…well, almost.
Seen in Insurance Journal:
The new managed competition auto insurance system being implemented in Massachusetts rewards many bad drivers and penalizes many good drivers based on certain supposedly-prohibited social factors, according to the latest charges by critics.
Many good drivers will pay more and many bad drivers will pay less under managed competition because premium discounts being offered indirectly incorporate credit score, homeownership, education level and other social factors that override the pricing impact of driving record, according to a new report.
The report, entitled ‘How You Drive’ Takes A Backseat to ‘Who You Are’: (Mis)Managed Competition in the New Massachusetts Automobile Insurance Market, was released by two consumer groups – the Center for Insurance Research and MASSPIRG.
I note that they don’t seem to take exception to other, long-accepted rating variables that are correlated to those factors. It seems to me, for example, that one’s income impacts the type of vehicle (or number of vehicles) one drives.
Or, what about the impact of one’s income on one’s ability to afford decent lawyers in the event of a traffic ticket? Heck, let’s not forget what the “driving while black” phenomenon could influence one’s driving record.
Let’s charge everyone the same rate! The middle aged driver driving a modest pickup in a rural area ought to pay the same premium as the teenager driving a sports car in an urban area.
After all, that’s the only way one can completely eliminate correlation between rating classifications and certain demographic attributes.
Folks, let’s have a little bit of sense here. Correlations are impossible to prevent unless there is one rate for all. Instead, in a fair environment, actuaries, underwriters, and product designers seek to pick and weight attributes in a manner that is least correlated to other, socially-frowned-upon and probably-not-predictive-anyway attributes.
And keep in mind, the finer we can slice-and-dice the pool of potential customers, the lower rates we can offer to more folks, partly as a result of the increased accuracy, and partly because of the increased competitive pressures arising from the healthy market.
