Definitely true. I see two causes: first news of “bad stuff happening” is just more widely reported and parents act on it. I was overprotected in one respect. A kid in my neighborhood fell off his bike, cracked open his skull, and died. That was it for my getting a bike.
Second cause: liability concerns. I had and hugely enjoyed a chemistry set as a kid. I remember using an alcohol lamp. Burning sulfur to produce S02, heating sulfur with paraffin to make H2S (and doing them together, which resulted in elemental sulfur plus water), experiments with sodium thiocyanate (from which it is possible to produce HCN) and so on. No chemistry set would have any of this today. Similarly we had jungle jims, too dangerous.
But they were relatively minor. I walked to school myself, as did my brother and sister, from the beginning. It was only a few blocks, but one of the crossings was actually route US1 and there was no light. Not a great deal of traffic to be sure. When I came home, I dumped my school books and went out to play till dark (or till dinner, in the late spring). We played touched football in the fall and winter and a kind of baseball the rest of the time. One thing was different. We played on a small side street and there was very little traffic and we didn’t have to contend with parked cars either. This gradually changed until by 1950, parked cars made it impossible to play on the street.
When I was 13 1/2 in 1950 I went off to HS (I avoided Jr.HS, just barely). This involved a bus, two subways and a walk of a few blocks. But by that time, I was well-accustomed to using public transit by myself. There was a story in the NY Times last fall about a woman who had allowed her 10 year old to us the subway by himself on a route that he had travelled many times with his mother. The horror of it!
My children went to school by themselves, but we live half block from the school and the one street they had to cross was lightly trafficked. Not so today; there is a horrible traffic jam in the front of the school as all the parents in their SUVs are dropping their kids off. It is now not safe to allow your kids to walk. My kids did not play much in the street because the neighborhood kids mostly didn’t so there was no one to play with. There was some street hockey, but not that much. The weather has something to do with it too.
My four grandchildren, ages 14, 12, 9, and 7 live a ten-minute walk from the elementary school that three of them are still going to. They have never been allowed to go alone, although we have walked them many times. But they are almost always driven to school. The route crosses only two dead-end streets with essentially no traffic. They never play outside alone. They live in an upper middle class enclave that has no through traffic. You never see kids out alone. It is unthinkable.