Compulsary Insurance Won’t Work
By Jim Baxter, NMA President
One of the hot button issues dominating the health care debate is the proposal that all citizens must buy health insurance. Of course the health insurance industry thinks this is a great idea. What nobody wants to admit or discuss is that we already have a compulsory insurance system, for motor vehicles, and it doesn’t work.
The effects and influence of mandatory automobile insurance have been far reaching, and largely counterproductive.
Theoretically, the political elite wave their magic wand, mandate universal auto insurance coverage, and the multitudes that previously didn’t have insurance, usually because they couldn’t afford it, immediately procure coverage.
That’s the theory, the reality is quite different.
Obviously, those too poor to afford insurance still can’t afford insurance, especially because it has also become more expensive. So they drive without insurance. They get caught and their license is suspended.
They continue to drive, often because they need to get to work, and they get caught again. More fines they can’t afford, just like the insurance they couldn’t afford in the first place, and then they go to jail for failing to pay the fines.
Now the government gets to provide their room and board and when they get out of jail they no longer have a job.
Before long, the state legislatures start cranking out new bills and regulations aimed at coercing more people to buy insurance, forcing the insurance companies to sell insurance to people they don’t want to sell to, increasing penalties for not having insurance, and setting up multi-million dollar systems to track who has insurance and who doesn’t.
Finally, the state gets into the insurance business to sell insurance to people who the insurance companies won’t or can’t afford to insure — call it a public plan to compete against greedy private insurers.
The state insurance program goes deep into the red and the legislature decides the deficit should be covered by private insurers who refuse to provide affordable coverage to the “bad” drivers in the state insurance pool.
The private insurers decide to cover their new losses by adding surcharges for traffic violations, routine accidents, poor grades in school, age, neighborhoods, and less than sterling credit ratings.
Back come the legislators and they pass more laws outlawing the more irritating and profitable surcharges. The insurance companies respond by ceasing to do business in that state.
Competition declines, prices go up, and even more people can’t afford auto insurance. This is a great system, it’s a wonder it wasn’t adopted for health care a long time ago.
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I fully agree with you James Baxter. This new computer system that matches registrations with the insurance companies data, costs the insurance company 50$ per vehicle and that gets added to everyone's policy. The system doesn't work (has a big loophole anyone can drive thru), and the insurance proponents will blame this on the uninsured drivers. The loophole? Mrs Smith can buy a policy for 400$ and let her DUI husband and teens drive without insurance since they are not authorized to drive the vehicle (not listed on the policy)
But there was no mention in the article or the comments on the nmbers on food stamps due to mandatory auto insurance. Is it worth it to have millions on food stamps for the next gazillion years? Go to http://www.foodstampstudy.com A food stamp survey done at my request thru the Montana DPHHS, showed 12 of 96 food stamp applicants said auto insurance was a reason for needing food stamps.
One does not need a 20,000$ vehicle to get to their job. A 1,000$ vehicle will suffice. If someone wishes to drive a 20,000$ vehicle (which they do not need, and do not have the right to drive on the streets), then they should protect it themselves.
There should be some compensation for those involved in motor vehicle accidents, but to put millions on food stamps is not the solution. People who never have an accident will be out 15,000$ and I have not heard a solution to that problem. And I'll bet there are a lot of landlords out of money because the rent had to go to auto insurance.
[...] unique perspective compares universal health care (by way of universal health insurance) to universal auto insurance. Summary: didn't work there, won't work for health [...]
Jim, put yourself in the position of a person who just had had his car totalled and been seriously injured by another negligent driver. One that is too poor to afford insurance and doesn’t have anywhere near the assets necessary to cover the loss. Do you still think insurance should be optional?
Your libertarian analysis of the alternatives is unduly pessimistic. In British Columbia we have a government run system that requires purchase of basic third party liability coverage in order to get a license plate. Private insurers are allowed to compete for additional coverage, but naturally they’re only interested in creaming off the best risks from the public system- the “choice” they offer isn’t for everyone, you see.
It may shock you, but the public system actually runs a surplus, and still allows the right to sue- private insurers are always pushing no-fault as a way to limit costs. It also has maintained stable premiums while private firms had to jack up rates to cover investment losses. Repairs can be done at any shop which will accept payment (they all do) which are conveniently located near claims centres.
Finally, the rating system is transparent. You can know in advance how much a ticket or claim will affect your rates. How many private insurers do that?
Finally as a Canadian, I’d love to talk about health insurance! Our system costs less, delivers longer life expectancy, and no one goes bankrupt because of it. My wife is from the US, and definitely prefers the system here.
Back in the mid-1980s when Ohio mandated auto insurance, all of the insurance companies raised rates overnight because they knew they would be getting new business.
JJ as far as I know every state regulates auto insurance companies. If the auto insuance were allowed an increase then the expenses were higher or they were required to take higher risk drivers so they would have to increase the rates of everyone to make up the added expenses unless they were allowed to increase the rates on the higher risk drivers. Tell us the facts that you have that the insurance companies were gouging the drivers or are you one to just complain without any information? How much was insurance increased? You tell us nothing.
I suppose you compained that the local gas station was gouging you last year with high gas price and they were pocketing a couple of bucks a gallon.
It was Goldman-Sachs & JPMorgan screwing the public. A dollar per gallon right to them.
George you miss the point as usual.
No, I got JJ’s point that when insurance what mandated, the costs went up, probably as a preventative move to protect their bottom line.
Now how would one be able to tell if that happened or the insurance companies were sticking to the people?
http://www.motorists.org/insurance/
George you can gouge the insurance companies all you like with huge lawsuits and no increases for bad risk drivers but they also have the right to leave your state. That does and has happened when the states make it so that they not only do they not make a profit but show a large loss. Like I said before if you think the insurance companies make so much money on in their opinion poor risk drivers then start your own insurance company.
My insurance is 394.48 for a full year and full coverage. I am a low risk person in a low risk area.
Jim Baxter you do not know what you are talking about. Insurance companies have computers full of data about accident statistics and costs of different groups. You do not have any. There are two choices. Either have the group that costs the insurance company more money pay higher premiums or have everyone else pay for their higher expenses. If you think that people do not cost an insurance company any more expenses than anyone else then you have NMA start your own insurance company and charge that group the same as everyone that does not get traffic violations. In your words you would make millions and millions of dollars. Good luck with that.
“The private insurers decide to cover their new losses by adding surcharges for traffic violations, routine accidents, poor grades in school, age, neighborhoods, and less than sterling credit ratings.”
I’m actually going to agree with Randy this time, it actually pains me inside. But I too am a low risk driver in a semi-low risk area. I pay $640.00 a year for full coverage. I have never got into an accident, thankfully.
Plain and simple if you own a car you have to have auto insurance. It’s stupid if you don’t. If you didn’t you could be sued and lose everything but your shirt if you were the cause of a bad accident.
If you can’t afford it then move closer to your job or get a job closer to home. These people can bike or walk to work or get a ride from a friend. If you dont want to pay high rates b a safer driver.