Vehicle Insurance Law Proposal

Great Debates
1

Prompted by thispost

I need a heavy pickup for pulling boats and carrying my camper, but otherwise I’d be comfortable with a small size economy vehicle. The problem is that to insure the second vehicle which I would drive most often instead of the first vehicle is going to cost me a couple of thousand dollars extra each year.

The quoted post above suggests to me that millions of others are amenable to a second fuel economy vehicle except for the extra cost.

Well though the capital outlay may be higher for two vehicles, some of it is recoverable due to less depreciation on the odometer of each vehicle and maintenence is simply a function of personal mileage which is independant off the number of vehicles a person owns.

In short, the biggest obstacle by far to my owning a fuel economy vehicle and using it most of the time is the couple of thousands of dollars I have to pay for extra insurance.

I can’t think of any reason why the insurance company is put out if I’m on the road with a second vehicle instead of the first one.

We need to get people moving on fuel efficiency. Options are important in that regard. Why not force insurance companys to insure the man and his most expensive vehicle and throw in the insurance on his cheaper vehicle because his most expensive vehicle is safely off the road.

2

Easy to spend other people’s money, isn’t it? Insurance companies set rates based on guesstimated risk. The cheaper vehicle, which shares the road with people driving their boat-pulling monster trucks, is a different kind of risk. Car insurance is more than property coverage. There’s liability, personal injury, med-pay in some states, “no fault” in some places, complicated by different levels of usage, which means different exposure to different risks.

3

Nothing I’ve proposed should have prompterd this comment.

You need to explain to me why the insurance company needs to double the premium to me because I have a choice of one of two vehicles to drive at any given time.

4

Forcing the insurance companies to assume risks they have not contracted to assume at no additional cost isn’t spending other people’s money? What is it, then?

5

Slow down!

I’m not for ripping up existing contracts .

I’m making up a proposal to add regulation for future contracts.

It seems to me that at present most insurance companies allow for extra drivers on a vehicle at no additional cost yet thereby increasing the risk of claims due to increased exposure on the roads.

My proposal (which would be limited to one driver/owner unless an option premium was agreed to) should only increase the cost to insurance companies by some nominal clerical outlays for plates and registration which I’d be happy to pay for.

6

You could enjoy Michigan no fault insurance. You pay buy if you get in an accident in an older car ,you lose it. My son was driving his Tracer on a 4 lane street. Two kids were racing ,coming the opposite way. He got hit head on. His fault zero. The kid got a ticket. My son lost a car and insurance paid nothing. You insure your own car. If it is old, there is a point when you just don’t want to spend thousands insuring a car worth only a grand or two. You get in an accident, you have no car and since the accident is " no fault", you are out a car and can not sue.

7

What you want is more coverage for less money, mandated by law. What you haven’t done is shown why an insurance company should not be allowed to charge market rates for their products. You win, they lose. That isn’t fair to the insurance company or its stockholders.

8

I heard or read somewhere that in some places there is insurance based on mileage. That would seem to be a good solution.

9

Lots of misinterpretation going on in this thread.

Let’s lay out a simple scenario. Liability insurance only - we’re not talking about collision or comprehensive. Now, let’s say I have one car, which I drive 10,000 miles per year. Now I buy a second car, and from now on, I’ll be driving each car 5,000 miles per year. Assume that the two cars are roughly comparable in terms of risk exposure (we’re not talking about adding a race car into the mix).

So, my total time on the road is exactly the same. And I’m the same person - I don’t suddenly start driving differently. So why is my liability insurance higher? My risk exposure is exactly the same, whether I have one car or two.

This is precisely the situation I’m in, so I fully understand the OP’s suggestion.

The problem is that auto insurance applies to the vehicle, but for the liability portion of it, it should apply to the driver. The insurance industry is doing something that makes no rational sense. It would be like charging you more for your health insurance if you choose to live in two different houses a couple of miles apart, instead of living in one house all the time.

10

With two cars in your stable, you have two opportunities to incur liability before your cars are inoperable.

It’s also possible for cars you own to do damage even while you’re not in them, e.g. if you are parked in a hilly street and it pops out of gear and rolls down hill.

Your vehicles as also covered by your liability insurance if your friend (who isn’t on the policy) borrows your car on a single occasion and T-bones somebody.

A similar situation applies for collision coverage, in that even when you’re not driving it, it’s at risk from theft, vandalism, acts of Dog, etc.

You may want to speak to someone in insurance before saying something that drastic. The free market ain’t perfect, but it’s pretty good at finding the best solution. If it were possible (business-wise) to do something along the lines of what the OP was suggesting, shouldn’t it have happened by now? I mean if every insurer out there is charging “too much” to insure two cars owned by a single owner, wouldn’t you expect a renegade entrepreneur to start a new insurance company that does exactly what the OP is asking? I mean wow, such an enterprising felow would have millions of customers beating a path to his door to buy his bargain-priced two-car insurance package! He’d be the next Bill Gates!

The obvious question: why hasn’t that happened yet???

11

This is silly. There are new ideas in the business world daily. Maybe it hasn’t happened yet because no one has thought of it. Even if the idea was rejected before, maybe the circumstances have changed enough to make it feasible today. Why do you think companies still roll out new products or even – dare I say it – new business models? If your ideas held sway, there would literally be no innovation, ever.

12

I can drive only one car at a time. If I drive 10,000 miles a year, there are 10,000 miles during which I might run into something or someone, whether I’m driving one car or a hundred. And what does inoperability have to do with anything?

Quite a stretch, since they’re garaged (and the insurance company knows that). Again, I can’t be out driving around in two cars at once.

That’s true whether I own one car or two. Of course, if I “permanently” lend one of my two cars to a friend, I’m defrauding the insurance company, and if they find out about it, they won’t pay on the claim, anyway.

I’ve specifically excluded comprehensive coverage. Collision is another matter, however. Again, only one car is being driven around at any given time, so the garaged one can’t collide with anything. Differing values of the cars, however, makes the insurance situation murkier. Let’s just stick to the liability question, to avoid confusing the issue.

The situation probably doesn’t arise often enough, and in this stark a form, to have induced anyone to take another approach to it. Most owners of multiple vehicles also have multiple drivers, so it’s usually not such a simple situation.

13

Except that this is so screamingly obvious. The reason is doesn’t work is that insurance pricing is either:

  • regulated by the state (I think only Massachusetts does this any more in a comprehensive way)
  • competitive.

In the competitive states I have lived in (Kansas, Missouri, Virginia, Maryland and Georgia) I have ALWAYS had premiums based on the number of miles I drive. Not strictly on a per-mile basis, but with some kind of discount or premium based on the number of mile the car was driven in the last year or six months.

The reason there is a big difference between the cost to insure two cars each driven 5,000 miles vs one car driven 10,000 miles is because the insurance companies have observed that mileage is NOT the only thing that matters. Just the existence of the second car is associated with additional risk. Specifically, if there is a second car, it is liable to being driven by undeclared other drivers, undeclared commercial use, more frequent hauling use and so on.

14

When I was a kid my dad did get the discount. Living out in the country we always had one more car than driver. The insurance was always less for the extra car. At one time I owned three cars but only two drivers. When I did not get a discount on the thrid car I asked why not. I was told that they quit giving discounts because too many times the extra car was loaned out and on the road, and being driven by someone not familure to it.

Now I have two cars but I car pool with my wife, and get a discount. but my sons are always borrowing my truck. My wife’s car gets about 19,000 miles a year. The truck about 9,000 miles a year.

So this is not a new business model, but one the insurance companies think of as a failure.

15

Think of Raiders of the Lost Ark at the very beginning.

Jungle Guide: “We must move quickly, there is nothing to fear here.”

Indy [holding him back]: “That’s what scares me.”

My idea (which is not at all silly) is NOT that one should not attempt to innovate. My idea is that one ought to carefully consider why this innovation hasn’t happened yet, rather than rashly advocating that it be forced to happen by government mandate.

It may indeed be that no one’s thought of it yet, or that business circumstances have recently changed to make it feasible. An entrepreneur may attempt to implement the business model I described, but if he’s a smart one, he’ll do a lot of investigating first to see why no one’s tried it yet.

16

The states share some of the blame for this situation. Many require that you have liability insurance before you can register a vehicle. What they *should *be requiring is that you have liability insurance in order to get a driver’s license. The car doesn’t do things that incur liability - the driver does.

Re: the mileage discount. Yes, I’m beginning to see some reduction because of that. But generally, that only kicks in if you’re putting less than something like 7,500 miles on the car. Change my hypothetical to 20,000 miles a year, 10k on each car. Usually, the rates are the same for 10k miles or 20k miles. This, too, makes little sense. Twice as much driving exposes you to twice as much risk, and the premiums should reflect that.

Re: undeclared use of the second car (undeclared driver, commercial use, etc.). These are all things that an insurance company investigates before paying on a claim. I shouldn’t have to pay a higher premium because there’s a chance I will try to defraud the company. In my case, it’s particularly annoying. I’m retired, and live alone, so there’s certainly no commercial use, and no one I could be lending the second car to with any regularity.

Re: the multi-car discount. I get some reduction for that, but it’s fairly minor.

By the way, talk about an insurance company doing something dopey! Some years ago, I had one car, and bought another. I kept both registered and insured for a few weeks while I sold the first car. Then I dropped that one from the policy. When I added the second car, I got a multi-car discount. But that discount persisted, even after I dropped back to one car. I asked about it, and the agent told me that once that discount was applied, it continued for the remainder of the policy term, no matter what. I asked her if that meant that at the beginning of each policy term, I should buy a $200 car, add it to the policy, trigger the multi-car discount, then immediately sell it to someone for $200 and take it off the policy. There was a long pause, and then she chuckled and said, “Well, I can’t actually tell you that you should do that!”

17

Well, to be fair, the insurance companies have mandatory auto insurance laws on their side which throws the whole “market forces” comparison out the window. If we want true market competition, then states need to give drivers the option of telling all of the insurance companies to get lost…

18

I hate government intervention, but, mandatory car insurance is one thing I think is a good idea.

A quick aside, I came to NM from MA, and Mass has it good on insurance, when your insurance isn’t current, your registration is pulled, a nice little printout goes to your local PD and if they aren’t busy, they come get your plate, unlike NM, where you pay for a month to get it registered and then never pay again, with no dire consequences until caught, which is usually less than paying for the insurance.

Back on topic. When I was younger I had 3 vehicles registered and insured and got a pretty good discount, but it sure would have been nice, since I could only drive one to only pay for one. I can understand the 2nd car is still legal and they don’t know if your lending it to cousin DWI Eddie, crash 'em up king.

Why not have 2 plates, one for registration, and one for insurance. The insurance plate can go in the rear window of the vehicle, tied into the DMV(RMV, MVD, whatever it is where you are). So… multiple vehicles, and visibly only one can be on the road at a time. Would also work pretty well for rental vehicles.

Or… in the future with electric vehicles, a half dozen folks get together and buy a crappy used pickup and a mini van to use collectively. Pay for the registration and when its needed, just slide your insurance plate in and take off. Seems simple.

19

That exists now, at least in my state. You can either buy insurance, or post a bond if you prefer. Think the amount of the bond is $10K.

20

Missed the edit window. You can deposit $15K in cash or securities instead of buying insurance, or you can use a surety bond with certain qualifications, in this state.