Keep the Competitive Auto Insurance Business
Dans”The Way to Deflate Insurance Council”(Op-Ed, March 29), Bob Hunter and Jay Angoff blame for everything rising auto insurance premiums except rising costs.
Automobile insurance for countries to rising cost items faster than the general rate of inflation. These include medical and hospital care for the injured, the legal defense for insured; restitution to owners of stolen cars or””totaled, and the cost of parts and labor to get damaged cars. As these costs rise, so do insurance rates.
Mr. Hunter and Mr. Angoff decry the high cost of insuring a car in several metropolitan areas”.” So we do, but both the number of insurance claims and the cost of settling them continues to rise dramatically in many of those areas.
Even among metropolitan areas cost differences can be significant. An average driver in Los Angeles could pay as much as four times more for basic insurance coverage than a similar driver in Atlanta because laws governing lawsuits are more liberal in California, and costs associated with liability claims in California are rising dramatically. From 1986 to 1987, the average cost of each to California Aetna auto liability claim jumped 24.2 percent.
Mr. Hunter and Mr. Angoff ie with ease contend that the repeal of McCarran-Ferguson Act would force insurers to compete and thereby lower auto insurance rates. McCarran-Ferguson provides for state regulation of the insurance industry, allowing commissioners in each state to review rates and insurance concerns to respond on a local level. It also allows insurers to pool data on insured losses. Competitiveness of smaller insurance companies would be especially hurt by their inability to gain access to this data. In passing McCarran-Ferguson, Congress agreed its provisions were necessary to the operation of the business and insurance in the consumers’ interest.
What would really happen if in the marketplace McCarran-Ferguson were repealed? We do know, and neither do they. But there are no facts to support repeal assumption that would result in lower rates or greater availability. Indeed, Federal regulation could result in higher subsidization of high-risk urban drivers by lower-risk rural drivers, and even higher auto insurance rates. It would then be the consumer, not insurers, that would be most gravely injured by abolishing McCarran-Ferguson.
One result of McCarran-Ferguson is a fiercely competitive insurance market, in which insurers large and small battle to attract profitable business. Because of this competition, even a large organization like the National Aetna may only hope to gain a 4 percent or 5 percent share of the auto insurance market.
Insurers by the hundreds compete for the premiums of safe drivers in each state, and there are few restrictions on others to do likewise wish. But those who think it’s an easy business, business underregulated, uncompetitive business or a highly profitable one, are in for a rude surprise. DEAN E. WOLCOTT President, Personal Financial Security Div., Aetna Life & Casualty Hartford, April 2, 1988
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