to be in the life field. And it is carried by the Weekly Underwriter, which is the first insurance newspaper in America, according to its banner claim.

Now to get back to the point I was making. Even if we resolve somehow or another without a direct preemption by the Federal Government, the problem of delayed payments and so on and persons with claims who, as the chairman reminds us, are never compensated, you still haven't faced the problem of the man who can't get insurance or the man who, as I say, is an establishment pillar who is canceled. Here is why I think the proposal I make requires under this first-party coverage the right of insurance for anyone who is licensed, retains his license as a driver, and pays his premiums.

Senator PASTORE. Would your plan be on the national level?
Senator HART. Yes, sir.

Senator PASTORE. It would be national insurance?

Senator HART. Well, the caption, the title of the bill, explains the basis on which we go this far: "A bill to regulate interstate commerce by requiring certain insurance as a condition precedent to using the public streets, roads, and highways, and for other purposes."

It would compel the writing of insurance for anyone licensed and cancellation, say, for failure to maintain your driver's license or pay your premium.

Now, Senator Pastore, I put an escape hatch in my statement when I introduced this legislation, acknowledging, as the Secretary has, that the field is complex, the problem is far from simple, that I suggest these things tentatively, but as a basis for doing more than just discussing a study, let's get some legislation in here.

I share Senator Magnuson's and Senator Cotton's hope that the administration next year will have their legislative proposals in early. There is a Wall Street Journal story of October 6 that bears on the second of the principal problems, as I see it, the cancelation thing— "Many motorists find auto policies canceled for no apparent reason.', And the subheading: "Firms, in a financial bind, arbitrarily cutting back; little recourse for victim. Some companies bow out."

I ask that be printed in the record also.

Senator PASTORE (presiding). Without objection, these articles will be inserted in the record.

(The articles follow:)

[From the Weekly Underwriter, Saturday, Aug. 1, 1970]

A HORROR STORY

This is a true story. Names are withheld to protect the guilty.

Recently, an insured whose automobile coverage had been written for some time through a broker, received notice of cancellation from the insurance company. Just like that. No warning, no explanation, nothing. Simply a flat notice that he was no longer covered.

Since he'd had no accidents and paid his premiums faithfully, he was somewhat puzzled; to say nothing of worried, flustered and annoyed.

On inquiring at length, and at considerable inconvenience, he learned that his broker had passed on to that great underwriter in the sky, and that the insurer had decided to close out the broker's book of business, rather than re-placing it. The company had not seen fit to tell the cancellees anything: why they were no longer insured, where they could get coverage, whether the insurer was glad or sorry. Not even that their broker had died.

I have no idea how large a book of business was involved. Even if it was only five policies, the company's behavior spawned ill-will ten times that number of policyholders.

In South Carolina, the National Association of Independent Insurers lately went on record as opposing a proposed insurance department amendment to the cancellation law, which would require much fuller disclosure of the reasons for policy cancellation.

It may well be, as NAII contends, that the proposed amendment would impose "severe impediments and restrictions on the abilities of companies to respond promptly to adverse circumstances." On the face of it, it does seem that requiring specific facts, in addition to reasons for terminations, would hamper and hamstring insurers.

But they have themselves to blame. If it weren't for horror stories like the one recited, there would be considerably less pressure for restrictive legislation. As it is-since the incident is far from atypical-pressure is likely to grow and to spread to other states.

It does the "public image" of our industry little good to publicize its general interest in highway safety and the common weal, when its specific dealings with insureds show such small regard for human welfare.

We can't expect people to accept us as the Good Witch of the North, when our behavior is more appropriate to Dracula.

J. K.

[From the Weekly Underwriter, Saturday, Aug. 15, 1970]

CASES IN POINT

The decline of underwriting profitability in the auto insurance industry has had a number of strange results-one of which is that some underwriters are beginning to panic. Understandably, companies are becoming more selective, and they should be. But too often, they turn down perfectly good risks for reasons that border on the ridiculous.

Two cases in point:

A woman in the midwest applied for auto insurance, but was informed by the insurer that she didn't meet company standards. She asked for specific reasons for the rejection. After encountering considerable resistance, she discovered that she had been turned down because the house she lived in was badly in need of a paint job and the underwriter reviewing her application felt that, since she didn't take good care of her house, she might be equally careless with her car. In fact, she was only renting the house and was not responsible for its upkeep. So for all practical purposes she was rejected because of her landlord's irresponsibility.

The second case concerns a man whose application for insurance was rejected by a company that boasted, "We accept all good risks." His record: over 25, licensed driver for about eight years, no accidents in all the years he had been driving, and his house didn't need a painting.

In the face of that record, one would expect that the company would have accepted him immediately, but no. The underwriter noticed on the application that the man's wife had a learner's permit and that she had been taking lessons from a private driving school. Since there was the chance that the man might give her lessons in his car, he was turned down.

After obtaining insurance from another firm, he received a notice from the first insurer saying that they were cancelling his policy (what policy?), and that they were notifying the motor vehicle bureau that he was no longer insured by them. Admittedly, auto underwriters are experiencing difficult times what with the reparations system in so much trouble and with the problems caused by inflation and increasing traffic accidents. But underwriters must realize that they have a responsibility to be fair to the public in addition to the responsibilities they have to their companies.

If things continue the way they have been, there may come a day when requirements for obtaining auto insurance will reach such wild proportions that a man can be rejected because his group has twenty-five per cent fewer cavities. P. Z.

[From the Weekly Underwriter, Saturday, Sept. 5, 1970]

ANOTHER HORROR STORY.

It's easy to shrug off a lot of the flak insurance companies get as the wild shots fired by disgruntled, uninformed or greedy insureds.

Not so easy to shrug off, is the letter we got from the top official of a mediumsized life insurer. His broadside was triggered by an editorial we ran under the title, "A Horror Story" (Weekly Underwriter, August 1), which described the cavalier cancellation practices of one property-casualty company.

Our correspondent, who is in his middle 50's and has had his driver's license since he was 18, describes a respectable driving record: never a moving accident where he was at fault (twice he was struck by other vehicles); one speeding ticket, received when he was 18; a ticket for going through a red light at a traffic "ambush," received 15 years later.

He goes on to describe his treatment at the hands of a giant casualty insurer which, some 18 months ago, refused to issue insurance either on the car assigned to him from his company's fleet of leased vehicles or on his personal car. The insurer in question-with whom this gentleman had done business for many years— gave only the vaguest reasons for refusal to renew.

An isolated incident? Not according to our correspondent. He details his experience with another of the giants, which insures his fine arts collection under a personal property floater. An art object, insured for more than $10,000,was damaged. Because of the special nature of the object, it was necessary to employ an expert on the staff of a large museum to make the repairs.

The insured reports: "It took five months and 29 letters from me before the company approved the repairs. It took seven more weeks and four more letters before the man's bill was finally paid." And this, mind you, involved a repair bill of only $400.

I think there are two points that need laboring. First, if an insured with a good driving record, high social standing and imposing professional qualifications has trouble with two or our largest insurers, where does the less heavily armed insured stand with those companies?

Second, where does it leave the public image of insurers when a man in a position to make his voice heard far and loud is unnecessarily angered? And in case you have any doubts about this gentleman's attitude toward the property-casualty business, here is the final paragraph of his letter:

"As far as I am concerned, the managements of most of the property-casualty companies have demonstrated their incompetence, their stupidity and their lack of worthiness to lead great financial institutions, and the utlimate nationalization of the property-casualty industry will rest squarely upon the shoulders of' the men who, for the past 50 years, have led that industry into its decline.”

J. K.

[From the Weekly Underwriter, Saturday, Sept. 19, 1970]

SON OF DRACULA ..

...

The editorials we ran ("A Horror Story," Aug. 1, and "Another Horror Story,' Sept. 5), chronicling the cancelation abuses of insurers, seem to have touched some deep discontent within the bosom of the insurance business. If the following comments came from an insured, they would be more easily disposed of; when a man who is obviously intelligent and articulate, and has probably spent much of his life in a business, is bitter about that business, one must suspect some fundamental rottenness in the state of Denmark.

It's probably unfair to keep pressing on a spot that is sore, if not downright infected; but perhaps, since the vigor and sincerity of individual complaints has apparently had little effect so far, the ache of repetition will.

We reprint this letter, as the paperbacks say, "complete and unexpurgated": Re: "Another Horror Story . . ." The unfortunate part of your editorial is that it wasn't printed in big, bold type so that some of the myopic insurance personnel would be able to read it more readily. Whether they would understand it, of course, would still be the $64 question.

Definitely, the situation referred to in your editorial is not an isolated incident. Underwriters seem to be "book read." They appear to go completely out of their way to find reasons for not writing business and for cancelling coverages which they have had in effect profitably for many years. For instance, try to find an

insurance company that has literature explaining the operation of the 80 percent co-insurance clause or literature readily understandable by the layman showing how much insurable values have increased.

The common courtesy element in dealing with the producer appears to be practically nonexistent. Quite frankly, I am almost convinced that complete nationalization of the property and casualty industry would be for the common good. The American insuring public, particularly the small insured and even some of the larger ones, quite frankly, appears to be the low man on the totem pole from the standpoint of being able to secure proper coverage and have their policies issued and losses paid.

Does any industry have more enemies among the general public than the property and casualty industry? As far as having friends in high places-i.e., the various insurance departments-the lack of the same is also an indication of the overall incompetence among property and casualty insurance executives. Not to be overlooked is their inability to present up-to-date, refined figures indicating needed rate adjustments on a plus or minus basis. On the other hand, these same companies can very meticulously find reasons for cancellation of agencies because the loss ratio to them appears to be out of line, and yet the same agencies' loss figures on an overall basis are far better than the state or nationwide experience of the insurance company involved.

You could write a "horror story" each week. Just go out and visit a few agencies and/or brokers and ask them to relate to you some of their experiences.

You may wonder why this letter will not be signed, the reason being that if it were signed, it would result in cancellation of our agency contracts.

J.K.

[From the Wall Street Journal, Oct. 6, 1970]

INSURANCE CRISIS-MANY MOTORISTS FIND AUTO POLICIES CANCELED FOR No APPARENT REASON-FIRMS, IN A FINANCIAL BIND, ARBITRARILY CUTTING BACK; LITTLE RECOURSE FOR VICTIM-SOME COMPANIES BOW OUT

(By Priscilla S. Meyer)

Frank Buryta is a mild-mannered, 37-year-old auto repairman. He owns a safe' well-maintained 1965 Ford station wagon, rarely drives more than 40 miles an hour in his sleepy hometown of North Tonawanda, N.Y., and hasn't had an accident in some 15 years years of driving.

Last month his insurance was canceled.

The only "wrong" that Mr. Buryta committed was his decision to continue living in the state of New York. His insurer, Grain Dealers Mutual Insurance Co. of Indianapolis, has decided that it can't afford to insure people who live in New York, New Jersey, Connecticut and Rhode Island, and so it simply has stopped selling and renewing auto policies in those four states.

The action is extreme, but not unique. In fact, arbitrary refusals to renew auto insurance policies are becoming commonplace. Thousands of drivers who have been paying their premiums on time and avoiding accidents are suddenly finding themselves without insurance. Some companies are getting out of the business altogether-College-University Insurance Co. of Indianapolis is dropping all 6,000 of its auto policies—and others are dropping everyone in certain categories, such as all people over 65 or all people in New York.

"A CRITICAL SITUATION"

Big and small companies alike are acting. Nationwide Mutual Group, the nation's fifth largest auto insurer, last week decided to stop all sales of new policies on personal cars, though it will continue to renew its old policies. Liberty Mutual Insurance Co., another large insurer, has fired 25% of its auto-policy sales force and has clamped tight restrictions on sales of new policies everywhere. Three Texas auto insurance firms, which used to write auto insurance with $12 million in preminums each year, have gone into receivership.

"The situation could scarely be more critical-barring a complete collapse of the private insurance industry," says Robert Coburn, president of the Independent Mutual Insurance Agents Association of New Jersey, a 2,000-member agent group. In an emergency action to protect motorists, New Jersey has temporarily forbidden the cancelation of any auto policy.

The insurance companies say they're as sorry about the cancelations as the policyholders are, but the firms insist they have no choice. They are losing so much money on auto insurance that they simply can't afford to insure some groups of people, the companies assert. They contend that states won't let them raise their rates nearly fast enough to cover the huge increases in payouts on claims. They say that rates generally have risen about 50% over the past decade but that total payouts have increased far more.

Many insurers say that their auto operations have been losing money for some time but that until recently the losses were offset by money earned from investment of premiums. But the declining stock market has cut into these profits of late, some insurance companies say, forcing them to take a harder look at the auto business.

Over the past 10 years, the industry has paid out $2 billion more in claims than it has taken in in premiums, according to a spokesman for the Insurance Information Institute. Losses have been increasing each year, he says.

SOME SOLUTIONS

Many solutions have been proposed, but few are acceptable to both insurers and motorists. Union leaders in New Jersey, where hundreds of policies were canceled before the state imposed its freeze, have urged the state to take over the auto insurance business. Several states are considering adopting "no-fault" insurance plans similar to the one scheduled to take effect in Massachusetts on Jan. 1; under that plan each driver's insurance company must immediately cover accident claims of up to $2,000 regardless of who is at fault. The Massachusetts plan is coupled with a 15% cut in rates. Sen. Philip Hart (D., Mich.) last month introduced legislation to set up such a plan on a national level.

When policies are canceled, the motorist often doesn't know where to turn. Some, like Mr. Buryta, the auto repairman, can find another company willing to insure them. Some, like Joe Corcoran, a retired 67-year-old businessman from Beverly, N.J., go to the state for help. Mr. Corcoran, whose policy was canceled for no apparent reason, asked the state insurance department to investigate, and it discovered the policy was canceled simply because Mr. Corcoran was over 5. The state then pressured the company to reinsure the motorist.

"CAN'T HELP EVERYONE"

"But we can't go to bat for everyone," sighs Walter Davis, one of the harried New Jersey insurance officials who handles such matters. Mr. Davis adds that's one reason the state banned all cancelations as of June 26.

Many policyholders have no choice but to sign up for so-called assigned risk policies. These are plans set up by all auto insurers in a state to take care of people who can't buy policies directly from a company. Policies are assigned by dealing them out in proportion to each company's share of the voluntary market. They typically cost more-up to 200% above a normal policy depending on driving record-because the group includes all the accident-prone and otherwise undesirable drivers in the state. But besides cost, the policies have other disadvantages. In all but a few states, the plans offer only limited liability coverage (up to $20,000) on the other driver and his auto. And in all but four states the insured can't purchase any collision, fire or theft coverage for his own car-at any price.

In Texas, a state generally considered to have a low auto-accident rate, the swing to assigned risk policies has been staggering in recent months. Herman O. Bergeman, manager of the Texas Insurance Plan, which handles assigned risks, says applications are now running at the rate of nearly 17,000 a month, double the pace of last year.

One recent applicant was Herman Stetler, a foreign exchange student from Germany who's at the University of Texas. He knows English well enough to have passed the Texas driving exam with flying colors. And he has never had an accident. But he was denied coverage by all companies to which he applied. "I guess they were afraid he couldn't read the stop signs or something, Bill Gammon, an agent familiar with the case.

says

But the move to assigned risk policies by motorists who have no other choice merely intensifies the crisis, insurers say. Since the assigned risk pool is generally made up of drivers who are bad risks, there tend to be more claims and higher losses by the companies. Surcharges cover only part of the increase, insurers say. And in states like New York, where assigned risks now make up about 10% of all auto insurance written, the burden on smaller companies is considerable.