Wednesday, March 17, 2010

Can we get some insurance reform please?

I am all for insurance reform. The cost to the average american taxpayer is becoming unbearable. I would love to see a public option put in place to allow everyone to participate.

I am not referring to the healthcare reform that is threatening to be pushed on us right now. The insurance reform I am speaking of is CAR insurance.

Every state in the union requires car insurance. The minimum standards change from state to state but everyone must have some level of insurance. I wish I could come up with a product and have the government mandate that everyone must buy it. I wouldn't have to worry about the quality or the cost.

Car insurance largely became mandatory state by state throughout the 1980's and 90's. Prior to that time car insurance might have cost $300.00 per year as insurance companies competed with each other to show value in their product to the consumer. Now, in Michigan, basic coverage can cost $500.00 to $1500.00 per year, or even more. This is only for basic coverage which provides little to no value to the insured other than compliance with state law. Much of that cost comes from the insured absorbing the cost of the uninsured. The uninsured take the risk because a ticket for no insurance may cost a couple hundred dollars. If you are ticketed once a year on average, the cost is significantly less than being insured. If your vehicle is totaled in an accident it was likely already a beater and is easily replaced. If someone else is hurt in the accident, that is what the basic coverage is designed to provide for. The uninsured runs the risk of being sued for medical costs in that case, but like many other areas of life for the poor, the prohibitive costs offer few alternative options. Even with the new driver responsibility fee of $200 per year, on top of the ticket for no insurance, the cost is still cheaper than carrying basic insurance coverage.

(As a side note, you would have to be blind to see the driver responsibility fee as anything other than another tax that is designed to bolster the insurance companies and provide revenue for a failing state economy.)

Lets assume for the moment that the government really does devise laws and financial mandates for our betterment and not to cover their own ineptitude.

I propose that if we had a "public option" to meet minimum state requirements we could ensure full compliance with the law. We could wrap up the cost of the basic coverage in the cost of car fuel. That way you contribute to the insurance as you drive. The bigger users of gas will likely be the ones at the most risk of an accident due to their longevity on the road, therefore the contribution ratio becomes the most evenly divided when paid for through fuel cost. This would also promote "green" cars which is another political drive by the government for our own good.

We would have to lock down the use of the funds to cover the cost of the insurance to ensure that the government would not be allowed to dip into the funds for other reasons as they are prone to do.

This "public option" for car insurance would also still allow private insurance companies to continue their benevolent work of providing comprehensive coverage at an affordable and competitive rate. Car loan providers would still require comprehensive coverage to protect their investments, but the consumer would benefit from competitive rates as insurance companies try to win the customer with the best value. This can only happen when the consumer is not mandated to buy their product.

And best of all there is no reason to fund abortion through car insurance so even this congress should have no problem getting this passed.

As always I am open to alternative thoughts on this. What do you think?

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