Friday, July 22, 2005

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.

28 Comments:

At 1:45 PM, Anonymous Anonymous said...

Let's say that you hit someone on the highway going 70mph. That person dies. That family sues you. You can afford to be sued for millions of dollars?

 
At 2:17 PM, Blogger Skippus said...

No, I can't. But my insurance only pays out so much, and if I got sued for millions and lost, I'd still be on the hook for more than I could ever afford. Either way, with or without insurance, I'm declaring bankrupcy because I could never pay it off.

Of course, that's assuming I would lose. I'm really a pretty careful driver. That doesn't mean that I won't have a wreck, but I can't imagine being so grossly negligent that I would lose a multimillion dollar lawsuit because if it.

Besides, the point is that whether or not I could afford to pay, the decision of whether or not I should buy liability insurance should be mine to make, not the government's.

 
At 9:12 AM, Blogger Alasandra said...

The other side of the story. I recently got rear ended by a reckless driver that didn't have insurance.

I resent the fact that not only do I have the liabilty insurance (required by law), the reckless driver who hit me will get off scott free while I have to pay the deductible on my uninsured motorist in order to get my brand new car (I have only had it 3 months and we bought it new)fixed. Liablilty insurance should be REQUIRED and VERIFIED and people who don't have it should go to jail for a LONG TIME. Maybe then they would think twice before doing damage they can't or won't pay for. See my blog for all the details. http://donotmoverr.blogspot.com/

 
At 12:38 PM, Blogger fockedatburth said...

I just got side-swiped by an uninsured moron-ist, i mean motorist, in my brand new BMW!! She tried to flee the scene too, but I chased her down flashing my high-beams and finally got her to pull over!

Here is my advice if this happens to you:
1)MEMORIZE THE PLATE # AND MAKE/MODEL
(write it down if you can, but you may not get the chance if they run)
2)CALL THE POLICE!
(if you don't, everyone will be asking why not, i.e. your insurance)
3)WRITE DOWN EVERYTHING YOU CAN
(what happened, when, where, why, how fast, and as much of the other party's info as possible)
4)ASK THEM HOW TO FIX THIS
(you can sue them you know. Let them know, and see if they want to try to settle outside of court, if you are ok with that)
I would strongly suggest pursuing compensation from the person that hit you. They may get arrested (she didn't this time, lucky idiot) and they will certainly get a hefty fine (in Oregon at least), but in my case, that fine will be 10% of the cost of repairs, which is bs that I get stuck with that. I will definately be calling her in the near future to see how she is going to make up for really screwing up my insurance and driving record (believe it or not, even a not-at-fault accident is still an accident on your DMV record, and it still goes through as an insurance claim, just like any other, which will raise the cost of your premium for 3-5 years).

 
At 2:17 AM, Anonymous Anonymous said...

I've been driving for 18 years and have not yet been in an accident. for the first 12 years I paid insurance, faithfully! I never had to make a claim. I know I gave the insurance company enough money to cover the cost of a new car.

In eighteen years of driving I've had two moving violations. The first one I received 6 months after becoming a licensed driver and was for speeding. The second on I received about 5 years ago and it was for failure to come to a complete stop. I consider myself "careful, not paranoid".

Yet, I sit here today with a suspended drivers license. Not because I have to many points against my license , or a DUI, or wreckless driving. My license is suspended because when my husband lost his job, I decided to pay the water bill and not the car insurance. My kids had water to drink, but I didn't have that little white piece of paper stating my VIN# and policy#. Without that white paper I couldn't renew my tags. Even worse when the officer pulled me over for expired tags, I had no little white paper to hand him.

Is driving then only a priviledge for those in higher income brackets?

 
At 5:43 PM, Blogger Skippus said...

That's just wrong. You definitely have my sympathy.

The worst part of it is that it's a catch-22. If someone doesn't have a job, they can't pay their insurance. If they can't pay their insurance, they lose their ability to register the car and their right to drive. If you can't drive, in most places in the U.S., you're really screwed in finding a job, because the public transit systems here generally suck.

So the idea seems to be, "Let's take the not-so-well-off members of society and impose unnecessary hardships on them." So much for the land of opportunity!

 
At 10:24 AM, Anonymous Anonymous said...

I have no argument with a mandatory liability insurance law required by most states. However, since there is no way to penalize a vehicle, the violation can only be placed on a driver. My question is, why should I be required to have three liability coverages on the three vehicles I own? Since my liability covers a rental car, why doesn't one liability meet state law requirements?

 
At 2:06 PM, Blogger AdollarShort said...

I was recently in a small accident, where I was crossing a highway and a girl hit the front drivers side of my car. However I am uninsured and the damage to her car was much more exstensive because she was going so fast. The police officer that came to the scene said it was my fault for yielding the right of way and issued me a ticket with a court date. What happens when I go to court? When they find out I dont have insurance can they sue me? Can you estimate how much trouble I'm in?

 
At 1:31 PM, Anonymous Anonymous said...

I would like to know what your response to adollarshort is, because we have been going through a rough time with money and didnt have insurance on our leased vehicle when my son got into an accident which was pretty bad for the other car. Anyway with no insurance they are telling me im in alot of trouble we dont have the money to be sued and Im wondering if one of use can be put in jail? this is in florida

 
At 12:03 PM, Blogger Skippus said...

I honestly don't know the answer, I'm not a lawyer. All I know is that both of you really, really need a lawyer. The insurance industry will spend vast sums of money if need be to protect their little realms, and I found out a long time ago that the law is not on your side.

My uneducated guess is that yes, you will be sued for the damages to the other car. If you cannot possibly pay back those damages, you will likely have to declare bankruptcy to avoid having to pay the judgment.

As for whether you will go to jail, the honest answer is that I don't know. In Florida, they have mandatory insurance laws, so you will at least have to pay a fine for driving without insurance, and possibly a fine for diving with a suspended license. In most states (I strongly suspect Florida is like this), the judge has the option to impose jail time with the sentence, too. Whether he or she does or not depends on how serious he or she feels you violated the law and, not to put too fine a point on it, what side of the bed he or she woke up on that morning.

So yes, you likely are in a lot of trouble indeed, and I can't stress this enough; you definitely need a lawyer. If you can't afford one, I don't know what to say. It's a bad situation and I feel for you, but such is the way our sucky system is set up. Obviously, I'd change it if I could.

 
At 5:41 PM, Anonymous Anonymous said...

i had a accident in the state of louisiana the person i hit had no insurance can he still sue me

 
At 1:34 PM, Anonymous Anonymous said...

Here a couple of problems with your post:

1) The insurance industry is heavily regulated, especially for UM/UIM. Don't believe me? Look up NCOIL, NAIC, ISO, etc. Moreover, assuming one accepts various free market tenets, there are more than enough companies to compete for your dollar making the margins very small for the industry....unless you beleive in rampant collusion.

2) You can write a bond for yourself. You do not need to carry liability coverage, you can set up a bond as long as you have enough funds to meet the state minimums (like a bonded plumber). If you feel you have +EV, which you alsways do on a policy since you pay for overhead, and the money to set aside, then you are free to do so.

 
At 12:59 AM, Blogger mark.a.craig said...

If a state (or the Federal, gods forbid) government mandates any form of insurance, it damned well better be providing the insurance in a non-profit fashion!

This is where Michael Moore's new movie really hits home, in the generic sense, when he tells Americans to stop being such fearful uneducated apathetic woosies and demand things like this. Stop rolling over and playing stupid whenever a corporation or our government is trying to screw us over!

 
At 4:09 PM, Anonymous Anonymous said...

It's only common sense that if mandatory insurance laws are repealed then insurance companies will be forced to offer a better product at a better price in order to sell insurance...good for consumers...bad for lawyers and insurance companies. It's been proven that "no-fault" insurance brings the cost of insurance down. I think you can never underestimate the stupidity of the public who will continually support legislation that is against their economic interest because an "authority", usually someone from law enforcement, told them it was good.

 
At 12:35 AM, Anonymous Garrett said...

I own a "for profit" business in California and I know for a fact that if everyone was required "by law" to pay me x amount of dollars a month I would be able to retire pretty quickly. Using the public police force to guaranty business to a "for profit" company is pretty discusting to me.

The whole concept of the insurance companies is to take your money and not give it back to you. Why don't people get this!!

 
At 7:36 PM, Anonymous Merlin said...

I would just like to say that I'm a proud Uninsured driver.
I spent every spare dime I had when I was younger on insurance, and when I got into my first accident, a head on collision with a speeding car in my lane on a slushy dirt road in Alaska, I got nothing. The cost in damage was less than one year of insurance that I paid faithfully. I had to quit paying the insurance so I could afford to fix my parents vehicle.

I don't know about the rest of you, but I don't take well to being STOLEN from.
I cant think of any other way to define it.

I drive cautiously (and slowly) enough to watch everyone else and compensate. I don't drive during busy traffic, I don't drive in downtown, and I rarely drive on the road at all.
I perhaps log 200-300 miles on the roads a month, half on dirt roads. Thats not much for Alaska.

But I still can not find any company who will charge me a price for insurance relative to how often I drive.

So until I can,
I will continue to drive without Insurance and without being hit by anyone.

 
At 2:46 AM, Anonymous Anonymous said...

Driving is a risk. Actually in many areas a high risk. If you buy a brand new car it is your bank loan that requires insurance, since you don't own the car until you pay it off. I do have a problem with mandatory insurance. As I said, driving is a risk and you just might die exercising that right with the risk that entails. If you want to insure your vehicle due to that risk, than you have the freedom to do so. But the state does not have the authority under our Constitution to mandate that in order to be able to get from here to there, you have to pay a tax, which is what mandatory insurance actually is. It's about weighing the risks and taking public transportation, or owning your own vehicle, or walking if necessary. But as a piece of property, it should be up to you whether or not to insure it. And it would be different if there was adequate oversight and regulation of insurance companies once they made that law. There is not, so unless and until they start overseeing these ripoff insurance companies, than although I am also taking a risk but have a very old car, than I choose not to insure it. Young drivers, yes during the learning curve. But after adulthood that's up to you.

And no amount of money can pay anyone back in the event you or a loved one should die in an auto accident. Life itself is a risk, unless someone deliberately uses their automobile to kill someone, then it is premeditated murder.

 
At 11:58 AM, Blogger Mickson Mvula said...

I got involved in a simple collision,noone was injured and realise that I was not insured.police filed a case for me and I want to know how dangerouse it is and how much I could be fined

 
At 6:41 PM, Anonymous Anonymous said...

I call it "collusion" insurance... (Great article!)

 
At 6:54 PM, Anonymous Anonymous said...

"Unfunded mandate"

 
At 10:43 PM, Anonymous Anonymous said...

sWe are giving up all our rights,seat belt law helmet law,it"s just a money thing government.

 
At 11:12 PM, Anonymous Roger said...

My uneducated guess is that yes, you will be sued for the damages to the other car. If you cannot possibly pay back those damages, you will likely have to declare bankruptcy to avoid having to pay the judgment

 
At 11:52 AM, Anonymous Anonymous said...

manditory insurance = manditory corruption
reminds me of the mobsters selling "fire insurance" to the storefronts along mainstreet
except now the state police are the hinchmen

 
At 4:03 PM, Anonymous Anonymous said...

wow we never got that "passing this law will lower your rates" promise.
i wonder what happened?
repeal this disgusting law now and let the insurance companies survive by providing a wanted service

 
At 7:32 PM, Blogger Аэийс Серкль said...

Mandatory vehicle/driver-insurance is just utterly stupid. This legalised state-MANDATORY EXTORTIONIST insurance-requirement WILL one day lead to MASSIVE civil-unrest & the "cost" will be the ENTIRE "society" itself. Your car suddenly seems worthless in comparison to the cost of lives that will be taken when sufficient numbers of people are driven into becoming psychotic because of these financial-life-destroying regulations that factually have NOTHING to do with one's ability to actually drive "safely" on the road (/sarcasm on: OMG ! Insurance policy suddenly expired, I SUDDENLY just became a "dangerous" driver ALL because of this "piece of paper" was "expired" for ONE f***ing minute, may as well implement "walking insurance" laws since my mere "presence" outside "could" be a "factor" that is "distracting" to drivers, and MAY cause an accident if I'm not carrying my "walking" papers ! /sarcasm off)

For good measure... here is more reading as written by the very Messiah himself about such idiotic public-extortion... The 'Policy' of Insurance

 
At 7:29 PM, Anonymous Anonymous said...

Mandatory liability insurance was legislated to allow insurance companies to sell affordable insurance to those who had been convicted of driving drunk. One day they will rue this law as it is now becoming about bicyclists having mandatory insurance - I will guarantee you there is a day coming when pedestrians will be forced to have it as well.
That said, I agree that it will remain extortion in my book because you are forced to pay for something that may never happen - if you never have an accident, it was all for nothing.

 
At 7:29 PM, Anonymous Anonymous said...

Mandatory liability insurance was legislated to allow insurance companies to sell affordable insurance to those who had been convicted of driving drunk. One day they will rue this law as it is now becoming about bicyclists having mandatory insurance - I will guarantee you there is a day coming when pedestrians will be forced to have it as well.
That said, I agree that it will remain extortion in my book because you are forced to pay for something that may never happen - if you never have an accident, it was all for nothing.

 
At 7:30 PM, Anonymous Anonymous said...

Mandatory liability insurance was legislated to allow insurance companies to sell affordable insurance to those who had been convicted of driving drunk. One day they will rue this law as it is now becoming about bicyclists having mandatory insurance - I will guarantee you there is a day coming when pedestrians will be forced to have it as well.
That said, I agree that it will remain extortion in my book because you are forced to pay for something that may never happen - if you never have an accident, it was all for nothing.

 

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