News article wording

[roup42]

The wording in this article from the Times really goaded me. Not that it surprised me in the least. It's consistent with how the issues are always presented.

A study last year by Consumers Union noted that a woman with 22 years of driving experience and a good record, residing in predominantly white Westchester, would pay $1,443 a year with

Comments

[fastlearner]

I certainly appreciate the concept of some neighborhoods being more likely to cost the insurance companies more than others, but that fact doesn't mean they have to rate by territory. Costs and risk can certainly be averaged out over all neighborhoods. Yes, it "punishes" those in safer neighborhoods, but hey, so do the idiots in any neighborhood.

Why is it so obvious that insurance companies have to rate by territory, again?

[roup42]

If there's no law against it, and Company A doesn't differentiate, they are adversley selected against. Let's say that (ignoring expenses and profit) suburban drivers cost $5 a year to insure and urban drivers cost $10. There are even numbers of both. Company A doest differentiate and charges $7.50 for it's insurance. Company B differentiates and charges $5 for suburban drivers and $10 for urban. All the surburban drivers will buy their insurance from company B, who will make a profit of $2.50, and all the urban drivers will buy their insurance from company A, who will lose $2.50, and soon go out of business. All the urban drivers also end up uninsured.

So the only option is to pass a law that says "You have to charge everyone in the state the same rate." Beyond the general fuck-upedness of this situation, you are making all the Suburbans subsidize all the urbans. Why are they having to do this? What also ends up happening is that you end up with Company C that happens to charge just $5, but wow, wouldn't you know it? They

[fastlearner]

I understood why one company can't just switch, but I thought you were saying that it automatically had to be that way.

Yes, it would require a law because no single company could actually survive doing it.

They "why" is simple socialism: when the underpriviledged are extra fucked simply because they're in the wrong class, spread the pain around. Which I'm fairly certain is extremely distasteful to you.

[roup42]

Well, also, as I said, because it ends up still not working. Because as it is a product sold by a voluntary, free market, what ends up happening is that the "wrong" (not the word I'd use) class ends up not being insured at all. To use our simplified example, if the state says "you can only charge one rate at all state-wide," then Suburban Insurance Company comes in and target-markets just to suburban drivers, by, for example, having affiliation marketing to members of the Pinehaven Country Club.

The government is coming in and saying "all insurers must charge the same rate," it's saying "each company much charge each customer the same rate," so in effect ends up mandating that the company cherry-pick. It fucks over the very people it's meant to help. It'd be like trying to help make sports betting "fairer" by mandating that all games must have the same point spread.

If you want to "socialize" insurance the only way to make it "workable" would be to actually socialize it and have one government-run automobile insurance carrier

[roup42]

replace "the govevernment is coming in and saying "all insurers must charge the same rate" with "the government is not coming an and saying "all insuers must charge the same rate""

[fastlearner]

I assumed in my posts that certain implied things were obvious, but clearly they were not.

I am referring to single-rate insurance that must be available to anyone who wants it. Rates could only vary within a company based on the value of the things insured and past behavior (auto accident-prone insurees should certainly pay more than safe/lucky drivers, for example). Companies could still compete on price and service. Regulating industry to protect the weak in this manner is a longstanding tradition, and insurance is a great example of where such regulation is important.

[roup42]

I am referring to single-rate insurance that must be available to anyone who wants it.

I'm not sure what "must be available" means. No underwriting? The insurer must take everyone?

What about office location? If Suburban Insurance Company doesn't have any offices in downtown LA, is it really available for those residents?

If you put a price cap on a good, it causes shortages. This is a basic of economics, and insurance is no exception. If you mandate one price for insurance regardless of risk, you end up with the higher-risk insureds not being able to get insurance at all, and end up hurting the very people you were trying to help.

[fastlearner]

Not a price cap. Same price regardless of neighborhood or economic status. Note that I specifically noted that risks besides geographical location (and therefore, commonly, class) should indeed count.

On office location, dunno how to solve that, but I'm sure it could be worked out. I know that I've only ever been to my insurer's office one time, and that wasn't strictly necessary.

On underwriting, it should surely be clear by now that I'm referring to not basing rates on neighborhood or class.

It feels like you're being purposefully dense. What am I missing?

[roup42]

I don't get what you're saying and don't get what you mean by saying I'm being dense. Insurers don't rate by economic status -- I have no idea what you are talking about there. Urban Beverly Hills is going to be higher cost than Encino, but who is richer?

By "price cap" I mean for the more higher-cost ZIP code, because you are having a legally mandated price cap forced on it -- you can't charge it more than the state average. Hence you will have a shortage of insurance in that higher-cost ZIP Code.

I would be willing to bet $1 million, if the scheme we're talking about went into effect tomorrow with every insurer in the state -- "Great news everyone, we will no longer 'unfairly' rate by where you live but just by whether you are a 'good driver' or not!" within 5 years you would be seeing banner headlines in the paper about a crisis about how people in higher-costs areas couldn't get insurance because companies were unwilling to write it there because they couldn't make a profit. Leading to tons of uninsured drivers. I Guaran.

[fastlearner]

We're somehow completely missing what the other is saying. Everything in that last post makes no sense whatsover based on what I'm saying, so I'm just going to have to assume that we can't communicate with each other on the topic.

[roup42]

Well I'm just going to have to assume that I'm right and you're wrong then. :)

[fastlearner]

And since I might not have been clear enough on price caps, this has nothing to do with what a company can charge. As I said they'd still be competing on price and service. They just can't do what's happening now, even though it's not necessarily intentional: charging poor people more than the rich because they can't afford a home in a less dangerous neighborhood.