Three years have passed since six-year-old Craig Thompson lost his right arm in a suburban St. Paul auto accident, but his family has yet to receive a cent in compensation. Reason: the insurance company involved has gone broke. Los Angeles Motorist Dominga Lopez found herself in a different kind of bind. She carried a $100-deductible policy, and her insurance company tried to get her to pay $200 damages herself by insisting that a three-car smashup was actually two separate accidents. In Memphis, a collision with a city bus cost Businessman T. J. Downs Jr. $114 in repair bills, but the bus company's insurer offered him only half that amount—take it or leave it. He will take it. "It would cost more than $57 to fight the suit," says Downs. "They've got me over a barrel."
Three out of four American families carry automobile insurance, and frustration over accident claims is only one of their woes. There are also protests against big premium increases, abrupt policy cancellations and lax state regulation of fly-by-night companies. The $9 billion-a-year auto insurance business is in such parlous shape that James J. Meyers, vice president for claims of the Crum & Forster insurance group, says the whole works may well become "a dying industry unless we reappraise our practices."
High Risk. Last year premium rates on auto liability insurance across the U.S. increased by 5.2% on the heels of a 9.3% increase in 1965. In Massachusetts, which has the highest rate of any state, a 10/20/5 liability policy* now costs an average $130 v. $93 ten years ago; for a Boston motorist who wants 50/100/5 coverage, the premium can soar above $600. Even in sparsely populated Wyoming, a similar policy can run as high as $136.
Insurance companies are also getting choosier about which motorists to insure, often dropping clients on grounds that may be actuarially sound but strike many as capricious. A Nashville man's policy was canceled when his insurer discovered he had been arrested for shooting craps back in 1951; Cincinnati Salesman Vaughn L. Cunningham, 70, was washed out following a $150 claim—his second claim since 1928.
In order to keep on driving, many such motorists have been forced to buy more costly insurance from so-called "high-risk" companies. Since 1960, more than 75 high-risk firms have gone into bankruptcy, leaving 300,000 claimants holding the bag for at least $100 million—and giving the whole industry a bad name. In California, where 950-ODD companies now write auto-insurance policies, Deputy Insurance Commissioner Harry Miller says: "If we could just cut that to 900, and pick the 50 we'd get rid of, we could cut out 95% of our complaints."