deal with pre-digested information provided by the insurance interests. Mauzy would support a move to expand the S.B.I.’s staff for this purpose. Thus inefficient and efficient companies would not be considered together, as they are now. Mauzy believes that it doesn’t make sense to let the companies, “in effect, regulate themselves” by the use of rating bureaus; “I’ll let you decide all day long what I should do if your decision will be based on my arguments,” Mauzy says. He believes that the S.B.I. also needs increased subpoena power to call for company records. He is complimentary of agency officials, but believes that the system under which they operate needs revision. He asserts that “the public has lost Mauzy is critical of the latest merit plan, which will add penalties to the rates paid by drivers who are convicted of moving violations or involved in accidents. “This appears to be a plan to penalize the bad drivers,” Mauzy says, “but it is inequitable. For one thing, only 101 of Texas’ 254 counties report all traffic violations to the Department of Public Safety,” whose records will be the authority for assessing penalties in paying for auto insurance for_ drivers who are involved in accidents or convicted of moving violations. Other inequities exist, Mauzy says. He recounts this situation: About seven of the 29 municipalities in Dallas County confidence in the system of liability insurance,” and every time the rates go up the number of uninsured drivers on the state streets and highways increases. Should this trend continue, he says, there may develop a public demand for compulsory insurance or state insurance. Congress seems to be increasingly concerned about auto insurance. One aspect that troubled the Senate Insurance Subcommittee in 1965, Ridgeway reports in New Republic, was that in the most recent five years, 300,000 people had been left uninsured after the failure of 65 companies, which went under with about $100 million in unpaid claims. U.S. Sen. Thomas Dodd of Connecticut is said to favor establishing a federal Motor Vehicle Insurance Guaranty Corporation which would guarantee that policyholders’ claims would be paid in case of company failure. This prospect displeases insurancemen, who do not view any degree of federal regulation comfortably. Mauzy believes that permitting the companies to compete on rates in Texas would probably be unwise, as it likely would result in more company failures than occur now. He says the big companies could afford to undercut their competition for several years, losing money if necessary, killing off competition, and then charging whatever rates they wanted. have “drunk in auto” ordinances which are invoked instead of the state’s “driving while intoxicated” law. A city, by having such an ordinance, can try drunk driving cases in its corporation court, enriching the municipal treasury with the fines so collected. If a city has no “drunk in auto” law, such cases are tried in county court. Thus, Mauzy says, a drunk driver in suburban Richardson, for instance, pays $100 fine in city court there. The conviction is not reported to the D.P.S., since it was a municipal, not a county, case. But an inebriate apprehended while driving in Dallas is taken to county court, where he is fined $150, given a three-day jail sentence and put on probation for six months \(and THE MERIT PLAN: INEQUITABLE?