Automobile Insurance.

The New York Times
January 11, 1922

The recent great increase in the cost of automobile collision insurance seems to be entirely unwarranted and extortionate.  The plea of the insurance companies is that owing to the increase in the number of automobiles in use and the consequent higher density of traffic, there has been such a rise in the number of collisions that the old premium rates no longer make the business profitable.  There is an obvious defect in this reasoning.  The increase in the number of automobiles, and therefore in the density of traffic, would naturally lead to a rise in the number of collisions.  But the annual increase in the number of cars in use means a proportionate annual increase in the number insured and paying premiums, while of course not all the cars are in collision.  The greater number escape.  So that if the number of cars paying insurance premiums showed an increase of 20 per cent., the number causing collisions for which damages had to be paid might not be more than, say, 5 per cent.  Whatever the proportion may be it is quite unreasonable to suppose that the companies lose money by the increase in their business.

An ingenious form of policy has been contrived to meet this situation and transfer the cost of collisions from the companies to the car owners.  It is known as the Fifty Dollar Deduction Policy, under which the owner of the car pays the first $50 toward the repair of any damage caused by his car, the costs above that figure devolving upon the company.  Inasmuch as the very great majority of collisions cause slight damage, involving payments less than $50, the singular beauty of this form of policy from the point of view of the company is evident.  It means practically that while paying a very high premium to the company to insure him against collision, the car owner is really insuring himself under the $50 liability, while the insurance company takes the premium and is called on for damage payments in only a small proportion of the cases arising.  The obvious remedy is for the car owners actually to insure themselves, declining to take out a policy so improvident and practically worthless.  The great majority of car owners would find at the end of the year that they had saved money by adopting this course.