Seen in the Winston-Salem Journal, an editorial complaining about average folks subsidizing others’ auto insurance:
About one in every four North Carolinians is covered through the massive N.C. Reinsurance Facility for risky drivers. That risk pool is larger than any similar mechanism anywhere else in America.
The facility regularly loses money, and state law allows the participating auto-insurance companies to recover the facility’s losses from all insurance clients, not just those who are risky drivers.[...]
At the end of the year, when the facility’s books are closed, the losses almost always come from the drivers who were in the pool because of these plea-bargain, non-point convictions, the insurance companies say. And, in many years, the recovery cost for those losses has meant an increase in insurance rates for all drivers of as much as 10 percent.
In effect, therefore, safe drivers are paying for the added risk and losses incurred by drivers who used the system to get their charges reduced. These drivers also benefit from considerably lower rates than do those risky drivers who do not get the benefit of a reduced charge. That hardly seems fair, either.
I couldn’t agree more, although I question whether the problem is really “leaks” in MVR’s and traffic court practices, rather than other restrictions (regulatory or not) that limit insurers’ ability to classify customers and explicitly increase/decrease rates based on those classifications.
Of course, it should be noted that many of those folks in the reinsurance facility are unlikely to be willing to purchase coverage (or purchase adequate coverage) if they are asked to bear the full brunt of their unsubsidized rate. In which case, most drivers will still end up subsidizing the risk via their uninsured/underinsured motorist coverage.
Still, it’s nice to see a newspaper op-ed agreeing with the notion that subsidies are bad in ratemaking.