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  #1  
Old 04-12-2004, 07:30 AM
Spectre of Pithecanthropus Spectre of Pithecanthropus is offline
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So! Some occupations more equal than others, in determining auto insurance rate.

What's the justification for offering lower rates to doctors, teachers, and engineers, because of their occupations? Why are they considered lower risks than, say, professors of philosophy, or librarians? Have any cases been brought to court on this issue?

I ask because I just heard a story about how that's being done in California.
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  #2  
Old 04-12-2004, 07:53 AM
sailor sailor is offline
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Quote:
Originally Posted by Spectre of Pithecanthropus
What's the justification for offering lower rates to doctors, teachers, and engineers, because of their occupations? Why are they considered lower risks than, say, professors of philosophy, or librarians?
My guess is that is what statistics show.
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Have any cases been brought to court on this issue?
On what grounds? I can't see a case.
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Old 04-12-2004, 08:23 AM
Spectre of Pithecanthropus Spectre of Pithecanthropus is offline
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I'd like to see those statistics. The problem I have with occupation based rating is that it goes beyond evaluating the insured's actual driving record, and the amount of driving they do. Engineers, for example, have to be careful and methodical about their work, which might suggest a more conservative and careful approach to driving, but so do CPA's. In other words, I can think of any number of occupations that should hit at safer driving, so it doesn't seem fair that only a few occupations get to enjoy the discount.
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Old 04-12-2004, 08:36 AM
MMI MMI is offline
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Conceivably there is sufficient data to give those professions a break (though I have not seen the [i]engineer discount[/b] line item on my insurance bill). It may be a combination of sufficient difference in accident proneness and a sufficiently large number of people in those professions that an occupational discount is good marketing sense. I don't know that there are enough philosophy professors or librarians that a solid statistical basis exists that they are better drivers or that makes a discount worthwhile.
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Old 04-12-2004, 08:40 AM
Aeschines Aeschines is offline
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The whole differing rates thing is BS.

I have always been a good driver and have never been in a "real" accident. But when I was young I got charged more. Unjust.

Sure, they will discriminate on the basis of this and that--but never anything like race. I bet statistics on race would show that one group causes more problems than another. But they could never get away with that. (Not that they should try!)

So they fool around with this and that. BS.
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  #6  
Old 04-12-2004, 09:43 AM
doreen doreen is online now
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Quote:
Originally Posted by Spectre of Pithecanthropus
What's the justification for offering lower rates to doctors, teachers, and engineers, because of their occupations? Why are they considered lower risks than, say, professors of philosophy, or librarians? Have any cases been brought to court on this issue?

I ask because I just heard a story about how that's being done in California.
Do you have a link? I ask because my insurance company apparently uses occupation to set rates in a way at least sometimes. I am a civil servant, and they asked me for my job title and pay grade when I originally called for a quote. My pay grade doesn't give any indication of what I actually do (for that matter, neither does my title,really) but it does give other information- the approximate amount I'm paid, the fact that I am overtime-exempt, the fact that even though I don't supervise anyone and am at the lowest level in my title , my employer considers my job to be the equivalent of second level supervisors in other agencies, and that I work pretty much independently- my supervisor doesn't even see most of my work. And while I can't think of any reason to expect engineeers to be lower risks than librarians, I can imagine that both engineers and librarians might be lower risks than mailroom clerks.
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  #7  
Old 04-12-2004, 09:50 AM
sailor sailor is offline
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Quote:
Originally Posted by Spectre of Pithecanthropus
I'd like to see those statistics.
You can do your own, they are not obliged to show you anything.
Quote:
The problem I have with occupation based rating is that it goes beyond evaluating the insured's actual driving record, and the amount of driving they do. Engineers, for example, have to be careful and methodical about their work, which might suggest a more conservative and careful approach to driving, but so do CPA's. In other words, I can think of any number of occupations that should hit at safer driving, so it doesn't seem fair that only a few occupations get to enjoy the discount.
Who said anything about "fair"? And where is the law that says the world is "Fair"? Welcome to the real world. It's not fair. And it is even more unfair for 99.9% of the world population than it is for you.

Insurance companies, airlines, car rentals, hotels, donut shops etc are free to sell their products and services on whatever terms they want so long as they don't break the existing laws which may prohibit discriminating on the basis of race but are silent on all the issues you mentioned. Individuals and corporations are free to set their marketing and sales policies freely and to engage in discriminatory pricing. They can give discounts to students or seniors or the handicapped. Welcome to the free market. It isn't fair, but it's the best thing we got.
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  #8  
Old 04-12-2004, 10:04 AM
Ravenman Ravenman is offline
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Am I the only one who saw "some occupations" and thought of Iraq and Afghanistan, then wondered what the hell that could possibly have to do with car insurance?
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  #9  
Old 04-12-2004, 10:07 AM
The Great Sun Jester The Great Sun Jester is offline
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Insurance company rate schedules must be approved by the state's insurance commissioner (IC). The IC is selected by the governor of the state or sometimes elected by the people of the state. The IC acts in the best interests of the consumers of the state, not in the best interests of the insurance companies. So, yes, technically a company can charge what it wants to whom it wants, but not if the IC rejects those conditions.

In order to get a rate schedule approved, the insurance company must show actuarial data illustrating why some drivers will be charged differently from others. The most common criteria include the age, gender, years of driving experience and 3-5 year motor vehicle record. A few years ago, credit history was discovered to be a stronger indicator of potential for losses than even your actual driving record. My own experience has shown me that people in certain occupations are more risky (clergy & insurance agents, oddly enough are abysmal) while other drivers are less prone to have an accident.

The reality is, every insurance company is different and pays attention to different things. If there is a group of people who get a break that you don't, the correct assumption is likely to be: there is data to support the discrimination.
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  #10  
Old 04-12-2004, 03:54 PM
PigArcher PigArcher is offline
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From The California Department of Insurance:
Quote:
Determination of Rates. Prop.103 established uniform guidelines upon which your auto rates would be determined. The primary factors are as follows:

The operatorís driving safety record;
The number of miles driven annually;
The number of years of driving experience.

There are 16 secondary rating factors which may be used in any combination to determine your specific rates and calculate your individual premium based on an insurance companyís filing with the California Department of Insurance (CDI). The secondary factors must not be weighted as heavily as the primary factors in the rate premium calculation. These secondary rating factors may include marital status, frequency and severity of claims in the geographic area where your car is garaged, gender, vehicle type, etc.
direct link
I couldn't find a definitive list of all 16 secondary factors, but I suppose occupation could be among them. FTR, I've been driving in California for over 16 years and can't remember ever being asked my occupation when shopping for insurance.
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  #11  
Old 04-12-2004, 05:33 PM
suranyi suranyi is offline
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Quote:
Originally Posted by Max_Castle
I couldn't find a definitive list of all 16 secondary factors, but I suppose occupation could be among them. FTR, I've been driving in California for over 16 years and can't remember ever being asked my occupation when shopping for insurance.
I wasn't asked either, but in one of my insurance bills many years ago there was a flyer which listed certain occupations as being eligible for a discount. I applied and got the discount.

In other words, the customer had to actively seek out the discount.

Ed
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  #12  
Old 04-12-2004, 08:54 PM
mike1dog mike1dog is offline
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I don't mind them giving discounts to anyone. What I dislike is that they will raise rates on people who have bad credit. Does bad credit make you more likely to have an accident? I also noticed on one website that State Farm just sent out letters to its customers saying that they won't cover your car if it is incinerated by a nuclear device.
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  #13  
Old 04-12-2004, 11:23 PM
Mr2001 Mr2001 is offline
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Quote:
Originally Posted by sailor
Insurance companies, airlines, car rentals, hotels, donut shops etc are free to sell their products and services on whatever terms they want so long as they don't break the existing laws which may prohibit discriminating on the basis of race but are silent on all the issues you mentioned.
That brings up an interesting question: Should insurance companies be allowed to discriminate on the basis of race? They already discriminate on other factors that are beyond one's control, i.e. age and gender, and if there's actuarial data showing that people of a certain race (however you want to define "race") are more of a risk, shouldn't insurers be able to use race as a factor as well?
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  #14  
Old 04-13-2004, 06:38 PM
Tedster Tedster is offline
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Years and years ago, insurance companies wouldn't insure folks who bought their car on credit. The thinking went, anyone who was stupid enough to buy on time was a bad risk.

In our ever-spiraling down the tubes "nothing is my fault" society, insurance companies discriminating on the basis of any number of factors really rubs our less-gray matter types the wrong way and they would prefer safe drivers to subsidize everyone else. Government mandates and other issues related to freedom of association have really screwed things up, and it's unlikely for the situation to improve.
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  #15  
Old 04-13-2004, 06:43 PM
Tedster Tedster is offline
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Quote:
Originally Posted by mike1dog
Does bad credit make you more likely to have an accident?
Yes - people with bad credit tend to have more accidents. Does that surprise you?
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  #16  
Old 04-13-2004, 06:59 PM
sailor sailor is offline
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Quote:
Originally Posted by mike1dog
I don't mind them giving discounts to anyone. What I dislike is that they will raise rates on people who have bad credit.
This, of course, shows what marketing is all about. Set a rate and a surcharge for those with bad credit and people will cry discrimination, but set a higher rate and give a discount for those with good credit and nobody complains. And yet you are doing exactly the same thing.
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  #17  
Old 04-13-2004, 07:19 PM
Spectre of Pithecanthropus Spectre of Pithecanthropus is offline
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Quote:
Originally Posted by suranyi
I wasn't asked either, but in one of my insurance bills many years ago there was a flyer which listed certain occupations as being eligible for a discount. I applied and got the discount.

In other words, the customer had to actively seek out the discount.

Ed
I was asked for the first time when I bought insurance through my employer, who used to be G.M. This was about a year ago.
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  #18  
Old 04-14-2004, 01:42 PM
DrDeth DrDeth is offline
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Quote:
Originally Posted by Spectre of Pithecanthropus
I ask because I just heard a story about how that's being done in California.

...I heard a story...." ? I heard a story "about a man named Jed..." too, but?

Never heard of it, come back with a cite.
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  #19  
Old 04-14-2004, 02:12 PM
suranyi suranyi is offline
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Quote:
Originally Posted by DrDeth
...I heard a story...." ? I heard a story "about a man named Jed..." too, but?

Never heard of it, come back with a cite.
How about a personal example?

I live in California, and I get a discount on my auto insurance because of my occupation. (I'm an engineer.) I've already mentioned this in this thread.

So, obviously, it DOES happen in California.

Ed
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  #20  
Old 04-14-2004, 02:24 PM
clairobscur clairobscur is offline
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Quote:
Originally Posted by Mr2001
That brings up an interesting question: Should insurance companies be allowed to discriminate on the basis of race? They already discriminate on other factors that are beyond one's control, i.e. age and gender, and if there's actuarial data showing that people of a certain race (however you want to define "race") are more of a risk, shouldn't insurers be able to use race as a factor as well?


I see a problem with this, even ignoring the political/cultural/moral/social issues. Contrarily to age and gender (at least in 99,9% of cases for the second item), race can't be clearly defined. And what could prevent you from stating you belong to race A if race A gets a discount, anyway? Who's going to prove you actually don't?
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  #21  
Old 04-14-2004, 02:29 PM
Frank Frank is offline
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Quote:
Originally Posted by Tedster
Yes - people with bad credit tend to have more accidents. Does that surprise you?
People with bad credit cost the insurance company more in claims. Not the same thing. And I would suspect that is because they don't have the money to pay for repairs that someone with better credit would pay out of pocket rather than report it and have their rates go up.
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  #22  
Old 04-14-2004, 03:32 PM
TaxGuy TaxGuy is offline
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Google for the aptly named "Hurt Report" (actually, I think it was done by a guy named Hurt), which breaks down motorcycle accident rates and the severity of injury suffered in motorcycle accidents by all kinds of factors.

One of the findings was that a rider's level of education is inversely correlated with both the rider's likelihood of getting into a motorcycle accident and the injuries the rider suffered if an accident occurred.

So, people with more education tend to be safer motorcycle riders than those with less education. It makes sense to me that this would carry over to driving a car, too, and many of the categories of jobs you listed as getting auto insurance discounts require more education than other categories of jobs.
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  #23  
Old 04-14-2004, 06:17 PM
The Great Sun Jester The Great Sun Jester is offline
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Quote:
Originally Posted by This Year's Model
People with bad credit cost the insurance company more in claims. Not the same thing. And I would suspect that is because they don't have the money to pay for repairs that someone with better credit would pay out of pocket rather than report it and have their rates go up.
Well, a counter argument is that people with poor credit can't get into expensive cars and wreck 'em. They're trashing the cheapos, but do you know how many 1995 Saturns you have to burn through in order to equal a 2004 Denali? I don't buy it.

Insurers give discounts for good students. Not because they wanna encourage studious behavior, but because good students can generally be relied upon to PAY ATTENTION. In class, and on the road. Engineers are infamous for their attention to detail. People who get into credit trouble show, as a group, poor planning skills & lack of foresight. Possibly they are risk-takers. The Insurance agents & clergy that I mentioned above spend a lot of time with their heads on topics other than driving, while they are driving (this bit is anecdotal).
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Old 04-14-2004, 06:56 PM
Frank Frank is offline
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Quote:
Originally Posted by Inigo Montoya
Well, a counter argument is that people with poor credit can't get into expensive cars and wreck 'em. They're trashing the cheapos, but do you know how many 1995 Saturns you have to burn through in order to equal a 2004 Denali? I don't buy it.

Insurers give discounts for good students. Not because they wanna encourage studious behavior, but because good students can generally be relied upon to PAY ATTENTION. In class, and on the road. Engineers are infamous for their attention to detail. People who get into credit trouble show, as a group, poor planning skills & lack of foresight. Possibly they are risk-takers. The Insurance agents & clergy that I mentioned above spend a lot of time with their heads on topics other than driving, while they are driving (this bit is anecdotal).
I'm not going to go digging for cites, but auto insurance rates are based on claims. If a specific group, such as the group of good students, is offered a discount, it is because the claims history shows that they can still make money that way. Insurance companies don't offer discounts just because they think good students will have fewer claims, they know it. Ditto on the obverse for bad risks.

Interesting post, TaxGuy, I'll go look for it.
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Old 04-14-2004, 07:09 PM
The Great Sun Jester The Great Sun Jester is offline
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This Year's Model, I think we're basically on the same page. That insurance companies base their decisions on data is not a point I've contested. I was just speculating on why that data might exist in the first place in an effort to explain why insurance companies don't set rates using a Witch Board & Magic 8-ball as seemed to be the belief.
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Old 04-14-2004, 07:28 PM
Mr2001 Mr2001 is offline
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Quote:
Originally Posted by clairobscur
I see a problem with this, even ignoring the political/cultural/moral/social issues. Contrarily to age and gender (at least in 99,9% of cases for the second item), race can't be clearly defined.
That's why I said "however you want to define race". Whether "race" even exists as a genetic reality is debatable, but there are certainly objective definitions of race and/or ethnicity that could be used.

The point of identifying groups like "young drivers" or "women" or "engineers" for insurance isn't to reflect any underlying scientific reason that people in those groups are safer drivers - the point is only to come up with a common factor that statistically makes drivers more of a risk. There's no biological reason that someone should be more of a risk the week before his 25th birthday and less of a risk the week after, but insurers (presumably) have statistics to show that people over 25 are less of a risk, so they use age as a factor for premiums.

If they also have statistics to show that, say, people with at least one grandparent from China are better drivers on average, or people whose skin is lighter than shade X on some chart are worse drivers on average, that serves the same purpose. It doesn't matter whether there's a biological reason that Chinese or white people should be better or worse drivers. All that matters is that insurers can describe a group of people who present more or less of a risk.

Quote:
And what could prevent you from stating you belong to race A if race A gets a discount, anyway? Who's going to prove you actually don't?
The insurance company will, using whatever definition of "race" they used to identify people for their statistics. If their statistics group people by skin color, for example, then it won't matter what you claim to be; your "race" will be determined by a color chart.
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  #27  
Old 04-14-2004, 07:57 PM
The Great Sun Jester The Great Sun Jester is offline
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Quote:
Originally Posted by Mr2001
If their statistics group people by skin color, for example, then it won't matter what you claim to be; your "race" will be determined by a color chart.
So plan that trip to Hawaii strategically. See the problem? Gonna buy in the summer or winter? Some criteria can be changed artificially. I'm sure there's plenty of folks who manage to convince the DMV that they are much older than they really are, but that takes a bit more moxy than climbing into a tanning booth or pencil whipping your family tree.
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Old 04-14-2004, 08:26 PM
Mr2001 Mr2001 is offline
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Quote:
Originally Posted by Inigo Montoya
So plan that trip to Hawaii strategically. See the problem? Gonna buy in the summer or winter? Some criteria can be changed artificially.
Some of the people included in the original statistics surely would've gotten some sun recently, so that would already be accounted for (to some extent). Also, tanning can only change your skin color so much; the new Michael Jackson is not going to look like the old Michael Jackson again, no matter how much time he spends outside. Choosing the exact shades based on the limits of healthy tanning, and possibly correlating skin color with other physical traits, would let you account for tanning even further.

That said, I doubt insurers would actually use criteria that are as variable as skin color... but there are other objective criteria that aren't so variable.

Again, the point isn't to identify genetic "races", but only to identify a group of people who are associated by physical traits and are more or less risky than average. If those groups don't exist, insurers would have no reason to use those traits to decide premiums; if they do exist, then why should insurers be prevented from using them?

Quote:
I'm sure there's plenty of folks who manage to convince the DMV that they are much older than they really are, but that takes a bit more moxy than climbing into a tanning booth or pencil whipping your family tree.
If you can figure out a way to change who your ancestors were, let me know - I'd like to be a wealthy prince.
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  #29  
Old 04-16-2004, 11:27 AM
notquitekarpov notquitekarpov is offline
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I have working in risk managment and insurance for the last, oh, 13 years or so but I am having real trouble imagining what possible objection you can have to rates being differentiated by all sorts of criteria - including age, occupation, sex, marital status, home city, income level, education level etc.

Unless it is transcribed by law - like race, and as will genetic testing information I predict - then surely it is completely fair to weight the premium of the assured to the risk he or she presents?

It would be unfair to do otherwise - but in the case of race and genetics I can see that the level or unfairness creating by legal preventing rating those factors is outweighed by the potential for abuse.

All these rating factors will be driven by statistical analysis which identify statistical associations not cause and effect. Now it is the job of good product developers to try to get behind associations and discover the true risks factors. In a class like auto insurance - with a mass of statistics - this is possible, with other classes (say, satellite launch insurance) it is more difficult.

All rating engines for mass personal lines classes like auto and homeowners will be driven by backward looking analysis of actual claims incurred versus risk profile not theoretical forwarding looking guesswork as to likely risk.

Why should anyone get their knickers in a twist of this appoach?

I am guessing it is something to do with your weird insurance commissioner system, with political influence on rates permitted for personal lines insurance etc. proposition XXX giving you discounts etc etc. So much for a free market, eh?
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  #30  
Old 04-16-2004, 05:10 PM
The Great Sun Jester The Great Sun Jester is offline
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Quote:
Originally Posted by notquitekarpov
So much for a free market, eh?
We like to protect folks from capitalist predators in some areas.

On better days I wouldn't say this, but it seems like everyone feels they are entitled to be treated as an individual and not as part of a statistical group to which they belong. "Sure 16-17 year old drivers cause more and worse accidents than any other group, but I'm different." Unless of course that group gets a perk. Then we all wanna be a number!
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