Louis Foster; Founder of Low-Cost Auto Insurer

Louis W. Foster, whose 1950s brainstorm of selling bargain basement auto insurance directly to customers helped him create and build 20th Century Insurance into one of the nation’s largest auto insurers, has died. He was 85.

Foster died Sunday of natural causes at the UCLA Medical Center.

He had been an insurance agent for two decades when he started 20th Century Insurance in 1958 with a one-room office, a secretary and $273,000 he had raised from investors.

By selling directly to customers, he avoided paying insurance agents’ commissions, which kept his prices low. He also insured only good drivers, and began by targeting teachers, engineers, scientists and telephone company employees, gauging them as cautious drivers.

At his death, Foster owned 6% of 20th Century and his stock was worth $130 million. The company, which is headquartered in Woodland Hills, does about $1 billion a year in revenues, has 2,200 employees, insures more than 1 million autos and is the nation’s eighth-largest publicly held auto insurer, doing most of its business in California.

Foster was proud of his low auto rates, and into his 80s, the feisty 20th Century chairman directed his company’s six-year legal battle with the state to avoid paying Proposition 103 insurance rebates. Foster believed that his customers already got lower rates, so refunds were unnecessary.

Then Insurance Commissioner John Garamendi blasted 20th Century as “an insurance outlaw.” In a 1992 Times interview, Foster was asked if he was going to fight the Proposition 103 case all the way to the end?

“You bet,” he said. Was the company going to pay rebates or settle the case? “Nope,” he insisted.

In the 1980s, 20th Century branched into home insurance--and nearly collapsed.

The company’s homeowner policies were in its backyard of the San Fernando Valley. After the 1994 Northridge earthquake struck, more than 46,000 damage claims cost 20th Century about $1 billion. The company was also reviled by consumer groups for allegations that it shortchanged many customers by not making full payments on quake claims.

In December 1994, the beleaguered company was saved from collapse when New York-based American International Group agreed to invest $216 million. Foster was then nudged into retirement and was named 20th Century’s chairman emeritus.

Soon after, the company struck a deal with the state to pay Proposition 103 rebates.

Foster, of Bel-Air, is survived by his wife, Gladyce, five children, 18 grandchildren and five great-grandchildren.

His funeral service will be Thursday at 11 a.m. at the Forest Lawn Memorial Park in Glendale.