Maryland Unsatisfied claim and judgment fund.-Effective date: 6-1-59. This fund is financed primarily by an assessment of insurance companies (maximum is 2% of premium). The remainder needed is assessed against uninsured motorists. Applies to BI and PD claims with $100 deductible. Includes BI in hit-and-run and insolvency cases for residents (non-resident if his state has a reciprocal arrangement with Maryland). Michigan Accident claims fund.-Effective date: 1-1-66. State operated fund financed by a $35 assessment on uninsured motorists and $1 on all others. Applies to BI and PD with a $200 deductible on PD. Hit-an-run cases are included in BI. New Jersey Unsatisfied claim and judgment fund.-Effective date: 4-1-55. This fund is administered by a board, part of whose members are insurance company executives. It is funded by a maximum $25 per uninsured motorist and an insurance company assessment (maximum is 1⁄2 of 1% of premium). Applicable to both BI and PD with a $100 deductible on PD, the plan covers hit-and-run for BI with residents (non-residents if their state has a reciprocal agreement with New Jersey). New York Motor Vehicle Indemnification Corporation.-Effective date: 1-1-59. Insurance company operated and supported. Pays to limits of $10/20 on BI if the person is not covered under UM coverage. This includes hit-and-run and disclaimer cases. If owner does not produce proof of financial security in a BI case within 48 hours the car will be impounded or stored by owner. North Dakota Unsatisfied judgment fund.-Effective date: 7-1-47. State operated with a maximum $1 assessment on all motorists. Applies to payment of judgments obtained by residents in BI cases. Carries a $300 deductible. Massachusetts COMPULSORY LAWS Compulsory for bodily injury liability insurance only. Limits $5/10. Applies to all owners of motor vehicles registered in the state and to owners of motor vehicles operated in state for 30 or more days in the state. Coverage is by Statute and the rates are set by the Insurance Commissioner of Massachusetts. The law covers only accidents which occur in the State of Massachusetts. Operation without required proof is punishable by a fine ranging from $100 to $500 or imprisonment for one year. New York Compulsory for bodily injury liability and property damage liability insurance only. Limits $10/20/5. The law applies to all owners of registered vehicles in the state. The coverage was established by regulation and covers the territory of the United States and Canada. Rates are established by the insurer, but these rates must have prior approval from the Insurance Department. Violation of law is punishable by revocation of license and a fine of $100 to $1000 and/or imprisonment of one year. North Carolina Compulsory for bodily injury liability and property damage liability insurance only. Limits $5/10/5. Applies to owners of all registered vehicles and covers the areas of the United States and Canada. The law is a portion of the Financial Responsibility Law with rates computed on a merit basis by a company-operated bureau. Operation of a vehicle without financial responsibility is a misdemeanor. PRIVATE PASSENGER CARS, $5,000, $10,000 AND $5,000 AVERAGE RATES, AS OF NOV. 16, 1966 1 All companies average rate as of Aug. 1, 1966. Does not reflect dividends paid to policyholders. Source: National Bureau of Casualty Underwriters. DETERMINATION OF COUNTRYWIDE AUTOMOBILE PURE BODILY INJURY LIABILITY RATE AT 10/20 LIMITS PER MONTH Private passenger: Texas, earned premiums at present rates for the accident year ending June 30, 1966 Bodily injury-- Med. pay-- $113, 456, 562 21, 291, 971 *1, 801, 470 +6, 614, 619 143, 164, 622 Uninsured motorist Increased limits B.I. $113.456,562/$143.164,622=79. 25%. .7925X$54.55 $43.23. Countrywide automobile bodily injury liability average rate at 10/20 limits. +$4.537,180 (NBCU & MIRB) × 1.45787 (NAH's Portion Nationally of B. I. Business). *All Classes. PRESS RELEASE, TEXAS STATE BOARD OF INSURANCE, DECEMBER 28, 1967 The State Board of Insurance today announced the adoption of standards of acceptable practice to guide companies cancelling or declining to renew policies. These guidelines are for use by companies writing property-casualty lines of insurance in Texas and are designed to apply to the personal lines which most people buy, namely family automobile policies, homeowners policies and standard fire policies on one-family dwellings and duplexes. Insofar as the Board has been able to determine, there has not been an abuse of the right of cancellation by the insurance industry in this State; nevertheless, the Board feels that a set of guidelines is needed and has called upon the industry to comply. RECORD OF OFFICIAL ACTION OF THE STATE BOARD OF INSURANCE, AUSTIN, TEX., DEC. 20, 1967 Subject Considered: Guidelines for cancellation or non-renewal of property or casualty insurance. GENERAL REMARKS AND OFFICIAL ACTION TAKEN Came on for consideration by the State Board of Insurance the problems sometimes presented to policyholders because of their policies being cancelled by their insurers or by the refusal of insurers to renew policies on their expiration dates. Although the State Board of Insurance has not had a disproportionate number of complaints about cancellations or the refusal to renew expired policies, cancellations by some property and casualty insurance companies impel the Board to adopt standards of acceptable practice to guide companies cancelling or declining to renew policies, and the State Board of Insurance hereby establishes the following guidelines for all companies writing property and casualty insurance in Texas. 1. The insurance policies most people buy, namely family automobile policies, homeowners policies and standard fire policies on one-family dwellings and duplexes, are presumed to meet the underwriting requirements of the company after a policy has been in effect ninety (90) days. a. Family automobile policies or family automobile coverage should be cancelled only for the following reasons: i. If the named insured fails to discharge when due any of his obligations in connection with the payment of premium for the policy or any installment thereof, whether payable directly to the company or its agent or indirectly under any premium finance plan or extension of credit; or ii. If the driver's license or motor vehicle registration of the named insured or of any other operator who either resides in the same household or customarily operates an automobile insured under the policy has been under suspension or revocation during the policy period. b. Homeowners policies and standard fire policies on one-family dwellings and duplexes should not be cancelled because the company subsequently changes its underwriting requirements during the term of the policy. 2. Family automobile policies or family automobile coverage, homeowners policies and standard fire policies on one-family dwellings and duplexes should be renewed at expiration unless the insurer gives written notice to the named insured and to the agent or producer at least thirty (30) days in advance of the expiration date that the policies will not be renewed. With respect to family automobile policies or family automobile coverage, if the policy or coverage is written for a period of less than one year, the company should not refuse to renew except as of the expiration of a policy period. 3. Insurers should not cancel or decline to renew family automobile policies solely because of ages of the insureds. 4. As to any kind of property or casualty coverage, insurers desiring to discontinue the underwriting of certain lines or classes or to withdraw from a geographical area or a particular agency should not summarily cancel all outstanding policies. Instead, insurers should retain until policy expiration date all such policies that met its underwriting requirements at inception date. Thirty (30) days notice of declination to renew should be given to the named insured and to the agent or producer. This guideline is not intended to restrict the ability of an insurer to reinsure such outstanding policies. 5. Each company should keep its underwriting information concerning cancellation or refusal to renew individual policies readily available to the State Board of Insurance, and the records should be retained in accordance with the company's normal retention practices for the "daily reports" of expired policies. 6. The Board hereby gives notice that it expects each insurer to exercise its rights of cancellation with discretion and without discrimination, and expects each insurer to be prepared to explain to the Board the principles which control its cancellation practices when called upon to do so. These guidelines shall become effective immediately. Statistics have already been offered with regard to the cancellation ratios in Maryland, Virginia, Wisconsin and Michigan. Later information has been developed for the State of Georgia. A recent survey indicates 1.24% cancellation of automobile insurance contracts out of 400,000 contracts sold. Mr. Moss. Our next witness is Mr. Robert Whittlesey, second vice president of the Auto Body Association of America. Gentlemen, we are pleased to welcome you. You may proceed. STATEMENT OF ROBERT WHITTLESEY, SECOND VICE PRESIDENT, AUTO BODY ASSOCIATION OF AMERICA Mr. WHITTLESEY. Thank you, Mr. Chairman. My testimony is very short. Before I go into it I would like to preface my statement. In 1946, I started out as an auto body repairman and then went from there into handling auto damage appraisals. Then I worked for 8 years as an adjuster for the State Farm Insurance Co., a very happy time in my life, and then opened my own shop. So I have come full circle in the repair and adjusting business. I feel like a small part of your investigation but we feel that it is quite important to the decision whether or not to have this investigation. Mr. Moss. Thank you, sir. Mr. WHITTLESEY. Mr. Chairman and members of the committee. I am Robert Whittlesey of Silver Spring, Md., an independent body shop owner, and vice president of the Auto Body Association of America. We are a national association of independent auto body and repair shops and closely affiliated industries spread throughout the United States. There are 58,000 auto body shops in the United States including independent and franchised dealer establishments which together employ over 380,000 persons. Our gross volume of business for the last year exceeded $2 billion of which 75 percent, or about $12 billion, was controlled by insurance companies. Our members are deeply concerned about some of the inequities that have grown up in this industry due to certain monopolistic and 92-100-68- -10 coercive practices which encourage the operation of unsafe vehicles and at times result in injustice to the body shop owners and consumers who drive insured automobiles. SAFETY Efforts of some insurance companies through their appraisal practices to repair vehicles at the cheapest possible price in current practice will often prevent expenditures vitally necessary for the proper operation and safety of the repaired vehicle. These practices account for many of the cars that are now operated on the highways in an unsafe condition. The increasing practice of driving severely damaged cars to insurance company operated drive-in claims services often keeps vehicles on the road that should not be driven, and encourages their use for prolonged periods in an unsa fe condition with consequent danger not only to the occupants, but to other motorists as well. MONOPOLISTIC PRACTICES It has been common practice in many areas for insurance companies to encourage the use of certain shops which by necessity must do work of marginal quality. These shops tend to overlook such real costs as overhead and depreciation and operate below cost at wage levels far below the standards of similar industries. Car owners are coerced into going to these shops rather than to the shops where they customarily go and prefer to have their work done. LOSS OF TIME AND USE Although not provided in the insurance contract, consumers generally must secure on their own time two or more estimates, and are then often forced to go to a shop in some other area than the one where they customarily have their work done. There are often long delays in payment, particularly with regard to shops not favored by the insurance companies, which result in hardship on the body shop owner as well as the consumer, who is denied the use of his car. The current practice of settling insurance claims involves great multiplicity of effort, both on the part of the car owner and the body shop owner, as well as the insurance companies. When one considers that over $2 billion of body repair work is done each year, and the value of the time lost by car owners alone, the loss to the Nation in productive time represents a very sizable economic loss to the Nation indeed. IN EQUITIES Often the insured is afraid to make a claim for damage to his vehicle for fear that his policy will be canceled, or his rate for premiums raised. Frequently when an older vehicle is repaired with undepreciable parts, the owner is assessed betterment charges on his vehicle. |