Freedomain Radio

 Forgive me if this has been covered in a previous post or podcast.

 
 I have recently obtained a job with a nationally  well known car insurance company, and I am beginning to understand just how dependent  this industry is on federal and state enforcement. Without the state requirements applied to every individual owning a registered vehicle, the overall profit of these companies  ( I think )  would drop substantially.This would relieve the pressure of having to buy the insurance for the individual, and put more pressure on the companies to sell and find new ways to attract policy holders. Now i might be wrong, but it  seems to me that this entire industry, with the help of uncle Sam, is to a degree, exempt from fair competition. For example:   

There is no law mandating that every individual in a particular state, sign a contract obligating them to buy green apples every Tuesday, for lets say, 6 to 12 months. So anyone competing in this states apple market, would have to win over there customers just like every other apple seller in this state. Having competitive prices, quality products, great customer service and effective marketing would most likely be the ingredients to a successful business. But NOT by legally forcing people to buy apples. This factor alone is responsible for what I believe to be at least 50 % of this companies profit. And everyone who drives a motor vehicle in America knows that you have to have at least liability on your vehicle.

This is what I've realized:   Just because you have the freedom to choose which insurance company you use, dose NOT mean you get to choose whether or not you buy insurance. The only choice you have is which company to use.  The Government is NO different.  That is the parallel. Im pretty sure that Stef addressed this in a podcast, but I just wanted to reiterate it, in relation to the car insurance industry.

Morality is about choice. 

Yeah, I have always wondered why insurance is mandatory.  I could understand a seller making you carry comprehensive on a new car and signing a contract to that effect...they want their pay-off quickly in case of a total loss.  But just people driving cars they own, they are mature enough, or at least should be, to decide whether their cost v. benefits analysis would tilt towards a shared liability for damages.  What if someone were rich enough to cover the costs of whatever accident they ever got into, why should they have to carry insurance?  Someone that rich would probably go ahead with insurance so that their personal wealth is protected and it is the insurance companies ass on the line but then again those types of people are not out dragging from light to light in a '79 Trans Am or driving drunk as a habit. 

Johnny:

Now i might be wrong, but it  seems to me that this entire industry, with the help of uncle Sam, is to a degree, exempt from fair competition.

Right, one reason the market does things better is because those in control of production try to anticipate what you want. That includes creating a product you wouldn't otherwise want but is made good enough for you to fork over the cash. I can see you point on this, but I would actually desire something similar in a stateless culture too. Technically you don't have to buy insurance, you just need it if you want to drive on public roads. Since the government is the "owner" of the roads, they are technically entitled to make conditions for its use. The reason they do it is so people can feel safe using their roads, knowing that people know if the worst happens to them there will be some coverage.

Cooper MacLean:

What if someone were rich enough to cover the costs of whatever accident they ever got into, why should they have to carry insurance? 

Because if they made the law more efficient by tailoring it for who they're worried about, it would resemble what it is: a tax on the poor. I don't think politicians are ready for that level of honesty. Overall I figure we pay enough in taxes and the state can't float the bill on some sort of liability insurance? You can't default on the government so they could just have the liable driver pay them back.

It seems to me that in a stateless society, it may still be required to have car insurance to drive on private roads.  If you think about it from the road owner's perspective, how would your business be affected if your road became known as a road where if you get in an accident that is not your fault, you are out of luck for compensation.  I think I would feel safer knowing that people I drive on the roads with have liability insurance. 

In our current system, I'd imagine that, as with most other things, there are government manipulations that are keeping auto insurance company's prices artificially high and hurting innovation.

Are there any podcasts that talk specifically about the car insurance industry?

I know exactly what you're talking about. I found a way to deductively prove that personal responsibility is cheaper than insurance, and that insurance itself causes accidents. The majority of people would choose not to have auto insurance if they could choose. The insurance industries went in bed with the state and artificially inflated the demand for auto insurance by mandating that everyone buy some. Take a look at some of this from my book:

    Premise: Insurance fixes damages by spending from the customer fund pool.
    Premise: Insurance cannot create labor or money.
        If insurance fixes damages by spending from the customer fund pool and insurance cannot create labor or money, then an insurance company has only what was contributed by its customers to fix their damages.
        Therefore, an insurance company has only what was contributed by its customers to fix their damages.

    Premise: An insurance company has only what was contributed by its customers to fix their damages.
    Premise: All customers of an insurance company pay for all repairs plus all services of all customers of that insurance company.
    Premise: To provide services an insurance company charges overhead expenses (Z) for which it must subtract labor or money.
        Therefore, the additional cost of choosing insurance over personal responsibility increases proportionately to Z.

    Y. A specific amount of labor or money.
    X. Damages.
    Premise: We live in an objective universe.
    Premise: Y and X are a part of the universe we live in.
        If we live in an objective universe and Y and X are a part of the universe we live in, then a specific amount of labor or money (Y) is always needed to repair damages (X).
        If a specific amount of labor or money (Y) is always needed to repair damages (X), then personally responsible people will have to pay Y to fix X.
        If a specific amount of labor or money (Y) is always needed to repair damages (X), then insurance companies covering irresponsible people will have to pay Y to fix X.
        Therefore, if personally responsible people will have to pay Y to fix X and insurance companies covering irresponsible people will have to pay Y to fix X, then Y and X remain the same whether or not X is attached to a personally responsible person or to an insured person. (Or in simpler terms, all damages cost the same labor or money to fix with or without insurance.)

    Premise: Insurance costs money to participate in as a customer whether damages are caused by that customer or not.
    Premise: If an insurance customer causes damages they collect money.
    Premise: If an insurance customer does not cause damages they collect no money.
    Premise: Collecting money is a form of reward, therefore collecting money implies reward.
    Premise: Losing money is a form of punishment, therefore losing money implies punishment.
        If insurance costs money to participate in as a customer whether damages are caused by that customer or not and if that insurance customer does not cause damages they collect no money, then insurance results in that customer collecting no money and losing money when they cause no damages.
        If an insurance customer collects money by causing damages, then insurance results in that customer collecting money when they cause damages.
        If insurance results in a customer losing money when they cause no damages and losing money implies punishment, then insurance companies punish their customers for causing no damages.
        If insurance results in a customer collecting money when they cause damages and collecting money implies reward, then insurance companies reward their customers for causing damages.
        Therefore, insurance companies punish their customers for causing no damages and insurance companies reward their customers for causing damages. (or in simpler terms, insurance punishes responsibility and rewards irresponsibility.)

    Premise: Insurance results in a customer collecting no money when they cause no damages.
    Premise: Insurance results in a customer collecting money when they cause damages.
        If insurance results in a customer collecting no money when they cause no damages and insurance results in a customer collecting money when they cause damages, then the only way for an insurance customer to collect money is to cause damages.
        Therefore, the only way for an insurance customer to collect money is to cause damages.

    Premise: Insurance results in a customer collecting no money when they cause no damages.
    Premise: Insurance results in a customer collecting money when they cause damages.
        If insurance results in a customer collecting no money when they cause no damages and insurance results in a customer collecting money when they cause damages, then the only way for an insurance customer to collect no money is to not cause damages.
        Therefore, the only way for an insurance customer to collect no money is to not cause damages.

    Premise: Jimmy is an insurance customer.
    Premise: Jimmy wants to collect money.
    Premise: The only way for an insurance customer to collect money is to cause damages.
        If the only way for an insurance customer to collect money is to cause damages and Jimmy is an insurance customer, then the only way for Jimmy to collect money is to cause damages.
        If the only way for Jimmy to collect money is to cause damages and Jimmy wants to collect money, then Jimmy wants to cause damages.
        Therefore, Jimmy wants to cause damages.

    Premise: Bobby is an insurance customer.
    Premise: Bobby wants to cause no damages.
    Premise: The only way for an insurance customer to collect money is to cause damages.
    Premise: The only way for an insurance customer to collect no money is to not cause damages.
    Premise: Insurance results in a customer losing money when they cause no damages.
        If the only way for an insurance customer to collect no money is to not cause damages and the only way for an insurance customer to collect money is to cause damages, then not causing damages as an insurance customer implies collecting no money.
        If not causing damages as an insurance customer implies collecting no money and insurance results in a customer losing money when they cause no damages, then not causing damages as an insurance customer implies collecting no money and losing money.
        If not causing damages as an insurance customer implies collecting no money and losing money and Bobby is an insurance customer, then if Bobby causes no damages he will collect no money and lose money.
        If Bobby will lose money upon causing no damages and if Bobby wants to cause no damages, then Bobby wants to lose money.
        Therefore, Bobby wants to lose money.

    Premise: Companies with good deals need no clubs to force customers.
    Premise: Automobile insurance companies need clubs to force customers.
        If companies with good deals need no clubs to force customers and automobile insurance companies need clubs to force customers, then automobile insurance companies do not have good deals.
        Therefore, automobile insurance companies do not have good deals.

    Premise: Insurance punishes responsibility and rewards irresponsibility.
    Premise: Automobile insurance is not a good deal, therefore automobile insurance is a bad deal.
    Premise: The additional cost of choosing insurance over personal responsibility increases proportionately to the expense of the insurance company overhead.
    Premise: Chumps like rewards for being irresponsible.
    Premise: Chumps like bad deals.
    Premise: Chumps like spending their money on unnecessary overhead.
        Therefore, chumps like automobile insurance.

Also, please keep in mind that I wrote this book over four years ago so I wasn't as sharp at checking for logical errors back then. I can see a few things I missed when re-reading, so I didn't put those parts in.

Tenko:

Therefore, insurance companies punish their customers for causing no damages and insurance companies reward their customers for causing damages. (or in simpler terms, insurance punishes responsibility and rewards irresponsibility.)

This is a good thing for auto insurance companies, too. More insurance = More accidents = more justification/demand for voluntary and mandatory insurance.

Interesting stuff.  I am quite sure that the statistics show that the existence of the present auto insurance scheme increases the amount of accidents.  I remember reading about those stats, but I've hadn't really considered the personal responsibility aspect.   It makes total sense that if people would be responsible for the damages they caused, there would be very stong incentives to be much more careful and thus reduce accidents.  It's simple economics: when the cost of something is subsidized, it increases and when the cost of something goes up, it decreases.