Even given all that, in the cold, harsh end, your son is nothing more than a statistic to be put into a certain bucket by the insurers. Each of those buckets is assigned a certain level of risk, and rates are based upon that. Are there 16 year olds who drive better than 30 year olds. No doubt. But an insurance company cannot objectively evaluate every driver. They can only look at huge amounts of statistics and make decisions based upon that. It’s why my new car in Queens, NY costs more to insure than your son’s car, despite a perfectly clean driving record. I could say I’m being discriminated against for living in NY; or I could say that I’m more likely to get into an accident in NY, and my car’s more likely to be stolen in NY. Would you like your insurance equalized to cover my increased risks? Mind you, neither of these has happened, but my risks for these are higher.
They check credit because it costs more to follow up on late payers and non-payers; if you’ve a history of that, it’s a mark against you. Certain insurers might not consider your business worth the potential hassle. Right, wrong? Who knows? Legal? Certainly.
>> More crimes are committed in black neighborhoods so we charge black people more for home owners insurance.
Let’s not play dumb here, ok? Higher rates are charged in bad neigborhoods to everybody, black or white. What’s the race of the owner got to do with it? It’s the location of the house.
I am not going to get involved in this thread as i already said pretty much everything I had to say in the previous thread. I just want to remind everybody that only discrimination for very specific resons is prohibited and other than that we are all free to discriminate as much as we like and most companies do it all the time. Probably no two people onboard an airplane have pai the same fare. Students get discounts, old folks get discounts, there are multiple tariffs for everything, phone plans, etc. It would be impossible to regulate the price at which things are bought and sold and this is a very good thing. Old folks get discounts on many things and that means I have to pay more but that’s the market. I like freedom to buy and sell for myself and for others. It is a good thing.
In addition, bad credit is statistically associated with more auto accidents. Auto insurers want to reflect this association in their rates, even though they may not know why credit and driving are related.
I have been told that the California Insurance Department once did a study which showed that the poor had worse accident records. They did not release this study. It may be that bad credit is a proxy for being poor.
Basing rates on individual driving performance is impossible with a first-time driver. There isn’t any individual performance history to go on. Many insurance companies offer “safe driver” discounts after some history has been accumulated.
The county, or area, thing is controversial and in California at least, there are periodic attempts to do something about it. The latest try might have had some steam behind it but it seems to have disappeared from the news.
But there’s a lot more to being a safe driver than being wise. If you’ve never driven a car or driving simulator, you aren’t going to have the reflex and reaction time necessary to handle emergencies like a car swerving into your lane.
General risk aversion will help prevent some dangerous situations (“should I slow down before this curve?”), but being familiar with how a car handles is far more important, IMO, because some situations are unavoidable. If you’re planning to drive on snow or ice, there’s no substitute for experience.
On a similar note… I can’t find the link, but I saw a study recently where senior drivers were trained and tested on simulators to gauge their reaction ability, and even practice with regular video games improved their performance and made them feel more confident while driving. And who plays more video games than teenagers?
How about a reasonable compromise. Insert a clause that states if after x years of safe driving insurance company will refund all assigned risk premiums.
This way the bad drivers get the extra bill and the safe drivers aren’t unfairly charged due to circumstances beyond thier control.
Easiest hole is purely a business one (and doesn’t require me to speak about actuarial tables and risk factors and cash flow projections and reserves and so on). The insurance company already has your money. It’s not about to give it back. At this point, put yourself in the insurance companies shoes, as they ask, “How does this benefit me? My competitors aren’t doing it. If I do it, my competitors will also, and all I have done is throw away revenue.”
I figure with all the regulations already in place, one more requiring something like this would be reasonable for all to comply with. Take the competitive element away and the revenue consideration in the issue disappears. Also D Odds , at risk of highjacking my own thread, do you know anything about how the state “re - insurance” facilities work? I understand it to be subsidized insurance for my insurance company. At any rate there have been charges for it on my insurance bill. Am I paying for my insurance companys’ insurance too?
Heading back into my vast library of collected knowledge (one thin volume), I come up with not much more than a little hand-written note on reinsurers. In really broad, simpe, the government cannot afford to bail out insurers and insurers cannot afford not being able to pay premiums, so insurance companies insure their reserves, spreading the risk among several reinsurers. This way, in a September 11 case (or hurricane or tornado), MetLife alone isn’t hit and put out of business (or put in a position where it is unable to pay claims). Instead, the risk is spread out over a wider net, reducing the risk of insurer default. Others can probably explain it a lot better, and I wouldn’t be overly surprised (just mildly) if someone came in and said “D_Odds is just talking out the wrong end”.
To get back to your thread, let’s say government mandates this. Insurers must now reimburse good drivers. This is a direct bottom line hit on insurers, something no business readily accepts. Higher premiums for all then. And that’s if they can get it past the insurance lobby to begin with. Plus it ignores any actuarial and statistical data that might not support this suggestions. Lastly, insurance does take your suggestion into effect - not refunding money, but by lowering the premiums for safe drivers. It’s been far to long since I was in any risk category, but they might even do so for those in higher risk categories.
Yes I see your point. But it is also a direct hit on the consumers bottom line. I don’t readily accept this either. Mind you not in the case of drivers with a bad history, that is justifiable, but in the case of drivers with no history it would seem sensible to me to at least refund any excess premium if the inexperienced driver happens to turn out to be a very low risk afterall. If I get a ticket or accident it is fine to charge me. I have identified myself as a risk by evidence. I am happy to pay that premium until I prove myself to be safe. The young drivers don’t get that chance. And afterall, if young people are a greater risk, they will get into more accidents and get more tickets and the rates go up. If you are already at assigned risk level a speeding ticket could render you unable to afford insurance at all.
I can’t speak for your insurance, but mine does reward good driving. My rates were lowered from their initial levels after I had gone a period without accidents. Essentially, I was paying a premium, despite a clean record, as an adult. I don’t know if the same works in the under-25 category, or even it is nationwide.
First off, it is not illegal to discriminate based on age (in the context we are talking about.) It is illegal in many circumstances (usually employment related) to discriminate based on age over 40, but you can discriminate all you want in terms of teenagers, under 25 or whatever.
Then, there are permitted exceptions to the discrimination rules that are based on gender, race, etc. For example, if you are casting for the lead in a TV biography of Marilyn Monroe, you can refuse to interview black male actors. This is “racial discrimination” but it is perfectly legal. There are a few other situations where the anti-discrimination laws allow exceptions.
Now, in terms of insurance, insurance is based on risk. You would not expect a 22 year old to pay the same amount for life insurance (one year term) as you would a 93 year old. If an insurance company did charge some sort of average flat rates like that, the young people would not buy life insurance (it would be too expensive) and the premium would skyrocket, and the insurance company that winds up only insuring the over-70 crowd is not going to be profitable. Nor even viable.
The same is true with car insurance. Statistics show that the under 25 crowd has more claims than the over 25 group, that young males have more claims than young females. These rates are also altered by whether the person is married or single, and most insurance companies give a “good student discount” if the young person is full-time in school with a B-average or above.
Imagine an insurance company that charged a single rate for everyone, regardless of risk factor. YOUR rates (as an over-25 year old) would go up, and the rates for the 20-year olds would go down. Large numbers of the older population would therefore go to a competitor insurance company that offers age-related rates.
In short: the total amount of claims that an insurance company expects in a year is fairly predictable based on statistics. The insurance company needs to collect enough premium to cover those claims. They can do that by assigning higher premium to the higher risk groups (as they do now), or they can do that by assigning a flat premium (as you seem to call for). The flat premium problem is that everyone else’s costs will go up dramatically to account for the higher claims of the under-25s.
You may want to look at other insurance companies. I know when I was at that age, my folks insurance company lowered my rate because they had good records. The company felt that I would be less risk, since I was under the influence of good drivers. On top of that, my rates were dropped for taking drivers Ed and getting good grades in school (turned my report cards in regualrly).
I lived in a fairly small town…very agricultural. I had friends who had lower rates for the very reason you think you son should. they had been driving on the farm for years. Mind you, my rates were still higher than my folks, but they had been driving for almost 30 years. So that makes sense.
Yes, but everyone on earth dies at some point. Therefore, the older you are the closer you are to dying. Period. Age is directly related to how many more years you can expect to live. Age is not directly related to how well you can drive.
Yes. Everyone’s rates would go up a little bit, but it seems more fair to give people a chance to determine their own rate by driving safely. It might even lead to teenagers taking less risks behind the wheel because they want to keep their rates low.
A few more points:
It is fine to use type of car as a factor in determining rates, because the type of car is directly related to how much the parts will cost and how many safety features the car has. However, age and location are not directly related to how well some one can drive.
2)Why did the Insurance CO’s decide that 25 was the safe age? If drivers under 25 have more claims than drivers over 25 then statistically drivers under 60 must have more claims than drivers over 60. So why not charge more for everyone under 60 and make even more money than they do now? The reason is that people under 25 do not have the political or economic power to really do anything about it, but older people might.
3)Assuming that almost all drivers will pass through every risk group, insurers could calculate the total risk of a driver through out their entire driving career. The rates could be based off of that risk factor. Then every one would start at the same rate.
Sweet Willy, you are operating under the fallacy that there is an infinite amount of insurance money out there. What you have to realize is that any plan that results in lower premiums for young drivers, either directly or through reimbursement results in a net loss of revenue for insurance companies, that must be made up somehow.
To massively simplify, the equation of insurance goes like this:
Individual assessment of young drivers would push up administrative costs on the right side of the equation. To re-balance the equation, more money would need to be collected as premiums.
Equalization of young drivers’ and older drivers’ premiums across the board would still have to result in the same amount of revenue going to the insurance company, in order to keep the equation equal. Thus, older drivers’ premiums would have to go up.
As for your reimbursement “compromise”, reimbursement of safe young drivers would be an additional expense to the insurance company, on the right side of the equation. In order to re-balance the equation, premiums would have to go up.
Anyway you cut it, reducing younger drivers’ premiums, either directly or through reimbursement, is a loss of revenue (or increased administrative cost) that has to be made up somewhere. And where that would be would be in an increase in older drivers’ premiums. Why should older drivers subsidize young drivers’ insurance (any more than they already do - which they do)?
Yes, they are.
Age - a young driver is more likely to make a claim. Simple fact. There are a number of scientific bases for this, from psychological to neurological.
Location - location will affect both accident-related claims and car theft/damage related claims. A driver living in West Nowhere, Nevada is less likely to get into accidents because there are less cars on the rode with which the driver can “interact”. Also, as more accidents out there will be one-car accidents, the claim for accidents that occur will be on average smaller.
As for car theft/damage claims, a car in East New York, Brooklyn is more likely to be stolen or vandalized then the car in West Nowhere.
I do not accept without evidence that all drivers over 25 are charged the same rates. Second, your statistical assertion is likely inaccurate.
That assumes huge amounts of things that simply aren’t true. First, that assumes that a driver (a) keeps driving and buying insurance his/her entire life. Taking myself as an example, I haven’t had car insurance (or a car) in 8 years, since I moved to NYC. Under your plan, I would have represented a loss to the insurance company. Second, that assumes that a driver won’t die, either in a car-related or non-car related accident (or murder or disease). Every driver who dies before the norm would represent a loss to insurance company. Third, it assumes that the driver would stay with the same insurance company his/her whole driving life. If a person switches insurers after turning 25, the original insurance company would again suffer a loss.
And how would all of these losses be made up? By higher insurance premiums.
Anyway, people’s insurance premiums are already equal. Under the same circumstances, all people will pay the same amount of car insurance premiums over the course of their life. They all simply pay a higher proportion of it when they are younger, and a lower proportion as they age.
Sua, that has to be the most subliminable thing I have seen in some time. I have never found any cars cars on my rode (thank goodness) but even if I did, in metric countries we measure cars in terms of “fewer” rather than “less”.
As to the substance of your post, you are right on. Of course.
OK. This has been fun and educational. No matter the reason, I will have to pay the premium. Which, BTW, is going to be $1470.00 per year compared to my $268.00 per year. So be it. Hint for next thread; My son is 15 and the federal and state governmant take taxes from his pay check. Representation anyone?
Something like this is used for workers compensation insurance. It’s called “retrospective rating.” The insured business pays a premium; after the policy expires, the insured may get a refund or pay additional premium depending on how costly the clainms have been for that policy. This approach works best for a large company which normally has several claims per year.
One weakness in Sweet Willy’s proposal is that there are lots and lots of competing insurance companies. Which one should pay the refund?
I second the suggestion of looking around. Rates and rating plans vary. A cheaper premium may be available.
[hijack]Unless your son is making more than (insert current no-tax minimum here), it will all be reimbursed (Federally speaking). Most children that age end up paying no taxes; those that earn more than the minimum are being penalized by the government because of previous tax cheaters using children to hide their income.[/hijack]