Tapping Into the Vast Safety Potential of “Loss Prevention” by the Insurance Industry

A recent newspaper article reports that GEICO, one of the largest auto insurers in the U.S., has amassed a staggering $189 billion in cash, apart from the reserves required by law to insure the volume of potential claims by its policyholders. Angry consumers have cried out about auto insurance premiums going up as the prices of new and used cars have risen sharply. Yet the company still has not joined other insurance companies like State Farm, Nationwide and Allstate as a funder of the 35-year-old non-profit Advocates for Highway and Auto Safety.

It costs about $200,000 a year for each insurer to become a sponsor of this Washington-based coalition of consumer and insurance groups that press for safer cars, safer roadways and safer driving. With a tiny budget of $2.2 million a year, the dedicated staff at Advocates has put the “loss prevention” responsibility of the insurance industry into practice.

A new study estimated that Advocates, working at the federal, state and local levels, has been instrumental in passing 495 state safety laws. Advocates was also credited with saving $2 trillion in avoided medical costs, work loss and property damage, and saving 215,000 lives (plus many more injuries prevented). This dollar figure reflects reduced insurance claims and processing costs, largely by auto insurers. (See the report by Ted Miller, PhD of the Pacific Institute for Research and Evaluation (PIRE)).

Advocates’ activity revolves around the largely neglected and ignored historical responsibility of the powerful insurance industry called “loss prevention.” You, the people, are supposed to be protected with greater safety and health standards, safer products and safer workplaces from the vested profit interest that comes with fewer claims by injured or sickened policyholders.

Back in the 19th century when the insurance industry was big on industrial safety requirements for insured factories, boiler explosions were common. Insurance company engineers were sent to inspect industrial facilities and require safer boilers from design to inspection or the factory wouldn’t be insured. Over 130 years ago (in 1894) property/casualty insurance companies founded Underwriters Laboratories to test electrical and other equipment and press for improved safety.

Regardless of the benefits to their bottom line, most insurance company executives appear indifferent to engaging in loss prevention. Yes, people have gotten premium discounts for being non-smokers or having a good driving record, but the potential for vast advances in the prevention of road casualties through available technology, in reducing distracted and drunk driving, and in correcting highway danger spots (for pedestrian safety as well) is immense.

Advocates was key to blocking a brazen auto industry move in Congress to deregulate autonomous or driverless cars. Its legislative, regulatory and litigation victories kept double and triple trailer trucks off the highways in many states, thwarted a crazy push to allow longer hours on the road by truck drivers and pressed for automatic emergency braking as standard equipment. The federal auto safety agency National Highway Traffic Safety Administration (NHTSA) just issued a mandate for the latter device, but weakly gave the industry until 2029 to fully comply.

The aforementioned report cites “electronic stability control” (ESC) as one of Advocates most impactful regulatory achievements. This was accomplished through Congress. When the system is built into all motor vehicles, NHTSA estimates that from 5,300 to 9,600 lives would be saved every year, with half the lives saved from preventing rollovers.

Years ago, I did a survey of insurance company foundations whose mission was safety and published the results in the Suffolk University Law Review (Loss Prevention and the Insurance Function, 1987). Very little of insurance company grants and programs focused on the kind of tough “loss prevention” efforts championed by Advocates.

Insurance company CEOs and Presidents are not venturesome. They don’t like to rock the boat in other industries whose companies could be their customers. One bold exception was the former CEO of Allstate, Archie Boe, who stood tall and early in demanding that the auto companies install airbags in all vehicles. Sharing a national television show with him in the 1980s, I asked why he was incurring the displeasure of GM, Ford and Chrysler. His forthright reply? “Because it saves lives.”

We need more CEOs like Archie Boe and more funders of the Advocates’ small but very effective budget. I’m sending this column to some of the insurance company holdouts with a cover letter.

Let’s see if each company can shake a few dollars from their ample investment earnings – an amount equal to a couple of the full-page ads some place in the New York Times or the Wall Street Journal. If only for the safety of their extended families, friends, workers and neighbors, insurers should write that modest annual check.

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