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As if to ward off that result, more state commissions are holding public rate hearings, denying premium boosts and ordering insurers to specify their reasons for cancellations and nonrenewals. But none of this will lower the price of insurance. As cancellations decrease, the industry will find itself handling more high-risk drivers and paying out more in damages. To reduce their losses, they will be forced to raise premiums still higher.
Somehow the industry must be helped to cut its costs. One obvious step is tighter state driver-licensing—or even a federal license for all U.S. drivers. If 20% of the country's drivers lost their licenses, says the Stanford Research Institute, the accident rate would go down 80%.
Some critics urge the Federal Government to do the insurance industry a favor and take over the auto-accident business entirely. Urban Specialist Daniel P. Moynihan, who chairs a federal auto-safety advisory committee, suggests a federal insurance system modeled on workmen's compensation, with awards made strictly on the basis of loss rather than fault. "Financing such a system," he argues, "might be the easiest part of all." Some $3.4 billion a year in gasoline taxes is already being spent to build the Interstate Highway System. When the system is finished in 1973, Moynihan would simply raise the gas tax a penny or so a gallon and switch the revenue to insurance, for which motorists would pay no other premium.
There are serious objections to Moynihan's nonfault Government insurance scheme, however tidy it sounds. For one thing, it would be fought hard by the oil industry, which aches to repeal the present gas tax. For another, it might be so financially painless that U.S. drivers would tend to worry less about their liability for accidents. And Government insurance might become a political football as legislators vied to curb needed rate raises.
Most experts still feel that private enterprise, with all its built-in advantages of business competition, should be given a second chance rather than a death sentence. They argue that the way to cut auto-insurance costs is to design a system that automatically compensates most victims regardless of fault, and still gives them the option of going to court to ask for more. Such mixed systems are already operating in several other countries, notably in Canada's Saskatchewan Province, where auto insurance costs two-thirds as much as identical coverage in adjoining North Dakota.
A much discussed mixed system geared to the U.S. is now being advocated by Law Professors Robert E. Keeton of Harvard and Jeffrey O'Connell of the University of Illinois. In their book After Cars Crash, they propose a novel form of auto insurance called "Basic Protection," which would pay benefits more widely and efficiently, yet preserve both private enterprise and the right to file lawsuits for severe injury and economic loss.