Why car insurance is mandatory in Boston

Unfamiliarity with insurance and ignorance of the business have led to many ridiculous misstatements in daily papers during the past week, in discussions of the compulsory automobile liability rates. Perhaps none was more flagrant than the one contained in a Boston editorial which declared the companies had made a net profit of 21 per cent on the business in Winthrop because the loss ratio in that city was 79 per cent. Compare car insurance quotes in Boston!

The 79 per cent represented 79 per cent of the premium spent-for losses. Out of the 21 per cent left the agents of the companies receive a commission of IS per cent for writing the business. Deducted, this would leave the companies themselves 6 per cent, out of which would have to be paid all expenses, rents, taxes, salaries, etc., innumerable, and take care of the “profit.”

The compulsory automobile liability figures for 1927 show that the companies received in premiums $16,869,- 753; had losses of $11,538,131 (of which $6,000,000 constitutes unpaid claims) and had total expenses of $6,902,018. On the face of these figures of the Commissioner of Insurance the companies lost $1,500,000 on the compulsory automobile liability business in 1927.

The Governor of the state has taken occasion to express the firm belief that the $6,000,000 of unpaid claims is largely overestimated and could be “whittled down” and the new rates lowered as a result. Disregarding the fact that 60 per cent of the unpaid claims has to be set aside by law as a reserve and cannot be touched, let us see what would happen by “whittling down” the unpaid claims. First, the amount would have to be reduced by 25 per cent to compensate the companies for their actual deficit in 1927.



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