Wind Bags

Casualty insurance companies are usually a pretty bland bunch. But a few have stood out in the past decade.

Allstate has crusaded for installation of automatic crash protection (such as air bags) in automobiles, much to the ire of General Motors. State Farm has battled for more competition in spare parts replacement costs. And Aetna Life & Casualty has poured large sums into newspaper ads designed to prejudice jurors against providing injured persons with adequate compensation.

Now Aetna is at it again—the first to request higher premium rates from state insurance commissions around the coun­try. Aetna president William Bailey has asked the insurance commission in your state to “bring about a prompt but orderly improvement in the conditions which affect both the public and the business.” If the Connecticut-based com­pany succeeds, other auto insurance and property underwriters will raise their rates as well.

Let’s examine Aetna’s contention that it needs more of your money as a policy­holder. The company claims to have lost $321.9 million in 1979-80 from paying out claims to its auto and property insurance customers. But during the same period, the corporation made $707.9 million on investment income earned from policy­holders’ money being held against future claims.

The total profits amounted to $378 million,- giving Aetna a very respectable 16 percent return on net worth last year. Total_ Aetna assets also rose from $30 billion to $35 billion in 1980. All this doesn’t sound like a losing operation, especially since the company increased its stockholder -dividend by 9.4 percent in February.

While its profits are unquestionable, Aetna’s efficiency is. Its overhead ex­penses are very high, as much as 39 percent higher than some other companies who sell Aetna’s leading lines. The prudent management of costs should be examined by Aetna executives before they move to transfer those costs so readily to consumers.

The property/casualty industry as a whole netted about $8 billion in 1980 and its surplus grew by almost $11 billion. Despite these figures, the industry pub­licizes regular gloom about losses because it fails to inform the public about the billions of policyholders’ dollars it earns on investment income. The business magazine, Forbes, ranked the property/ casualty industry third in terms of return on equity out of 83 major industries it surveyed.

Insurance costs absorb almost 12 percent of the average consumer’s dispos­able income, according to the Federal Trade Comission. The insurance industry is nine times bigger than the auto industry measured by asset value. Insurance is very much a big business.

One would think that Aetna and other cash-and-carry companies would match at least the efforts of Allstate and State Farm to obtain lower claims costs and lower casualty rates through public advo­cacy for safety standards and fairer auto­motive market practices. During its finer moments in history, the insurance indus­try has pushed for safer conditions in fac­tories and the marketplace, but Aetna seems to be a leader, in transferring, costs to consumers rather than trying to reduce costs and casualties through vigorous loss-prevention efforts.

Policyholders should stay away from the likes of companies such as Aetna until they see top company executives out there fighting for improved fire prevention safeguards; safer and less damageable motor vehicles (for example, more crash- protective engineering) and dozens of readily available life-saving systems that need champions in the insurance industry.

For information about Allstate’s and ‘ State Farm’s auto-safety efforts, write to Allstate Insurance Co., Allstate Plaza; Northbrook, Ill. 60062; and State Farm Insurance Co., 2309 E. Oakland Ave., Bloomington, III. 61709.