A crisis on the roads

The law of unintended consequences has been working its way into the public's consciousness as the results of the recent elections see the new lawmakers taking up their positions in state legislatures around the country. With the swing against the Democrats, many of the voices that tirelessly criticized the insurance industry for driving up the premium rates are gone. It's all chicken and egg in a vicious cycle. The higher the premium rates on the basic liability insurance, the more people cannot afford to pay. These people depend on having transport and so they drive uninsured. As more uninsured drivers come on to the roads, the risk of accidents involving the uninsured rises. That forces the remaining policy holders to spend more on collision and uninsured/underinsured driver coverage. In other words, higher prices to one group forces higher prices to the other. Since the insurers sit in the middle, they set the prices to give them a profit no matter how many or how few people end up paying (within limits, of course).

Take Michigan as an example. As the home of Detroit and the heartland of the motor manufacturing industry, it should be protecting drivers. Yet unaffordable premiums and the general rises in the cost of living, has been forcing people to leave the state in search of work. Those who remain are lying to get coverage at lower rates. This effectively means they are uninsured since the insurance company will cancel the policy as soon as the deceptions are discovered. It's estimated about 20% of drivers in Michigan have no insurance.

Michigan and other states face the same problems as California where bad practices like relying on ZIP codes and credit scores have been limited. Needless to say, the old and now the newly energized GOP representatives are pro-insurer and against any increase in regulations. This produces gridlock. If a state makes it mandatory for its citizens to buy insurance, it should control the cost. But getting politicians to agree on something so simple is next to impossible.

What we need are tax credits for the poorly paid to give them more money with which to buy essentials. We need low-cost plans to spread the cost of the insurance, and even more importantly, we need controls on the cost of medical treatment. One of the main reasons for the premium rate increases has been the hospitals and clinics. They now demand what to many seem excessive amounts for what should be routine treatments. States should control medical costs when the injuries result from traffic accidents. That will push down premium rates. If that makes cheap auto insurance available to more people, the police can be more active in pursuing the uninsured. The more the mandate on liability coverage is enforced, the more people pay something into the system which allows the overall premium rates to fall. It becomes a virtuous rather than a vicious circle. It really can make cheap car insurance available to all if a state has the political will to make it real. Yet with the Democrats losing office around the country, there's little chance of any real change until the next elections come around.