Make Car Insurance Fairer

Forbes ^ | 03.17.03 | Ian Ayres and Barry Nalebuff

[wallcrawlr]

Wouldn't it be a great idea if the oil companies offered all-you-can-drive gasoline? For one fixed price, you could drive as much as you wanted. Of course, this is ludicrous. It would be massively unfair. It would create terrible incentives. Yet this is how auto insurance is sold. Some insurers offer a 15% discount if you drive less than 7,500 miles a year. But beyond this distance the price is fixed. People who drive 10,000 or 100,000 miles pay exactly the same premium.

Econ 101 says that when something is free, people consume too much. In this case, all-you-can-drive insurance encourages people to drive more than they otherwise would if they had to pay the full cost of each mile. The heavy drivers don't bear the total costs related to their actions--hospital bills, body shop bills, highway congestion.

Low-mileage drivers (e.g., women, who drive half as much as men) get a raw deal. Fixed-price insurance hurts Detroit, too. More people would choose to have second and third cars--maybe a ragtop for weekends?--if the extra insurance weren't so expensive.

So what should be done? Simple. Charge drivers for insurance on a per-mile basis. That does not mean higher average insurance rates. It does mean that the low-mileage drivers would stop subsidizing the high-mileage drivers. If the per-mile fee reflected the incremental risk, Berkeley professor Aaron Edlin calculates that driving would be cut back by 9%, with an insurance savings of $8 billion a year and an additional $9 billion savings in reduced congestion. Not to mention the environmental benefits of reduced fuel consumption.

Proposals for implementing usage-sensitive rates go way back. In 1963 Nobel Prize-winning economist William Vickrey suggested that insurance be included in the purchase of tires. Anticipating the objection that this might lead people to drive on bald tires, Vickrey said drivers should get credit for the remaining tread when they turn in a tire.

Andrew Tobias proposed a variation on this scheme in which insurance would be included in the price of gasoline. That would have the added benefit of solving the problem of uninsured motorists (roughly 28% of California drivers). As Tobias points out, you can drive a car without insurance, but you can't drive it without gasoline.

In Vickrey's time, turning back odometers was, perhaps, too easy. With digital electronics, rolling back the odometer is much harder. It is also illegal. Odometer readings are good enough for car leasing--why not for car insurance?

Alternatively, an insurer could monitor distances driven using the Global Positioning System. As this magazine noted earlier (Nov. 27, 2000), Progressive Corp. had a pilot insurance program using this technology.

GPS could slice the risk equation more finely. Highway mileage could be given a discount, and nighttime driving could be charged a premium. Speeding could also lead to higher premiums. To put a positive spin on it: You safe drivers would get the discounts you deserve.

Why has the insurance industry been so cool to mileage-based pricing? An established insurer might be reluctant to adopt it because it would lead to higher rates for half of its customers, and that half would be angrier than the other half would be pleased. Pay-per-mile insurance makes the most sense to a company that is trying to grow and to attract more women customers.

Another stumbling block is that some states make it very difficult for insurers to provide this product. Patrick Butler has been working for some 20 years to get the law changed to bring per-mile insurance to the marketplace. With the support of the National Organization for Women, he has drafted model legislation to allow firms to offer per-mile insurance.

In January 2002 Texas became the first state to explicitly permit per-mile insurance. There is mileage-based insurance legislation pending in both Oregon and Georgia.

In the U.K., Norwich Union, a major auto insurer, has already rolled out a similar plan. Early indications suggest that customers who drive less than the norm are saving, on average, 25%.

[max61]

Why should I continue to pay for PIP and liability insurance?

How else do you expect insurance companies to make up for losses incurred as a result of natural disasters?.

"No-Fault" auto insurance means everyone gets screwed.

[laotzu]

"That really is ALL the information..."

Again with the blanket statement. A more close-minded attitude doesn't exist.

Because of a weak understanding of insurance/business structures & practices; it would be foolish to accept your interpretations without a more qualified confirmation.

However; as you are militantly opposed to even considering the existance of addtl information, any educational value gained there would likely fall on defiant ears.

Pride often effects hearing the most; leaving one with the wit & wisdom of an eight year old.

(I can't get puns anymore....I had them as a child)

[discostu]

What's is linked to is the entirity of the ASRS Motor Vehicle regulations. When it comes to determining if self-insurance is LEGAL in AZ insurance/ business structures and practices DON'T MATTER. Only the ASRS matters. The topic here isn't if self-insurance is practicle or desirable, only if it IS ALLOWED UNDER THE LAW. The only data necessary is THE LAW.

Instead of blathering endlessly why don't you put your money where your fingers are. PRESENT THE G-D DATA. Don't tell me there might be more, FIND IT AND PRESENT IT.

As for my hearing, what's affected that is a fondness for loud rock and roll. Luckily this is TYPED so my hearing doesn't matter. Stop babbling and present facts to support your case. Prove, with supporting links, that self-insurance is generally available in AZ. Or admit you were wrong and self-insurance isn't a universally viable option across the whole country. Put up or shut up. I've got a yardstick, put it on the table, time to see if you measure up. If your next post doesn't consits 100% of DATA AND LINKS supporting your position then I'll take it as an admission of defeat.

[laotzu]

"When it comes to determining if self-insurance is LEGAL in AZ..Only the ASRS matters"

ASRS Motor Vehicle regulations do seem to be relevant, and speak to the question at hand. Are they the entire word on the subject?

To test that question let's try...hmmmmmmm....how about Arizona Insurance regulations. What have we got to lose? Follow me over to
http://www.id.state.az.us/consumerautofaq.html to find:

"Personal Automobile Insurance
Frequently Asked Questions

Why should I buy auto insurance?

Before you can register a vehicle in Arizona, you must show proof of financial responsibility. This can be in the form of a certificate of insurance, a bond, or certificate of deposit or cash in the amount of $40,000."

"PRESENT THE G-D DATA. Don't tell me there might be more, FIND IT AND PRESENT IT....Prove, with supporting links, that self-insurance is generally available in AZ. Or admit you were wrong"

One of us should. Here's your "G-D DATA". Are you able to confess to being mistaken, or has fact indeed fallen on defiant ears?

[laotzu]

I must confess to knowing self-insurance was available from the beginning. In all fairness though, I did say I was comfortable with saying so.

Now...you weren't quite being fair with me, were you?

”LIAR.. being a born LIAR..you're a bloody LIAR..a lieing nitwit..your pattern of LIES..you don't make any sense..you're just scrambling around trying to be right about something..you lie..Stop lieing..apologize for your past lies”

You lied about me being " a bloody LIAR". Not nice.

[discostu]

That's nice but again we have to filter through the LAW and the LAW 28-4007 clearly delinately who CAN go through the self insurance, and that list is pretty small and basically commercial (fleets of 25 or more cars, chaffeur, hauling, haz-mat).

Then there's the matter of why we had to go through 3 days of BS with you accusing me of everything under the sun before you'd finally get around to addressing the actual point of contention. And let's not forget, that's just one state, you said ALL states, still got 49 to go.

[discostu]

if you knew self-insurance was available from the beginning then why did you spend 3 days accusing me of bashing insurance companies rather than simply prove it. Sounds like another LIE here. LIARS just can't seem to stop LIEING

No, you LIED when you BLATANTLY AND REPEATEDLY misqouted me, mostly on topics that had NOTHING to do with our actual dispute in your deseperate persuit of RED HERRINGS. You're still a freaking LIAR. Actually you're compounding it by LIEING about what I accused of you LIEING about in the first place. LIES upon LIES upon LIES. You should run for office.

[laotzu]

Check the header of the page, pal. It says "Personal Automobile Insurance". It is not speaking of commercial auto...why are you?(look where shooting your mouth off has brought you)

"Prove, with supporting links, that self-insurance is generally available in AZ"

I met your challenge precisely as you spelled it out. Who's scrambling now?

Defiant ears boldly refuse to listen, or learn. Pride indeed effects hearing the most.

Although your apology is more than warranted, save it. It would carry no more value than does your childish name calling. The humor of an eight year old....geeze!! That's rich.

[laotzu]

" No, you LIED....LIE here..LIARS just can't seem to stop LIEING..a freaking LIAR..by LIEING..LIEING..LIES upon LIES upon LIES"

Yea..I know....my pants are on fire, and your big brother can beat up my big brother.

Ahh, insult....the cleverest of all debating techniques. No really; from you, it appeals to reason & influences the intellect.

I'm betting this isn't the first time you shot-off your mouth like you knew what you were talking about; and had to cover with schoolyard name-calling. No wonder the insults were so smooth...hey!! they even rhyme!(just like Jesse)

[laotzu]

"why did you spend 3 days accusing me of bashing insurance"

Why does a cat toy with a mouse before stomping down hard on it?
Because that's what the mouse deserves....arrogant little fur balls.(you never hear one apologize either)

[discostu]

I've got nothing to apologize for. According to you you've been sitting on this all week while trying to make out to be some insurance company basher. If you had this the whole time, and it said what you think it does which it DOES NOT, then you could have ended it LAST week. Reconcile this with 28-4007 section A:
A. A person in whose name more than twenty-five motor vehicles are registered or who is required to comply with the financial responsibility requirements prescribed in article 2 of this chapter may qualify as a self-insurer by obtaining a certificate of self-insurance issued by the director as provided in this section.

Which clearly limits who can self insure. Show me how this, which I now quote for the THIRD TIME says anybody can self insure. Go ahead. It doesn't. You know it, I know it. Pretending you "had the information" while spending 3 days throwing red herrings doesn't make you look smart, it makes you look like a jagoff trying to start flame wars. If you "had it" you should have presented it rather than make things personal. Since you spent 3 days playing obfuscation BS it's clear you didn't "have it". And 4007 still make it clear that what you "have" isn't it.

[discostu]

Schoolyard name calling?! You mean like spending 3 days calling some one an insurance company basher? Or do you mean like spending 3 days lieing about what a person has said?

I'm not insulting you, I'm stating the truth. you repeatedly and deliberately LIED about what I said, deliberately attacking my character while ignoring the matter at hand. That's the truth, if it insults you then you should change the truth and stop LIEING and OBFUSCATING.

[discostu]

Cats toy with mice because they have brains the size of t-spoons and are easily amused by their own stupidity. They also chase flashlight circles, laser-pointer dots, and imaginary whatever.

It's clear by how long you obsessed on unrelated issues digging through my posts that weren't even to you that you had nothing and you knew it. Now you think you have something but you have yet to address 28-4007.

[laotzu]

"28-4007 section A:
A. A person in whose name more than twenty-five motor vehicles are registered or who is required to comply with the financial responsibility requirements prescribed in article 2 of this chapter may qualify as a self-insurer by obtaining a certificate of self-insurance issued by the director as provided in this section.

Which clearly limits who can self insure."

Alright, I'll humor you a bit longer. Let's pretend I don't know what I'm talking about....no no, wait.....and that you do.

This rule tells us how a commercial risk "may qualify" to self-insure. As an educated professional P&C man, please advise; where does it "clearly" limit who can/cannot self insure their personal auto?

"Reconcile this with 28-4007 section A:"

Your mixing apples and oranges. There are seperate regulations for commercial & personal auto(hard to believe isn't it?). They do not mix, nor have to be reconciled with each other.

Is this sincere, or are you purposely being dense?

"Show me how this, which I now quote for the THIRD TIME says anybody can self insure"

Oh my...It doesn't say anybody can self insure, does it? Nope, not a damn thing! I tried to tell you....I offered to help you. Your looking in the wrong place.

Oddly enough, some regulations having to do with insurance can actually be found at the Dept of Insurance. Boggles the mind, doesn't it?

Now....where does your "quote for the THIRD TIME" "clearly" limit who can/cannot self insure their personal auto?(please don't tell me you shot off your mouth yet again!! Tsk, tsk...not very professional)

[laotzu]

"It's clear by how long you obsessed on unrelated issues..."

I wanted you to have the opportunity of finding the truth on your own; I even offered to help. You latched onto the unrelated piece of cheese I tossed out, and blindly refused to let go of it(even now).

It wasn't until I realized how rewarding your chain was to yank that I became cruel, and toyed with your emotions. I'm so ashamed.

[discostu]

It clearly limits it by giving an exlusive list. Just look at how it's written:
A person in whose name more than twenty-five motor vehicles are registered
(it starts off by naming a group of people, this might actually be non-commercial people, I suppose private citizens can have 25 cars, Don Johnson supposedly had 20 at one point)
or
(now we have a list connector indicating there's going to be at least one more group of people)
who is required to comply with the financial responsibility requirements prescribed in article 2 of this chapter
(another group of people, this one is cross referenced and you'll have to go to article to see who they are, but once you get there you see it's not every Tom, Dick and Harry on the road)
may qualify as a self-insurer
(now the meat of the biscuit).

So we have a very clear sentence structure. Those in Group A or those in Group B may do this thing. Nowhere does it state that this option is open to the general public. Were the option open to the general public you would need the list, everything between "person" and "may" could be dropped.

I'm not mixing anything 4007 isn't commercial or personal. It's general, it list who can self-insure. That list consists of people who have 25 cars and those using the vehicle for chaffeur, hauling or haz-mat duty. That list would probably only be commercial, but it's listed under "CHAPTER 9 - VEHICLE INSURANCE AND FINANCIAL RESPONSIBILITY
Article 1 - General Provisions". And lets not forget that YOU are the person that first brought up 28-4007 back on Monday, if it doesn't apply then you shouldn't have brought it up.

Oh there you go with the name calling again. I'm being very sincere. You brought up 28-4007 as proof of self-insurance, I don't read it that way. Simple parsing of English shows that it's an exclusionary list. The Dept of Insurance is nice and all, but it's regulations are laid out in the laws, I prefer to go to the root if it's available. The guy writing the FAQ might have screwed the pooch, the law is the law and AZ's insurance requirements are laid out in the Motor Vehicle subsection of the ARS. Any place else is somebody's interpretation, and unless it's case law it's really not binding.

[discostu]

Oh so now you're saying you threw out, in support of your own arguement, false evidence that you knew had nothing to do with the topic and was itself a lie. Well at least you're admitting to being a liar, that's a step in the right direction.

Face it. You lost this friday and are continuing to try to make this personal for lack of any supporting evidence of any merit.

[laotzu]

"lack of any supporting evidence of any merit"

Despite the difficulty you bring, the Dept of Insurance clearly has relevance to insurance regulations. The evidence I provided could not be more easily understood, or from a more official source.

An interest in the exchange of information can be satiated. A foot-stomping, name-calling, temper tantrum is a desire not for answers, only attention.

It was all big fun to get others to 'tilt at your windmill'. Now that you have tilted at mine, is it still big fun? Manipulating grown-ups isn't as much fun as you thought.

When I, graciously, offered you the last word....you should have taken it. When I, generously, offered you the opportunity to get addtl info....you should have gotten it. If you have no interest in an exchange of information, why are you here?

So, Don Quixote; you owe me an apology....unless you are not finished tilting.

[discostu]

You've already admitted you lied for the sole purpose of pulling my chain. It's over. Bye. Don't bother to reply, I'm not reading your rubbish anymore. Freep-mail deleted unread.

[laotzu]

That's a very interesting/imaginative interpretation.

Discostu should avoid contractual law. Seriously.