Automobile Insurance Reform

Abstract

purpose of this paper is to put together already defined concepts and ideas for auto insurance reform into a plan which has merit and which might be acceptable to all involved. core provision of the suggested plan involves creation of a state pool in which individual insurers would participate. pool would be confined to premiums and losses on compulsory automobile liability and medical paymentsdisability coverages. insurer would be paid a servicing fee with no possibility of underwriting losses or gains. Further, a proposal is made which it is hoped would obviate the need for no-fault provisions, while still assuring prompt payment of claims. The matter of automobile insurance reform is a very complex Of the dozens of articles, reports, hearings, and conferences on this subject which the writer has read and attended, this statement almost invariably is made at the start of the discussion and in the summation. In between are figuratively mountains of data to support one contention or another or to further validate the proposition that this is a complex problem. To some extent, it is another instance of too much information and not enough understanding. It is suggested that the first step should be to analyze the problem on a purely theoretical basis, and then to look for solutions indicated by these findings. Although this approach has been pursued in depth by many writers on the subject, James R. Young, M.A., C.L.U., is Assistant Professor in Marketing Management at East Texas State University. From 1951-52 and 195366, he was with Rio Grande National Life Insurance Company, serving as Vice President and Agency Director and member of the Board of Directors the last ten years. He was Director of Publications for the American College of Life Underwriters, 1952-53. Since 1966, Mr. Young has been on the faculty of East Texas State. This paper was submitted in Apr-l, 1971. it seems that the conceptual perspective tends to be warped by a resulting bias and eventually is lost in the maze of data. Hopefully, any plan for automobile insurance reform would be one which would be basically compatible with the existing situation in each of the fifty states. For reasons which will become obvious as the proposed plan is described, the system in Texas is used for analysis and for modification to incorporate the essentials of the proposed plan. Perhaps a comment of a colleague recently moved to Texas will make the point, If it will work in Texas, it will work anywhere. It takes little imagination to accept the proposition that no soft, moderate reforms are going to correct a situation such as that in Texas automobile insurance where these elements exist: 1. Over 300 companies are in competition for sales and profits, although by law they cannot compete either on price or on product. 2. A marketing system exists where little or no creative selling takes place. In fact, the function of the individual