Rants
The Insurance Scam
Everyone needs auto insurance. It's the law in the US. If you've shopped around for auto insurance lately, you've probably noticed that there wasn't much of a variation in rates from company to company (other than the "high risk" providers). Ever wonder why? The answer is because all insurance companies "agree" to charge a set rate for a given vehicle. When a customer requests an insurance quote, the agent refers to a chart to find the rate for the vehicle. All insurance companies use the same chart, and when it's updated, they all get a new copy. The purpose of the chart is to prevent the insurance companies from losing money by having customers "shop around". Since the only real discount is for long term coverage, drivers are encouraged to stay with their existing company.
But isn't this an antitrust violation?
Of course it is, but unfortunately, insurance companies are exempt. How did this happen? Simple... since auto insurance is required by law, insurance companies have a sort of "captive audience". Any regulation is spoiled by pocket lining, that is, insurance companies pay handsomely to avoid real regulation. These pay-offs also helped to get them exempt from the anti trust laws that apply to all other businesses.
Don't I get a discount for having air bags or abs brakes?
Sorry, there are no discounts in the auto insurance industry, other than the one you get for staying with a company. There are only surcharges. When you ask about discounts for safety features, you are told that these things are "figured into the insurance price". Every vehicle gets a baseline rate, then surcharges are added for things like accidents, points, young drivers, geographic location, and estimated mileage. The base rate takes into consideration the type of vehicle, price, cost of rapair, vehicle desirability, and how other drivers who own your same vehicle have driven.
Let's take sport utility vehicles. Since they are very popular now, insurance companies have begun charging higher rates for them. Why? Simply because they think you are more likely to pay a higher rate for a vehicle you really want. If you were buying a Geo Metro, you wouldn't expect it to have a high insurance rate, but a sport utility by the same company, well, that's different. That may be the only sport ute you can affort, or it may have the features you really want, so the insurance companies think they can get away with burning you on the rate.
Make and model "racism"
The worst part of auto insurance is how rates are based not on your driving record, but other people's driving record who own the same type of vehicle as you. You may have a flawless driving record, and you may be purchasing a car very similar to your previous car, but if you're unfortunate enough to be buying a vehicle that other people tend to wreck, you're out of luck. You will be charged as if you are the one with the poor driving record. What does someone else's driving record have to do with your insurance rate? The answer is, absolutely nothing. It's just another pathetic excuse to charge drivers an unfairly high rate.
We can see how unfair this is if we change the wording just a little. What if your insurance company told you, "Well, you're black, and lots of black people get in traffic accidents, so we're going to charge you a higher rate because you're black". Imagine the uproar that would cause!
Is there a solution?
Realistically, no, but I have thought of a solution in the event anyone is still reading. The solution is to eliminate insurance companies as a private business. Instead, insurance should be paid to some type of holding body and put into a sort of trust fund. As each person pays, their fund would grow, and thus their annual payment would decline, until it was merely adding to the fund to compensate for inflation (increasing parts and repair costs, etc.) If a driver is involved in an accident and depletes his or her fund, that driver will have to return to paying the initial rate until the fund is built up again. Drivers that are involved in numerous accidents, would have to pay a greatly increased rate, as they do now. Having an accident on an empty fund would not be a problem because the fund would be "virtual" - the sum of all funds acting as a buffer. Elderly drivers who can no longer drive would be eligible to receive either all or most of their insurance trust as a type of pension.
By eliminating insurance as a private industry, you eliminate the greed factor. Is this killing free enterprise? I don't think so. Remember, insurance is required BY LAW, so it only makes sense to remove it from the control of a private company.
I suppose it's worth mentioning (for those of you who disagree with this article) that this article was written after a lengthy conversation with someone who provides legal services for a major auto insurance provider, as well as an honest person in upper management for the same company.
