Insurance: After the Riots

Swarming across riot-torn Detroit, an army of 400 insurance adjusters poked through the rubble for days, arrived at a damage estimate of $84 million. That was a far cry from the $500 million figure offered at one point by Detroit

Fire Chief Charles J. Quinlan, and the truth probably lies somewhere in between. For one thing, insurance adjusters naturally tend to put a low figure on damages. More important, the adjusters’ estimate referred only to insured losses within the riot areas, where many looted and burned-out properties were only partially insured, or without coverage altogether.

Understandably, the rioting in Detroit and in other U.S. cities has led to some alarm in the insurance industry. Insurers, says American Insurance Association President T. Lawrence Jones, are unhappy not only about the present rash of damage claims but also about “the potential losses from similar events in the future.” Insurance companies will certainly try to cut their losses—especially for any future disturbances. “Those people in Detroit are going to pay a whale of a price,” says James L. Bentley, president of the National Association of Insurance Commissioners. Jones does not hesitate to predict that looting and arson in the ghettos will result in higher insurance premiums and outright policy cancellations. To guard against the latter, both the Michigan and New Jersey state insurance commissioners asked for—and got—pledges that most insurance companies would refrain from canceling ghetto policies for 90 days.

Pooling the Risk. There is some recent history to indicate what will happen after the 90 days. In the two years since Los Angeles’ Watts riots, which caused about $40 million in insured damage, rates for property coverage in the area have at least doubled; some 1,000 ghetto merchants have complained that they cannot get insurance at all. Watts now has only two major retail stores, one of them a new White Front Inc. department store with fortress-like slits instead of display windows, especially designed to thwart brick throwers. To meet the Los Angeles situation, 108 California insurance companies have formed a $15 million, assigned-risk “Watts pool” that has insured more than 500 merchants against fire and riot damage—though not against the threat of theft that such businessmen face daily. Similar plans are likely to emerge in both Newark and Detroit.

Another possibility is some sort of federal action. Now pending in Congress are a host of insurance bills, ranging from legislation providing for a mere study of the growing insurance problem in the nation’s ghettos to a measure empowering the Federal Government itself to underwrite such insurance. Even the insurance industry is reluctantly starting to look toward Washington for a solution to the problem. Last week the American Insurance Association, representing most property-casualty insurers, called for Government-industry cooperation “to assure the continued availability of insurance in riot-prone areas.”