Toledo Union Journal

How to Buy
Auto Insurance Industry Chaotic;
States Block Money-Saving Efforts

By SIDNEY MARGOLIUS

In the past year, 28 states have increased auto-insurance rates, typically 15 per cent, in some cases for the ninth time in the last 12 years. Increases are under consideration in other states.

In general, the cost of insuring a car has jumped 72 per cent in the past ten years compared to a 31 per cent increase in the price of cars themselves, and an average rise for all goods and services of 24 per cent.

For example, it costs $100 and up to replace a shattered windshield in a modern car. One authority points out that it cost only $10 to do so in such cities.

Yet even with these steep rates, it has become difficult for car owners in some large cities to get auto insurance at all.

Insurors have clamped down in New York, for example, to the extent that often drivers who have had a minor accident even if not their fault, or even a traffic violation, must go into the "assigned-risk" pool. In that event, they often pay 35 per cent more than even the high standard rates.

In effect, the insurance companies are on strike.

In general, insurance companies blame the present chaos in metropolitan areas on the increase in accidents, high injury awards, high repair costs, increased hospitalization costs and steep attorney and doctor fees.

Some of these arguments are true, but not the claim that increased accidents are a major cause. There were ten million accidents in 1957 compared to eight million in '39. But the number of cars has more than doubled—from 30 million in '39 to 66 million in '57. Thus there now actually are fewer accidents per car.

Two reasons for the climbing rates and the difficulty many motorists have in getting insurance at all, are not publicized by the companies.

One is the big cut of the insurance dollar they demand for selling and administration expenses, and profit. They want 40-50 cents of every premium dollar for themselves, and expect to pay out in claims only 50-60 cents.

Also, while the insurance companies complain about high repair costs, they themselves have contributed by condoning exaggerated claims.

Automotive-writer Joseph Ingram reports that an estimated 25-40 per cent of all repair bills paid by insurance companies consists of bribes, secret commissions and padded charges. It was profitable for the insurance industry to condone exaggerated claims as long as they could charge another dollar in premiums for every 50 cents more they paid out.

At the same time, the insurance industry, especially the stock companies and agents associations and some state insurance departments, are hampering efforts to introduce economy methods which would keep down insurance costs.

One of the most promising is group auto insurance, in which labor unions are pioneering.

Group purchases of life and hospitalization insurance have cut costs enormously. Some plans operate on less than ten cents of the premium dollar compared to the 40-50 cents the auto insurors demand.

Until group insurance is available or the states themselves provide auto insurance as does the Province of Saskatchewan in Canada, we advise:

(1) Concentrating on liability insurance rather than collision coverage, since a liability suit is your greater danger, and non-reimbursed damage to your own car is tax-deductible anyway.

(2) Shopping for lowest rates in your area and your particular classification among mutuals and other rate-cutters who give savings to drivers with good safety records.

(3) Making sure you get proper classification and a reasonable rate if you buy through a car dealer or finance company—they have been known to charge buyers the rate for higher classifications than necessary.

(4) Driving with great care and avoiding small nuisance claims or exaggerated claims, since it's getting costlier and harder to get insurance at all.