Casualties Ahead

Practically every American carries some casualty insurance to protect him against damages--and 600 of the 4,800 U.S. insurance companies sell it. As it turns out, those firms could use some casualty insurance themselves. While the rest of the $40 billion insurance industry is prospering, most property-casualty companies are losing money on their insurance operations. Several major companies have recently reported losses or decreases in earnings, and last week Chicago's Continental Casualty Co., one of the industry's giants, announced that its first-half underwriting losses reached $17.6 million. Continental admitted that its small net profit of $372,000 had been made possible only because of an increase in income from its investments.

Insurance men attribute their woes to an impressive array of factors. They cite rising crime rates, more auto accidents and higher costs for repairs and medical care; repairing a new Chevrolet's dented rear fender, which cost $16.85 twenty years ago, now costs $149.75. Dishonest and fraudulent claims have risen steadily, and juries seem as quick to give out generous awards as state insurance commissions are slow to allow rate increases. As if all these troubles were not enough, the industry has contributed to its dilemma by engaging in a ruinous rate war.

In an effort to ensure better profits, the casualty firms have tried to cut their costs by installing computers and setting up drive-in claims offices for on-the-spot settlement designed to eliminate expensive paper work. Sears Roebuck's Allstate, which pioneered many of the innovations, now has 375 such offices. The industry has donated driver-training equipment to many high schools to help slow the rising auto-accident rate and has begun tailoring its policies more closely to fit the risk. Insurance commissions have been besieged by companies seeking rate increases: fortnight ago. New York granted a long-awaited 4% to 25% increase in its auto insurance rates.

Despite these efforts, the casualty insurance industry remains on shaky ground. "Investment has saved the bacon for everybody," says James Kemper Jr., president of Chicago's Kemper insurance group. "If we were in the investment climate of the 1950s or had a market break like 1962's, a lot of us would be in trouble." Kemper has taken over three faltering casualty companies in the past 15 months because he believes that there is strength in consolidation, but he makes a gloomy prognosis: increasing casualties among the casualty companies.

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