THE grim statistics of highway travel in the world's most motorized society add up to an irresistible sales pitch for auto insurance. Cars have killed more Americans since 1900 than the death toll of all U.S. wars since 1775. Roughly 24 million cars crashed in 1966 alone, injuring 4,000,000 people, disabling 1,900,000 and killing 53,000.
The economic loss caused by this carnage is well over $12 billion a year, and there is no question that the U.S. desperately needs a highly effective auto-insurance system that would compensate traffic victims rapidly, fairly and at reasonable cost to policyholders. But there is no question, either, that the U.S. auto-insurance system is a model of expensive inefficiency. The country's 103 million drivers have every reason to complain.
In ten years, the average premium has soared 55%. Car owners who take out a standard 50/100/5 liability policy (on which the company will pay up to $50,000 to one injured person, a total of up to $100,000 to all persons injured in one accident, and up to $5,000 for property damage) are also likely to include comprehensive protection (fire, theft, etc.), plus a collision policy requiring them to pay the first $100 in repairs. In Los Angeles five years ago, that package cost $279 a year for a couple with an 18-year-old son, even though his high school driving course got them a 10% discount and he used their low-priced car for pleasure only. Today the cost is $342—up 23%. In Houston, the rate has risen 49%, to $284.40. Boston tops the U.S. with a yearly premium of $711—up 71%.
The price of auto insurance is so high that most people would like to find a way of passing it up. But even though New York, Massachusetts and North Carolina are the only states that make liability coverage compulsory, it is virtually unavoidable everywhere. An uninsured driver must buy it or post equivalent financial security as soon as he is involved in a serious accident or gets convicted of a serious driving offense. And whichever alternative he chooses, he is in trouble. With a damage claim hanging over his head, few if any insurers will accept him as a future risk. If he posts personal security, he may lose his home or savings.
Paint It Red
Insurance companies say they are losing their savings, too. Despite the steep rise in premiums, the industry colors itself a bright red. In ten years, physicians' fees have gone up 39% and hospital costs 92%. Weekly factory wages have risen 42%, boosting lost-income settlements. Typical repair bills have climbed more than 50%. As a result, the average bodily-injury claim is up 31%, the average property-damage claim 46%.