Why Doesn't ...

New Jersey just ban insures from charging people higher rates for being bad drivers and cut to the chase.

Consumer groups claim that charging people differential rates is discriminatory, but we do it all the time.  Young males pay more because they are riskier as a class.   Elderly drivers pay more and people with accidents pay more.  This is all discrimination.  However, what we want is for people to drive better and the only way in the long run to do this is to charge bad drivers more.  People will choose (discriminate) to be more careful if it has an effect on their ability to get inexpensive coverage.  Insurers are going to mine their data to find those variables that are statistically related to higher risk and use this information to discriminate between expected high and low risk drivers.  This is legal and this is discrimination.  We forget that it makes the better drivers have lower rates.

However, if we want to eliminate discrimination then we should go full bore.  For example, we should not allow auto manufacturers to sell to people differentially.  They must use the lowest common denominator (price).  Similarly, we must use the lowest common denominator for breakfast cereals or coffee to avoid discrimination.  This means everyone will get up and eat their breakfast composed of super sugar smakeroos with extra sugar and generic coffee.  Then after that lowest common denominator breakfast they will drive off to work in their extremely inexpensive, but ugly cars.

Comments

[Megan Mahan]

While I agree with you that bad drivers should pay more for auto insurance, I’m going to argue that this post is a tad overzealous.

Firstly, we’re not talking about young or elderly drivers here. I can understand the risks associated with these age groups and the consequent premium hikes.

However, (and unfortunately) the current caste system in the U.S. still finds minorities holding fewer degrees and lower-paying jobs as a result. I’m sure I don’t have to explain to you that, under some insurer underwriting guidelines, many minorities are paying more for car insurance just because of their job title—not because they’ve had multiple violations.

I recently came across a Star-Ledger (of Newark) article which found that a 30-year old single male lawyer would pay about $1690 per year, while a 30-year old single male janitor with a high school diploma would pay over $2800 per year. That, to me, is crazy talk.

Now, I also read that the New Jersey Department of Banking and Insurance hasn’t gotten any complaints regarding these underwriting guidelines (as of yet). I imagine this is because not many consumers realize that their occupation and educational background are being factored into the underwriting of their policy. Truthfully, I wonder if anyone ever will complain—I doubt we’ll hear from folks in high-paying jobs who are enjoying lower car insurance premiums.

I know insurers need to assess risk and make money. It’s a business just like anything else. But unfortunately the insurance industry as a whole doesn’t exactly have the best reputation, and these types of things aren’t going to help matters.

Anyway, this is just the opinion of a lowly copywriter/payer of auto insurance premiums.