• Tue. Nov 29th, 2022

Maine Voices: What if we reorganized car insurance?

ByElla E. Kidwell

Nov 5, 2022

According to the National Highway Traffic Safety Commission, about 42,915 people died in traffic crashes last year, “a 10.5% increase from 38,824 deaths in 2020. The projection is the highest number of deaths since 2005 and the largest annual percentage increase in the history of the Fatality Analysis Reporting System.

These 42,915 people represent about 74% of the 58,220 Americans who died in the Vietnam War.

There are many causes of car accidents, including drink-driving, drowsiness, speeding, and driving while distracted (eg texting while driving). However, one factor that is rarely mentioned is the fact that insurance will often cover your costs, even if you are at fault. Your premiums will probably increase, but that’s in the future.

Overall, therefore, car insurance involves a transfer of money from those who do not have accidents to those who do. Seen in this way, assertiveness can be considered a case of positive reinforcement, as described in B. F. Skinner’s 1953 book “Science and Human Behavior”.

Without insurance, a responsible person involved in an accident would suffer immediate and significant losses. With insurance, there is little immediate financial loss, although a premium increase may very well occur. In economics, these perverse incentives are called moral hazard.

The same analysis applies to other forms of insurance. For example, a recent Maine Voices column (“Maine Voices: All Mainers Need Paid Family and Medical Leave – Not Just Some of Us,” October 28) argued for family and medical paid. As author Katrina Ray-Saulis wrote, “No matter who we are or what we do for a living, we should be able to take the time to care for our loved ones in times of crisis, without risking our jobs. or our accommodation, or make other terrible compromises.

In other words, if a person has a sick family member, others should cover the costs associated with being away from work. (Ray-Saulis doesn’t say others will cover the costs. She says the ballot initiative she’s working to get before the electorate “would create a fund to pay workers for the time they need – without employers having to bear the cost.”

Is there a way around the counter-productive effects of insurance? Consider the following. A person who needs car insurance pays premiums on an annual basis, as is the case today. However, this money goes into a fund that belongs to the person in question. If he is responsible for an accident, money is taken from this fund to cover the costs. If more money is needed, money is borrowed from other people’s funds.

Upon retirement, the money remaining in his fund (which earned compound interest due to the loans mentioned above) is returned to the owner, to be used for living expenses – or for any other legal purpose. Those who drove carefully thus have more comfortable retirements than those who caused accidents. Since each person bears the cost of their own at-fault crashes, we should expect fewer crashes involving drink-driving, drowsiness, speeding or distracted driving.

A reorganization of the insurance structure has the potential to reduce road accidents and improve health, to name just two areas. The broader message is that people take greater responsibility for the problems they cause, rather than shifting that responsibility onto the shoulders of others.


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