And the best part is it’s mandatory!
How insurance should work: Disasters are unpredictable, are bound to happen and can be very expensive to resolve. So instead of each individual risking bankruptcy for participating in a system, everybody pools together money at a much lower individual cost. That money goes toward a statistical guarantee that the cost of any disaster will be covered.
How insurance actually works (under capitalism): For-profit companies use every tool at their disposal, regardless of ethics or legality, in order to take as much of your money as they can possibly get away with while simultaneously paying out as little as they can possibly get away with, and then pocket the difference.
The province I’m in has socialized car insurance through a crown corporation. We all pay relatively the same rate, and there are discount tiers applied based on years of experience. If they have a good year of low payouts we get rebate cheques because its not a profit corp.
That’s the way you do it, if it must be done at all. And despite my antipathy towards cars, it seems it must.
I would think it would disincentivize driving?
Drive less > less chance of accident > fewer payouts > bigger refund check > adjust forecast lower for next year > lower premiums > GOTO 1
Or maybe it’s closer to zero sum. because some think that way while some asshole cough Alberta uses the money on extra tires and gasoline to drive even more.
Not surprising that the refund check doesn’t reduce driving in practise. If memory serves - you can’t reward a behaviour into extinction, just like you can’t punish a new behaviour into existence.
At least, that’s if you credit what they teach in applied behaviour analysis courses. I don’t get to use my degree much, except at times like this.
What happens if they pay out more than forecast?
Then there might be a rate increase for everyone in subsequent years, but not your current contract.
Why people think first part is great for insurance, but when somebody wants to scale that up its suddenly horrible socialism.
America basically has socialised healthcare already. It’s just funneled through a 3rd party first, who jack up prices. Where do they think those premiums are going?
"When you pay the government, you’re paying for other people’s care. The taxes will go up when more people use and abuse the system and probably won’t even be used for healthcare, and will just be used for something equally unimportant to me like feeding someone elses children in a state I don’t even live in. When I pay a private insurance company, I’m only paying for me. The rates only go up when the insurance company deems it necessary. The profits go to the people that really deserve it, you know? The hard working executives.
🦅 'murica
How dare you.
everybody pools together money at a much lower individual cost
Another example of this is would be public transport.
Another example of this would be a thousand things: Firefighters, police (not American), education, Healthcare (not American), defense, unemployment, childcare, pensions, roads…
defense
I don’t believe in socialized nuclear deterrence, which is why I think every red-blooded American should own their own backyard hydrogen bomb.
Or not to build homes in a place called Tornado Alley, for example.
Iirc, margins for insurance are actually extremely thin. Consumers almost always go with the lowest cost option, and since insurance is mandatory, they don’t differentiate much on anything except cost. Insurance companies don’t actually make money on insurance premiums. They make money by investing the float.
What op is describing is called “self insured”
Also called “illegal” in most places.
And the flying is, it was much cheaper when it wasn’t mandatory. Liability insurance used to be super cheap because people didn’t want to pay for insurance that didn’t cover their own car. But when states started mandating liability insurance the price skyrocketed.
What grinds my gears though is being required to have liability insurance for every car even though the car itself isn’t covered. I’d love to daily drive a super-efficient electric car, but I teach scuba on the side and once or twice a week end up having to haul a bunch of dive gear in my cargo van. But with the cost of liability insurance, I can’t afford to keep my van as a beater weekend driver when the time comes to get a new daily driver, so I’ll have to buy another fuel-guzzling murder machine that I mostly drive to an office job downtown.
Have you considered a hatchback plus a small trailer?
As someone with the hatchback and small trailer, the extra space + maintenance requirements mean that this is an option only for some people.
I rent, so I’m not showed to store a trailer, so I’d have to pay for trailer storage.
I actually own a little trailer, but I have to keep it at my parents house, which is about 200 miles away.
Funny enough, if somebody offers you insurance that builds cash value, even though the sound of it does make sense you should probably run.
I’ve never heard of this. Why should I run?
The price of insurance only covers the statistically predicted amount of payoffs to all people insured plus a profit. If you’re building a cash value, then that’s priced in, with more profit priced in for them on the equity youve built. You’re better off pocketing the difference.
Right, I would assume it’s an investment vehicle with the extra margin built in. This is why insurance should only be in the largest pools with no profit interference and only the lowest administrative overhead possible.
Its like gambling, I bet 100 bucks something will happen to my car this month. Damn nothing happened, lost again.
Except you know legally required.
It’s not gambling, it’s risk aversion. They are not the same. It’s assuring you’re protected from harm by distributing out the costs in case of harm, that any individual couldn’t handle.
Gambling the goal is to get money. Insurance the goal is distributed liability so that possible danger will not bankrupt you. You still often can not come out ahead with an insurance payout, but hopefully won’t come out bankrupt.
That’s part of why medical insurance is so bad these days is because it doesn’t even prevent that. But it’s still an insurance, and not one that you want paying out.
Hell, not all insurance is even monetary --conceptually, saving grain silos for drought and famine is still insurance.
Actually, insurance is like gambling, your goal is just to loose, not to win. Lloyds, the world’s first and foremost insurance company started as a London coffee house where rich aristocrats met and bet on the return of ships. This was the pure gambling stage. Merchants soon started to bet that their own ship won’t return and the rest is history.
Thats a really dumb analogy.
You could frame anything involving risk as “gambling”.
In gambling you potentially profit from risking losses. With insurance you pay to mitigate your risk. Not really similar at all.
So you think getting cancer and having your medical bills paid is winning? Because that’s one form of insurance. Sure, if you get into certain types, it can be closer to gambling. But it can be further or closer
Sort of – you loose health and win money. It’s definitively a win compared to getting cancer and not being able to get treatment.
Yes. In this framing, where the goal is to lose the bet, getting cancer is winning. Winning the bet is a bad thing.
I used to be with a mutual insurance, which was still actually a mutual insurance, meaning the customers were also the shareholders. I got a small dividend most years out of whatever surplus existed.
Wish we could have that for fire insurance in California but the company would go belly up by the end of the month.
I first thought of starting a nonprofit insurance (all kinds) 40 years ago. It really is that obvious a market. Risk pool is always better when it’s bigger. Obama care did something, but not enough.
Everybody is 12
Everybody is broke.
I don’t understand your comment. 12 years old? What does that have to do with this? Or is it an “I am 12 and what is this?” joke I’m not getting?
And if you don’t pay it you can’t legally drive a car. And if you can’t drive a car, you aren’t going to be hired for a job.
I repeat, YOU ARE REQUIRED BY LAW TO GIVE A CORPORATION MONEY IN RETURN FOR NOTHING IF YOU WANT TO PARTICIPATE IN SOCIETY
Car insurance is a fucking scam.
You don’t have to drive, you can take the bus, ride a bike, use taxis/rideshares, etc. Plenty of people get around without a car. My area is pretty poor for carless living, yet I did it for a few years.
Car insurance is to protect others from you, and a lot of it is due to medical costs and lawsuits. Without insurance, one accident would financially ruin you and the person you hit, so it’s a good thing people are required to have it to drive on public roads.
Every time I see a comment like this, I want to beat the poster mercilessly with public transit maps for cities like Houston, Jacksonville, Phoenix, etc. until they realize what a stupid fucking suggestion that is for millions of people.
Yea sure, just walk 5 miles in 100+ degree heat to the nearest bus stop for the bus which comes every 50 minutes and will drop you off 5 miles away from your destination. So easy!
I used to bike to/from work ~10 miles, and in the summer it gets 100+ on my way home. Sometimes I would take the bus because it was too hot. I get it, it’s not convenient in many parts of the country.
However, you do have options. You can move closer to transit, move to a different city, etc. There are options if you want to make living carless a priority.
When I switched jobs, going carless was not a priority, so I ended up driving to my new job. I could have moved closer, dealt w/ a long (2+ hour each way) commute, or gotten an e-bike to make it feasible to ride the 25-ish miles to work. I made the conscious choice to drive, because it was a better fit for my family.
Victim mentality is destructive, reframing things in terms of choices you can make is healthy. That’s what I’m getting at. It’s okay if you choose to have a car, but do know that it is a choice.
Oh golly, you’re right. I forgot the option of packing up my entire life and moving cities simply so I can go carless. It’s not like I have any ties to my current location, and I definitely have the funds available to make such a move. My job is also happy to work with me on my relocation and will certainly accommodate my desire to not have a car by providing options, such as WFH or office transfers. Yep, moving sure is a perfectly reasonable option that anyone can just do without weeks/months of planning and no major impacts to their life that would be harder/more expensive than just driving a car.
People move for work all the time, and reducing the barrier to moving is one of the main perks of renting. Median job tenure is about 4 years, with a lot of people spending less time or significantly more time. You can move across town and keep your job if you like it, or you can apply to closer jobs if you prefer the area you live but want to have a more comfortable commute.
If you value a car-free lifestyle, plan for that the next time you move. ~2/3 of renters have been in their current place less than 5 years, and 1/4 have been there for less than 1 year, so most people will have plenty of opportunities to try something different. If you don’t value a car-free lifestyle, that’s fine too, just know that it’s a choice.
When I bought my house, my priorities included proximity to a bike trail so I would have the option to bike to work and close enough to a grocery store and the library to bike there as well, and I have made good use of it. My previous apartments were close to something I went to frequently (first and second were the city library and close enough to school, third was the grocery store and the freeway). There are more factors than just rent cost, and I really enjoy not having to use my car for every little trip. I could have gotten a bigger, nicer house for the same money, but I would have had a very different, very car-dependent lifestyle, and I didn’t want that. Likewise for when I rented an apartment, I could have saved a bit on rent by moving further away, but I decided that my lifestyle choice was more important.
It’s fine if you make different choices than me, just own that your lifestyle is a choice, instead of whining about transit not coming to you (general “you”, not you specifically).
I mean, you could hold a few hundred thousand in a surety bond instead, but who can actually do that?
People who got paid a fair wage before wealth inequality spiraled lol
No it’s not, mandatory insurance of cars is there in case you do something, is it better if you get into accident and go bankrupt instead?
Agree about having to own a car but that’s a North America problem, even then there are some cities where you don’t need to own a car
Idk what country you are in, or where you live, but you are absolutely not required to drive a car to participate in society. A car is a luxury item, a privilege. Car companies have been brainwashing the public for a hundred years with pro-car propoganda so it may seem necessary but it definitely isn’t.
Trains, trams, busses, taxis, bikes, walking. These are all options available to pretty much everyone. No insurance required.
Now that I think of it, at least where I live the level of insurance you actually need to legally drive is included in your registration.
So maybe what you’re saying true for you and whatever area you live in, but it’s definitely not universally true
There are many cities in the US where it absolutely is required to have a car. Where trains, trams, busses, taxies, bikes, and walking are actually NOT available or feasible because the city does not have the infrastructure in place for them. Your comment comes across as incredibly privileged and ignorant of the reality many people face. And you can say, out of sheer ignorance, something like “well the people living there should change that!”. Sure. The single mom just trying to get her kids to school before getting herself to work everyday is going to get right on that.
Didn’t realise you were in the US. My apologies, and condolences. You guys have probably been hit the hardest with car dependency. Tbh I can’t even imagine what that’s like.
I think my comment stands for most of the developed world, but yeah, probably not the US
The idea is when everyone pays into insurance the collective fund is used to pay for the costs any individual wouldn’t.
Thankfully accidents or thefts don’t happen to everyone, but if they do you usually get more out than you put in (personal liability is usually millions of dollars, nobody puts that much in individually).
Where this goes wrong is when fraud happens or insurance companies are incentivized to manipulate rates to increase their profits.
Where this goes wrong is when fraud happens or insurance companies are incentivized to manipulate rates to increase their profits.
I’d say the problem is that insurance companies can take profits above operating expenses at all. These should all be strictly regulated (if not entirely state-run) and predicated on funds going to reimbursements for expenses + minimal admin overhead. If money is leaking out the window to shareholders via dividends and stock buybacks, its effectively being embezzled from policy holders.
There’s an argument for maintaining a reserve (think about disaster prone areas for things like floods, hurricanes, etc…), but I agree that it would be better for insurance organizations to be prohibited from being publicly traded (private or public benefit corporation only)
There’s an argument for maintaining a reserve
In a federalized system where you print your own currency, there’s really not. Insurance premiums become a deliberate dampener on economic growth that offsets the possibility of future spending (and subsequent inflationary risk) during a large disaster, and an incentive to mitigate risk in order to reduce expenses.
But there’s no money in simply holding cash in reserve. That’s why private insurance companies typically try to parlay their premiums into investment ROI. The real money in running an insurance company is what you can do with all the cheap cash you’ve collected while you’re sitting on it, with the expectation that you won’t need to pay it all out again any time soon.
A public system wouldn’t need to hold cash in reserve that it can print/loan itself at ZIRP. And it wouldn’t need to seek private ROI ahead of inflation or to pay off private investors in order to mitigate the risk of holding large volumes of cash for a long period of time. But - most importantly - a public insurance program attached to a large state/federal government has a financial incentive to mitigate risk on travel that it can combine with actual public policy to improve the economy overall.
Rather than just insuring a house or a car, state officials can implement public works that reduce the risks of flooding, provide emergency relief during natural disasters to mitigate loss of life, and reduce instances of highway accidents / fatalities. Instead of simply outsourcing and privatizing the risk management aspect to an independent contractor, they can attack the problems of social risk holistically, then set policy prices to reflect the risk-adjusted negative externalities of cleaning up a mess created by risky individual behaviors.
Rather than just insuring a house or a car, state officials can implement public works that reduce the risks of flooding, provide emergency relief during natural disasters to mitigate loss of life, and reduce instances of highway accidents / fatalities. Instead of simply outsourcing and privatizing the risk management aspect to an independent contractor, they can attack the problems of social risk holistically, then set policy prices to reflect the risk-adjusted negative externalities of cleaning up a mess created by risky individual behaviors.
Uhhh, that sounds like socialism
No better way to reduce car accidents than to kill 100 Zillion people.
In my Canadian province car insurance is government run and if you’re a good driver your premiums and license fees are reduced
Must be nice
It is. I’m in one of those provinces. We get rebate cheques if they take in more cash than outgoing.
We also had an accident where somebody turned into us, but no witness. The insurer of both parties is identical because its the same for everyone, so they did a 50-50 fault and we both get our car fixed with no premium changes
We also had an accident where somebody turned into us, but no witness.
I mean, in my experience that’s the point where you put in a call to the local PD and get it reported, so the accident doesn’t go on your record. If their car is t-boning your car, its a pretty clear-cut case of them being at-fault.
But if it was minor and folks were in a hurry and nobody cared, I definitely get it. Nice to live in a country that friendly and chill.
Police don’t come for accident here, unless it is really major or injury. There’s no suing each other or an opposing insurance, so a police report becomes irrelevant.
I though a side dent would show other person at fault, but the insurance company said an alternate way is person is already turning and instead of yielding to traffic in a turn you speed ahead. I felt like arguing it, but since it doesn’t matter we just let it be.
I don’t understand why we don’t have nonprofit insurance. It would be cool if someone started one that focused on serving poor people.
Where’s the disincentivization for manipulation?
Not all markets are the US.
Ideally you have an independent regulator who makes sure there’s competition, and if the industry can’t keep up it gets cleaned up into a well regulated government entity.
Even the US has things like Medicare/Medicade. That is, government run services that are supposed to just be a service, not a profit-making activity. Funnily enough, they don’t have the same issues.
They made issues, unfortunately. Medicare Advantage (latest iteration) has private contractors handling your care which the government reimburses, and Medicaid varies from state to state, with some covering more and others far less (and some having similar arrangements with private contractors).
In theory: Public backlash leading to competition taking market share, and regulatory penalties.
But what about the shareholders? Gotta pay out them sweet sweet dividends.
Mutuals and professional body insurances are a thing to.
Liability insurance: legally required.
Also liability insurance: costs hundreds and the price gets jacked up every few months because fuck you.
Imagine somebody without liability insurance hits you with their car, breaking your spine. And they don’t happen to have any spare money. You’d have to remodel your home for accessibility on your own dime.
Why does that person not have insurance? Statistically, because they can’t afford it. Your example is a failure of society and how for-profit insurance is structured, not because an individual chooses not to be insured.
Yeah, it sorta is. Also, if you can’t afford insurance, you can’t afford a car.
Too bad a car is required for the vast majority of working folks just to get to their job that would pay for said insurance along with everything else they need in life. Guess they can’t afford to live either. Seems like a great system.
Guess they can’t afford to live either. Seems like a great system.
Yes, the system is fundamentally broken and designed to screw over the little guy.
Except your city isn’t walkable and poor transit… So you can’t afford not to drive.
Not what I was saying, and goddamned if I’m not too tired to argue.
If it were a socialist systemic thing, and we rephrased it to, we all contribute a little each year and it goes into a pot for anyone who needs their car fixed, who contributes? (but then you gotta erase the evil corporation that rakes in billions and pays ceos unimaginable money)
Need a new paint job? Get in an accident. Check engine light? Get in an accident.
I am not a
lawyerperson whose advice should be listened to on anything, ever.This already exists, and they are called unit linked insurance plans. Basically the insurance company provides you some units in an investment/trust fund, in addition to the policy benefit, for your premiums (obviously higher to compensate).
They are actually much scammier, because the insurance company administers the unit fund as well, and the fees are often much higher than if you just buy the policy and an exchange traded trust/fund separately. They were formulated by insurance companies basically for the sole purpose of bamboozling people who echo this meme. Back in the day, door to door insurance salespeople would say “even if you never claim, you still get a payout!”.
Unit-linked insurance plan - Wikipedia - https://en.m.wikipedia.org/wiki/Unit-linked_insurance_plan
Protection racket.
Insurance has its place. How much it costs, how much they fight to help you when it comes time, those are the problems.
The fact that for-investor-profit insurance companies exist are the problems.
The fact it’s run for profit AND is a mandatory requirement to having a car.
If it wasn’t required the cost for those who pay in to cover uninsured accidents would be much higher. But I do agree that like many other things, if we nationalized the cost and eliminated profit we could drop the individual price. It would also help to use federal influence to provide other means than individual cars for transportation, less cars resulting in less risk on the road.
The second part is a good thing. It’s how people get paid when someone damages their property (or causes physical harm)
Everybody’s like: I’m a good driver I don’t need insurance.
But they always forget that half the drivers on the road are below average, and your insurance covers you in the event of a hit and run.
Or even simple accidents. You can be the safest driver in the world and some things are just unavoidable
absolutely this
That’s basically what whole life insurance is, and it’s a complete scam IMO because premiums are high (to allow for investment) and the investment is too conservative. You’re much better off buying term life insurance and investing the difference.
You can partly do this DIY with self insurance. Basically, you put a certain amount of capital into a bank account or something and hand that over to the state treasurer in a trust, and it needs to be about $200-400k in my area (range is because the law isn’t clear to me). If you can stand to part with that much, you probably prefer to have the insurance take that risk for you so you can retain control over that money and not worry about lawsuits.
