INDIANAPOLIS, March 24, 2015 — The way we are charged for auto liability insurance is absurd. Consider: We are forced to purchase liability insurance as a requisite for driving a vehicle on the road.
The concept of mandatory insurance itself requires convoluted logic.
With all other forms of insurance we insure ourselves against loss; we decide how much coverage we need, for example, to replace our house.
Auto liability insurance insures someone else: the person we run into.
In many states, drivers need to purchase “uninsured motorist” coverage for just that eventuality, because lawmakers know that a lot of people on the road are uninsured, law or no law.
All we really need here is uninsured motorist coverage, just as our own home insurance covers us in case our irresponsible neighbor’s fireworks burn down our house. What we are doing is to make sure that those who didn’t buy insurance against our acts – and their lawyers – will have plenty of money, after we cause trouble.
In any other situation, we would be personally responsible for the harms we cause. But if we have liability insurance, we don’t have to worry about losing everything. Could that, on some level, actually allow us to ease up on our vigilance while driving?
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Ask the parents of a teenage driver. In fact, there is a whole body of research surrounding the “offset hypothesis,” which says basically that greater perceived protection leads to riskier behavior, as you would notice if you were driving a tank.
But it’s even worse than that.
We need to buy liability insurance for every vehicle we own. Think: How many vehicles can we drive at one time?
The obvious solution to this stupidity is to pay for liability insurance on the worst-case combination of driver and vehicle. Example: I’m single, and no one else drives my vehicles. I haven’t been charged with causing an accident for over 30 years (note how I don’t take responsibility!) and haven’t had so much as a speeding ticket since 1977.
So, charge me according to the highest-potential damage I’m likely to do. That would be on my Dodge truck or my old Riviera.
Say that figures out to $100/month. Now, when I add a motorcycle, I’m obviously lowering my potential liability – a “multi-vehicle discount” should actually be a discount rather than an additional charge.
The insurance company should be grateful that I’m not going to run into someone with the truck and reduce my rates according to how much I give them that break!
If I have other drivers in the family, adjust the rates accordingly. If my fictitious 17-year-old daughter wants to use the equally-fictitious Lambo on the weekend, we can make adjustments. If she lets her 17-year-old race driver wannabe boyfriend drive the little red car, I understand there is an enhanced likelihood of a claim. (Unfortunately, no insurance will pay to get my head examined.)
But even in the case of a large household with teens and a Lamborghini, there is some maximum exposure – and all the other combinations would lower that rate, in proportion to the use of the other vehicles. Remember those forms that request the annual mileage for your vehicles, and how far you drive to work?
That’s why they ask.
We buy comprehensive insurance for all our vehicles, in proportion to their values. While that truck sits in the driveway (or the Lamborghini resides in my living room), I’m paying for coverage in case something bad happens to it.
Why we’re paying liability insurance for every vehicle, all the time, makes no sense. We’re paying, but we’re not even insuring ourselves.
Of course, the insurance lobby is well-organized and generous when it feels its industry is threatened. Against that, we have disorganized, uninformed and otherwise-occupied citizens, who allow the crony capitalists to simply tax us according to their own needs.
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