IN MY OPINION The Auto Insurance Situation: A Few Shafts of Light Appear Probably the most interesting discovery for me in working on the auto insurance story that appears elsewhere in this issue was that ‘there has been, for nearly 50 years, something of a muted, underground dispute in insurance circles regarding inclusion of investment income, or part of it, in setting rates to be paid by policyholders. Judges in their decisions, experts in the insurance industry, and close followers of the business have criticized the existing method of setting auto rates. The insurance boys usually speak with a single voice well-modulated, self-assured, and soothing. Yet, here it is, evidence of dissent in court decisions dating back several decades; in a carefully worded, yet explicit, statement by Best’s, the authoritative standard of the insurance world; and in the elaborate prose of an expert’s affidavit and of a technical legal volume. I think the public has been unaware that there is a considerable body of opinion, in the insurance world, that the companies may have been getting away with something. Perhaps change is coming. There is, I think, a widening sense of something seeming amiss in the auto insurance picture not only in Texas but throughout the nation. People are coming to demand straight answers to some basic questions. After many hours of work in the past three months, one thing seems to me now utterly unarguable: the companies cannot justify keeping the profits from their investment of premiums paid in advance and of reserves \( over-reserves, apparentholders get some consideration for this use of their money. This is investment income, all right, but it is not the companies’ money that is being invested in these two instances; these are funds as-yet unearned by the insurers. There is still a great deal I don’t understand about the auto insurance picture; working through the technical mumbothat exists is a tedious and at times unrewarding task for a layman, and it was quite some time before some shafts of light began to get through to me. Our state legislators must begin to insist that they be fully informed about the system which preceding legislatures have established. All they have to say, in effect, to the insurance industry is: “OK, you say we don’t understand. Explain it to us. We’re not dumb and we’re the ones who have to set the rules. Make it clear to us or else the public may demand state ulation.” That would make the explanations more clear, I think. Perhaps the pendulum is beginning, at last, to swing back on the insurancemen; maybe time is catching up with the game they’ve been playing, and playing unfairly, it seems to me, with a public that has not been fully and candidly informed about the situation. We must demand that the potentates of the insurance empire answer our questions responsively. And we must demand that the right questions be asked: Why shouldn’t those parts of investment income referred to above be considered in rate-making? How are rates set? Should the companies’ rating bureaus continue to submit loss and premium data to the state, or should the companies be required to do this individually? How much of this highway loss is insured? What is the relationship of the higher accident and economic loss on the highways to rates paid by drivers? Since there are more drivers, doesn’t this mean greater premium income for the companies? Let insurancemen be more candid with our elected representatives in Austin than they have been in the past or let’s throw them on the mercy of federal regulators who often tend to be more difficult to get along with than their state counterparts. Consumers’ Assn. It was suggested to me, also in the course of my work on the auto insurance story, that maybe what we need in Texas is a consumers’ organization. Such a group, financed at, say $2 or $5 annually by individuals who have little leverage in Austin, could go to court to protest such things as auto insurance increases; lobby in behalf of those, the majority in our state, who are unrepresented by Austin’s lobbyists; and try through propaganda and news releases to marshal public opinion for us thin or medium-built cats. Organized labor spent about $25,000 in 1965 carrying a protest to court against the auto coverage rate increase of that year, but felt it would not be justified in spending more of its members’ funds to appeal the adverse decision. It was believed by some that the judge in the case was hinting that an appeal should be pursued. Adequately financed, a consumers’ organization could carry through such questions to more conclusive answers. This is worth considering. Accurate Data? One argument advanced by the state insurance interests had given me pause. It runs: why is Texas first in highway mileage, third in auto registrations, and yet 36th in auto insurance rates? That seemed persuasive to me; perhaps the Texas system of rate-setting was fair. But I now question the assertion because of a personal event. Missouri, it was said in the summer of 1965 by the Independent Insurance Agents organization, has the highest rates in the nation. Well, I moved from Dallas to Missouri during that period, to a town in the St. Louis metropolitan area, a region comparable in population, roughly, to Dallas. I assumed that my rates would jump. But look what happened: on May 15 in Dallas I had renewed my policy on two Fords for six months. Cost: $78.24. Nov. 15 in Missouri I transferred my policy to that Because I had changed states, I lost the renewal discount that company normally gives \(a practice I question, but that’s anThe cost for the same coverage on the one remaining car in Missouri, for six months: $32.66. We are told in Texas that Missouri rates are double those of Texas; all I know is, I didn’t find this to be the case. I now see, on rereading the assertion by the insurance organization, that they are comparing states’ bodily injury and property damage rates, combined. They do not mention liability coverage; perhaps that’s where the difference is, or perhaps, for some reason, liability rates are difficult to compare for one state and another. The point of all this, I think, is that we must not be put off or put on, either. We of the driving public have honest questions on this matter. We are not too unintelligent to have these questions answered and the situation fully explained. December 30, 1966 13 GARNER & SMITH BOOKSTORE 2116 Guadalupe, Austin, Texas Mail order requests promptly filled Texas Society to Abolish Capital Punishment memberships, $2 up P.O. Box 8134, Austin, Texas 78712
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