December 8, 2013
The rollout of ObamaCare is, once again, displaying the federal government's adeptness at managing complexity -- a capability already illustrated by the Internal Revenue Service (IRS), Amtrak (FUBAR), and the United States Postal Service (USPS). Given the extraordinary rollout of ObamaCare, it's time to start moving toward single-payer auto insurance.
Here are two reasons why.
First, auto insurance companies offer a mind-boggling array of pricing options. Their nationwide, indecipherable rate structure cries out for the keen, coordinating skills of the Washington D.C. central planners.
Second, the spread of telematics applied to vehicle tracking will offer the federal government new surveillance and revenue enhancement opportunities.
Between 1989 and 2010, the National Association of Insurance Commissioners (NAIC) reported a national average increase of 43.3% in auto insurance rates. (By the way, the new NAIC CEO -- essentially a lobbyist job -- is former Nebraska Senator Ben "Cornhusker Kickback" Nelson.)
Sure, 43.3% is less than the CPI 76% inflation rate increase over those same years, but it's still unfair because the increased costs were not equitably shared. The costs need to be redistributed and, when necessary, supplemented by federal subsidies for those living in high-premium urban areas who can't afford auto insurance.
Meanwhile, as auto insurance premiums continue to rise, so does the cost of collision repairs.
Body shops labor rates are increasing, and some shops charge customers for unnecessary repairs -- leaving those unable to pay involuntary pedestrians.
The economic scope of the problem is not insignificant.
The U.S. Department of Treasury June 2013 Annual Report on the Insurance Industry recognizes the scope of the industry in America, in which auto insurance plays an integral part.
"The insurance industry plays a vital role in the economy of the United States. Insurance premiums in the life and health (L/H) and property and casualty (P/C) insurance sectors totaled more than $1.1 trillion in 2012, or approximately 7 percent of gross domestic product. In the United States, insurers directly employ approximately 2.3 million people, or 1.7 percent of nonfarm payrolls. Separately, more than 2.3 million licensed insurance agents and brokers hold more than 6 million licenses."
IBISWorld, a business intelligence company, calculates the number of persons employed in the auto insurance business to be about 250,000, in about 2,000 companies, with total 2007-2012 revenues of about $180,000,000,000.
For many consumers, their address plays an unfair role in determining how much they pay for car insurance. A variance in zip code can amount to an 82% difference in your annual premium.
Age matters, too. If you're between 16-25 years old, single, and live in Washington D.C. you'll pay much more for auto insurance than if you're retired and living in North Dakota -- the lowest-cost auto insurance state in America. New Jersey has the highest rates.
Supposed you live in the nation's cheapest town for auto insurance, Bullhead City, Arizona. Don't move across the Colorado River to Laughlin, Nevada to take a new job; your auto insurance will nearly double there.
If calculating auto insurance rates isn't already complicated enough, factor in the variance in premiums offered by competing insurers for a hypothetical consumer based on the same address and the same profile. Carinsurance.com compared rates offered within one Los Angeles zip code by six major insurers including State Farm, Progressive, Government Employees Insurance Company (GEICO) and Allstate. There was a $2,000 delta between the highest and lowest premiums based on an identical customer profile in the same zip code.
So auto insurance is a free-for-all that's not free for anyone, more expensive for some, and unavailable to others. It cries out for social justice. And what will that look like under ObamaCar Insurance?
It will look like fairness.
Fairness means you can't be denied car insurance because of a precondition, like multiple DUI convictions or a history of car accidents. Just as a career criminal's record can't be used to leverage a conviction in a trial on a new charge, with ObamaCar you can't be denied auto insurance based on your driving preconditions. And, if you want to keep your car, you can keep your car. Period.
Fairness is equity in premiums, meaning that a twenty-something male driver doesn't have to pay an exorbitant rate based on age and gender discrimination because of the driving misbehaviors of some other young men. That is blatant profiling, presumes guilt by age-gender association, and is patently unfair.
ObamaCar social justice means that even though you live where it has never ever hailed, you still have to buy hail damage coverage. By doing so, you help make hail damage coverage cheaper for others. And, after all, we're all in this collective together.
Under ObamaCar you'll be required to buy auto insurance even if you live in Manhattan and don't own a car. You're sometimes a passenger in a car, right? And, you may own a car someday. By paying for ObamaCar Insurance now you'll help more equitably spread auto insurance costs across the nation.
Disinterested auto insurance companies will help draft the ObamaCar enabling legislation -- the Affordable Car Insurance Act (ACIA) -- because they'll think it means more customers for them. And it may -- for a time.
If you refuse to buy ObamaCar Insurance you'll be penalized -- or taxed -- whatever Chief Justice John Roberts want to call it this time, at an initial rate of 2.5% of your annual income.
To paraphrase M.I.T. Economics Professor and Obamacare "architect" Jonathan Gruber:
ObamaCar Insurance will offer Americans a pathway to auto insurance equity. Today we have a highly discriminatory auto insurance system where the genetic lottery losers with a bad driving record, or those who might drive badly in the future, often can't get car insurance. And, if they can, they pay much more to be insured that those more fortunate. The only way to end that discriminatory system is to "bring everyone into the system and pay one fair price". And if you can't afford that price, the federal government will help with a subsidy. (Gruber channeling off.)
Not convinced yet of the merits of ObamaCar Insurance? Factor in the second big reason why the federal government will take control of the vehicle insurance business.
It's telematics -- "a technology that will revolutionize the entire automobile insurance industry," according to a White Paper released by the SAS Institute, a company that specializes in advanced analytics and is one of the largest private software companies in the world.
"Telematics refers to the use of wireless devices to transmit data in real time back to an organization. The data recorded in telematics devices can be used to develop more accurate pricing, improve the granularity of risk management techniques and reduce losses by enabling better claims assessments." (snip)
"Consider the amount of data automotive telematics devices are expected to generate. Every second, a telematics device will produce a data record. This data record will include information such as date, time, speed, longitude, latitude, acceleration or deceleration (G-force), cumulative mileage and fuel consumption.
Telematics will have a major impact on the vehicle insurance industry, and relatively soon.
On October 22, 2013, propertycasualty360.com, an underwriters' website, posted an article entitled Telematics at Tipping Point as Execs Weigh Ultimate Impact, Obstacles. In part, it read:
"Insurance telematics likely will go mainstream within five years, will have a medium-to-large impact on the auto-insurance market, and even though privacy concerns remain an obstacle, consumers are willing to have telematics devices installed in their cars if they can save enough on insurance, according to a recent survey."
A study by telematicsupdate.com states that, "The potential US Usage Based Insurance (UBI) market is estimated at approximately 1 million vehicles in 2012, climbing to 5 million by the end of 2013 and 60 million by the close of 2019." In 2011, there were 254 million registered vehicles in the United States.
Voluntary telematics equipment installation in personal vehicles will be incentivized by auto insurance discounts. That initial voluntary commitment will evolve to required compliance -- like seatbelt use, Click-it or Ticket. If you refuse to install a device in your old car -- it will be standard in new cars, like catalectic converters -- the question will be "So what are you trying to hide?" Compliant, patriotic citizens will say, "Go ahead and track me. I've nothing to hide."
Telematics will offer the federal government new opportunities for taxing based on miles traveled, miles-per-gallon with penalties for excessive fuel use, mail-delivered speeding tickets for excess speeds, recorded over-night locations, tuned-in radio stations noted (flagging frequent listeners to talk radio), individualized event-attendance monitoring (NASCAR race fans chronicled), and enhanced in-car Bluetooth telephone monitoring.
In short, telematics represents a cornucopia of new surveillance and revenue-enhancement capabilities for the expanding D.C. Data-voyeur's Candy Land.
With telematics in place, Washington D.C. will be corporate headquarters for ObamaCar Insurance.
And, the federal agency best equipped to filter telematics data-streaming 24/7/365 will be, of course, No Such Agency.
As Captain "Sully" Sullenberger once said, "Brace for impact," for the ObamaCar groundwork has been laid by the U.S. Supreme Court's decision on the Constitutionality of ObamaCare.
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