The Maryland puff piece I posted earlier has me thinking… If I were king,
how would I address the issue of minimum limits auto insurance being
required in a state, yet being unaffordable for some.
(Yes, I do think too much.)
I don’t accept the idea that tightening rate regulation, restricting the use
of rating/underwriting variables, or similar ideas imposed on insurers is
the answer. The free market operates best when a minimum of external
control is exerted. Compare the auto insurance markets in Illinois and
Massachusetts, for example.
I acknowledge the problems of insurance affordability and the public need to
minimize the number of uninsured drivers on the roads. However these are
public/social issues, and I believe that these problems are best handled
with public/social means.
So…what would I do to balance the free market versus the public/social
concerns?
The easiest thing to do, I think, would be to implement an auto insurance
tax credit — allow taxpayers to receive a tax credit for auto insurance
premiums paid above a certain level, and phase out the tax credit above a
certain income level. The tax credits could be funded with an increased
premium tax.
Of course, that still creates a problem of some individuals simply not
having the cash on hand when premium payment time comes up, and it would do
almost nothing to address the public perception of the unaffordability of
even minimal insurance coverage.
Another idea would be to build upon the “pay-at-the-pump” scheme that
surfaces every so often:
- Have the state act as the insurer for minimum limits liability
coverage within the state for both personal and commercial auto risks. For
coverage beyond minimum limits, or for coverage outside the state, a
consumer would need to go to the private insurance market. The state could
contract with private insurers for claims handling services, etc. - Coverage would be funded through multiple sources:
- Part of the premium would come from an extra x-cent-per-gallon
petrol surcharge. The rate could vary by geography, or by fuel class (e.g.
charge different rates for regular vs premium unleaded vs diesel), to
reflect some of the risk differences by geography and by vehicle type.
Surcharging gas usage also gets you a proxy measure for exposure due to
amount of exposure (miles driven) and vehicle class (heavier, less
fuel-efficient vehicles cause more severe accidents). - Part of the premium could be collected via piggy-back fees/taxes on
vehicle registrations, tickets, licensing fees, etc., enabling some
recognition of different risk classifications due to driving record,
experience of operator, or class of vehicle. - And part of the premium could be collected as a piggy-back/add-on to
property and income taxes, getting at the social aspect of some people being
more or less able to pay for state-mandated coverage. Poorer people almost
by definition have lower incomes, and are less likely to own valuable
property.
- Part of the premium would come from an extra x-cent-per-gallon
That’s just a very rough outline of an idea, really. I haven’t done any
number crunching to see what it would take to make such a scheme work.
Besides, like all of my bad ideas…it’s rather unlikely that such a scheme
would ever be adopted, given the nature of how politics work in this
country.
[...] I still haven’t seen an actual proposal coming out of the California DOI. However, I will take this opportunity to point back to an earlier opinion I expressed on a similar subject — minimum limits insurance. If the social issues regarding insurance affordability are so great that they require intervention by a state government, it’s (IMO) a problem that should be solved by social means, rather than an aggressive imposition on what should be a free market. For an extreme example of what happens when you fail to do that, look at Massachusetts, or pre-deregulation New Jersey. [...]
Mandatory Minimum Insurance…
Riskprof asked, should auto insurance be mandatory, referencing a change in California, noted on Indemniblog, where sub-minimum limits coverage (10/20/3) is becoming more readily available to low-income households.
A few months ago, I wrote this post,…
California Auto Territorial Debate Rages On…
Every day, in one of the Google news searches I query via RSS, it seems like there are a handful of stories in California papers about the CDI’s plan to restrict territorial rating. This article at the Lake County Record-Bee is typical:
Lakepor…
The focus needs to be getting really bad drivers off the road and punishing chronic bad drivers (excessive speeders and chronic reckless drivers) and their enablers (those of whom lend their vehicles to those drivers).
The focus should be to heavily fine bad drivers and impound vehicles (wheel locks in driveways will do) until those fines are paid.
Permenant disablities caused by MVA injuries will be the third leading class of permenant diabilities in this country by the year 2020. Believe me, state minimum insurance limits are ususally carried by those who least afford insurance and who fit in the demographics of the worst drivers…generally, the less educated and those who live in lower class neighborhoods.
The fines should go into a state pool to pay the ever-increasing economic costs (accross the board)associated with MVAs.
Future SSDI payments due to permenant injuries from MVAs could alone burden Social Security even more beyond most acturaries imaginations.
We need a radical shift in transportation policies on a national level – this can be federally mandated with good models developed to carryout the mandates – there will be no costs to the states – a percentage of the fine monies collected for the fine pool can pay for the administration and adjudication of the mandated programs.
I am starting a non-profit consortium to start a national movement to bring about this change.
Contact Greg Hill at: ghill4safety@yahoo.com
SORRY ABOUT THAT HORRIBLE SPELLING IN THE PREVIOUS COMMENTS – WHEW! I CANNOT DO MY WORK AND POST ON THE NET AT THE SAME TIME.
MY APOLOGIES TO YOU ALL.
[...] I’ve written previously on how a mandatory minimum limits auto insurance scheme could be operated in a manner that (arguably) enhances affordability and fairness, but still preserves the free market for non-mandatory coverage. [...]