Auto insurance is dying. At least it seems that way for now.
For insurance companies, it’s not profitable. For consumers, rates are always increasing. There doesn’t seem to be one of those “win win” situations on the horizon either.
Let’s talk transparently for a moment about facts we all know (but probably don’t want to hear).
Insurance is based on the law of large numbers. Okay, so what is that? The law of large numbers is all about probability, frequency of events, risks, and outcomes.
In short, you take a large amount of people and spread the risk out.
But now, there are new factors and risks in the mix for auto insurance companies.
What are these “new” factors? I’m glad you asked. Have you shopped for a new car lately? Probably. How much was the sticker? Did it have a back-up camera? What about a rain-sensing windshield? Navi anyone? My kids love their widescreen TV with DVD player in our van. I digress. But, you get my point.
Automobiles are priced more than ever. And with all the bells and whistles, there’s no wonder why. With that said, when we wreck our fancy, over-priced cars, the insurance companies have to pay for it.
“But I’ve never had a wreck. Why do I get penalized for everyone else?” Let’s go back to the law of large numbers. It is a fact that more people are having accidents than ever before. It is also a fact that auto prices are more than ever before. I’m happy to cite articles, reports, and facts….and don’t get me started on distracted driving.
If an insurance company is paying more claims on higher priced vehicles, then prices must rise to spread out that risk.
If prices don’t rise, the likelihood of that company lasting long-term is slim.
“I’m not satisfied with that answer. Why can’t I pay lower while the people that have wrecks pay more”. Well, you are. Insurance rates are determined by a variety of things. If you have an accident that an insurance company pays for, your rates will likely increase. Same with a ticket.
Now that we’ve established that people are having more wrecks, auto prices are higher than ever, and that insurance companies have to spread the risk over all people, let’s talk about the new fads of insurance.
I’ll admit, some insurance companies are on point with their commercials. I’m smiling thinking some of them. What I don’t like is “fad” insurance.
Even though I’m a licensed insurance agent and my eye glass prescription seems to increase every year, I’m not too blind to see the big push to online insurance. It’s already happening, and I’m not too happy about it.
But the reason I’m unhappy isn’t the same you’re thinking.
It’s not about money. There, I said it.
I’m unhappy because anyone can do it. And again, it’s not about money. It’s about education. I’ll get to that in a moment.
Some auto insurance companies are making what seems to be a game out of auto insurance and allowing you to “name your price”. I know that we all everything possible for as little as possible, but, in my opinion, this is bad.
It’s bad for me. It’s bad for you as a consumer. It’s bad for you a driver. And, it’s bad for your family.
Let me ask you this. When you do to the doctor, do you say “Hey doc, just give me some of that cheap stuff!” No. You wait until you’re evaluated then you expect to get the remedy you need.
Insurance is your remedy.
Yeah, it’s sometimes expensive. But unlike some medicines, it works every time.
This new fad insurance game puts something serious and important into the hands of everyone, whether they know what they are doing or not. And, you need to know what you’re doing or things could go south quickly.
Okay, so I’ve said that a couple times. Why?
Giving everyone the ability to “write their own” insurance or “name their price” is like walking into a drug store and prescribing yourself medicine. You think that you may be picking the right option but won’t know until you see the affect.
That’s scary.
It’s scary as consumer because if you select the wrong option or wrong coverage, you greatly increase your own risk. You risk getting sued, risk losing future wages, etc.
It’s scary as a driver because you have to make sure your coverage is good enough at everything. Basically, you have to treat everyone else like they don’t have insurance.
It’s scary for your family because you may end up paying unnecessary medical bills if someone injures you or a family member in an accident that was their fault. If they don’t have enough liability coverage, you’re waiting on a court battle when you should be with your family.
Don’t get me wrong, I’m not saying that everyone will do this wrong. But, giving everyone the opportunity to choose their own insurance and trusting that they will do so correctly is a long shot.
Recent Comments