Mandatory Insurance Laws
I just got through paying yet another insurance payment to my car insurance company, and I thought I'd take a few moments to put these thoughts out there.
I personally think that insurance is a complete waste of money, and insurance companies are the second dirtiest industry in this country today only behind the tobacco industry. I don't spend a cent on insurance that I don't have to because in my mind, it's like gambling in Las Vegas, except you're betting on the odds of something bad happening (e.g. getting into a wreck) instead of something good happening (e.g. winning a million dollars). I don't like gambling except as a rare entertaining diversion, yet I am forced to by law.
My car is paid for, free and clear, and has been for several years. Given a choice, I wouldn't spend a cent on insurance for it. Yet every six months, I still have to send a check to an insurance company for liability insurance. In case someone's not familiar with this concept, liability insurance pays other people for any damage I might cause in case I do something stupid and cause a wreck. In the state of Georgia, liability insurance for a car is required in order to legally drive it. If you don't have liability insurance and you get caught, there are stiff fines and possibly even jail time, and the real possibility that you'll lose your car.
The concept, of course, is that everyone who drives a car should be financially able to pay for any damage they cause while doing so. If I don't have liability insurance and I cream a $100,000 Mercedes, the owner of that car would be stuck with the bill since I don't have $100,000 sitting around to pay for it.
My problem with the concept is that there are a whole bunch of flaws that turn the nice thought into just a bunch of laws designed to screw ordinary people and to make insurance companies a lot richer. Here is my laundry list of problems with mandatory liability insurance laws:
- Many people still don't have the mandatory liability insurance, so if you want to be covered in case someone hits you, you still have to have uninsured motorist insurance, which covers you in case someone without insurance creams your car. Whether or not the person who hits you has insurance, the damage to your car will still be paid for. If you are making car payments on an automobile loan, uninsured motorist insurance is almost always required as a term of the loan.
- In theory, since everyone is now required to carry mandatory liability insurance, the cost of uninsured motorist insurance should be drastically reduced, practically next to free, since there are significantly fewer uninsured motorists on the road. In reality, the cost of uninsured motorist insurance has only gone up. The insurance companies are pocketing all of the extra government mandated income.
- There are people in the world, like me, that could pay for any damage that I may cause while driving. At least, I could certainly handle the cost of any damage I may cause up to what my liability insurance would pay. It wouldn't be particularly easy or convenient for me, but I could still do it. By forcing me to pay for liability insurance, the government is taking away my freedom to choose how I spend my money and how much financial risk I can be willing to take with my money. In this sense, I consider my thoughts on this issue to be Libertarian or even Conservative (gasp!).
- Forcing people to have mandatory liability insurance can actually encourage people to drive less safely. Why? Because if I don't have insurance, I am a lot more likely to drive very carefully, because I don't want to lose a lot of my personal wealth for being stupid and causing an accident. If I know I won't lose anything, I would probably be a lot less worried about damage I might cause to other vehicles. I find it hard to believe that I'm a weird rare exception.
- When government forces me to spend money on something, I consider that to be a tax, and as a tax, I believe that the receivers of that money should be held accountable to the taxpayers as to how much they can charge and what rules they must follow. The insurance industry, especially automobile insurance, is highly unregulated. They can charge whatever they want and act however they want, and the people have no choice but to keep paying because government requires it. The cases of insurance companies screwing people out of legitimate claims are too numerous to list here, and it's just not right. Oh, these government mandated payments aren't tax deductible, either, and as far as I know, there aren't any programs to help low-income make these government mandated payments.
So although I think the motivation for requiring people to have liability insurance is a good one, I strongly disagree with actually enacting it into law. I don't want to get stuck paying the repair bill for someone else's stupidity any more than the next person, but mandatory liability insurance laws doesn't prevent that, they only cost responsible people a lot of money and make insurance companies a lot richer.