Make Car Insurance Fairer

Forbes ^ | 03.17.03 | Ian Ayres and Barry Nalebuff

[Jim Noble]

Make it voluntary and watch the price plummet.

[rollin]

Since when does the number of miles driven have any correlation to the number and type of accidents occurring per mile traveled by driver?

The facts are exactly the opposite. Drivers who don't drive many miles have a greater number of accidents per mile traveled because they don't have the experience of driving in all types of weather and in all road conditions.

This is just another attempt by the insurance companies to drive up the cost of insurance. And unfortunately, the public can be seduced by a program that promises to "lower costs and make it fairer" while the hidden agenda of being able to monitor your movements via GPS is overlooked.

This is a program that should be squashed!

[goodnesswins]

Actually, something I'd prefer is a discount for those who park their cars in a garage....since garage parked cars are NOT stolen, broken into, had CD players, etc. ripped off.....at home at least, where lots of the problems occur (on neighborhood streets).

Someone can drive A LOT of miles and be a better insurance risk, than someone who simply drives to the store everyday, but is a looney or crazy driver. Think teenage kid vs. salesman.

IMHO this is another attempt by the envirowhacko's to keep people from driving.

[Husker24]

Anyone who says that women get a raw deal on auto insurance is a FU*KING MORON!!! I know women who have multiple vehicles mutiple accidents and tickets that are unmarried who are the same age as me who pay less than HALF of what I have to pay, that is whats unfair about insurance. If blacks had to pay twice as much as whites there would be a national uproar and a supreme court case.

[Alberta's Child]

I'm surprised to see an idiotic article like this in a respectable publication like Forbes.

Why has the insurance industry been so cool to mileage-based pricing?

For the same reason that car rental companies started offering unlimited mileage on their rentals. The cost of tracking the mileage and assessing variable rates would be enormous. And when all is said and done they'll find that the people who drive the fewest miles are actually the highest risks.

The best driver I've ever met is a salesman who puts about 30,000 miles per year on his car, almost all of it in the worst region in the country for drivers -- the New York metropolitan area. He hasn't had an accident in years, but this kind of scheme would cost him a fortune.

[reloader]

Driving without insurance is a felony in Idaho. Yes, you lose your right to vote and your right to own firearms. This opens the door for insurance companies to charge (extort) exorbitant fees.
I realize driving without insurance is a serious matter, but a felony?.

[Ben Ficklin]

"The cost of tracking the milage would be enormous."

USAA Auto insurance simply asks the customer how many miles per year. This is done on a yearly basis.

[sarasmom]

Someone explain to me the following:

Florida is a "no-fault insurance state.

You must have PIP and Liability to legally drive your car.

It is stongly encouraged that one gets uninsured motorist coverage.

I have no tickets, no claims, no accidents, yet my insurance premiums rise every year due to "uninsured motorists".

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

[Alberta's Child]

I know. But once you get above a certain point (10,000 miles per year, I think) the rates don't change. USAA is more interested in how the vehicle is used than in how much it is used. Someone who takes a bus to work most days but puts 12,000 miles per year on the vehicle pays a lot less than someone who drives five miles each way to work and puts only 5,000 miles on the car.

[hopespringseternal]

Make it voluntary and watch the price plummet.

Exactly. It is the cost of covering the bad drivers that drives the cost up for everyone.

And yes, it is the people who drive the least who drive the worst. Long haul truckers can handle much more dangerous and less nimble vehicles for millions of miles without an accident, while half the econoboxes on the road have bashed fenders from hitting stationary objects.

[steve86]

Driving without insurance is a felony in Idaho.

Are you sure about that? I remember reading that auto insurance fraud is a felony in Idaho and some other states but driving without insurance?

If you do have a reference please post.

[cksharks]

Your last two posts makes me think Forbs is turning socialist.

[expatpat]

Not only that, but highway miles are much safer than urban miles. All the accidents I've suffered have been in urban or suburban areas (the last one was on Independence Ave. in DC when a clown in a Caddilac blew through a Stop sign).

[goodnesswins]

Actually, we should INSURE THE PERSON, NOT the CAR!

[Libertarianize the GOP]

No fault Insurance allows everybody to buy as much or as little personal coverage as they desire and actually reduces claims.

[JZoback]

The best way to lower insurance costs is to get rid of no-fault insurance. Good drivers don't pay for the bad drivers.

Insurance per mile is a bogus way to increase your premiums... sort of like your federal taxes....the more you make the more you pay.

Insurance set up like that will always increase.....just like taxes.....

[ZOOKER]

The GPS angle leapt out at me, too. The insurers already have a database of the worst intersections, accident-wise. Your rate could be hiked just because you drove through one. Then there are neighborhoods with high rates of theft and vandalism, hope you don't live or work near one. Are you starting to feel the eyes of BB on the back of your neck yet?

The author also throws out some figures you are supposed to accept on faith --- like the one about men driving more than women. My wife wears out cars at twice my rate, and I don't think our situation is particularly unique. In our soccer-mom phase, she frequently spent most of her day behind the wheel, while I sat at a desk all day.

[JZoback]

No fault Insurance allows everybody to buy as much or as little personal coverage as they desire and actually reduces claims.

How does no fault reduce claims? I would think no fault would increase claims since nobody is at fault

Inquiring minds want to know

No fault means insurance companies split the risk. No fault covers their butts, not the insurers.

[Ben Ficklin]

I have no knowledge of how they charge for commuting to/from work. Until recently I had one vehicle @ 20,000 miles per year used in my work and a second vehicle @ 3000 miles per year for pleasure. Of course there was a difference, especially with the second car discount.

On the other hand, where you drive is significant. The difference in rates for Dallas County, TX and a west Texas county are sizable. And the difference between Texas, where they sell County Mutual policies thanks to the legislature, and Arkansas, where it is a casulty policy, is also significant.