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Friday, December 25, 2015

Why Auto insurance is forced legal theft

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Auto insurance is a legal requirement in many countries and driving without it can get in a lot of make a profit.
trouble with the law. Not only can you be fined, but you can also end up serving jail time. And this is all well and good except for the fact that insurance companies charge ridiculous rates and

In 2012, Canadian insurance companies made a whopping $4.4 billion in profit, 4.4 billion! Despite this, auto insurance rates have not decreased. And to further add insult, insurance companies are notorious for not paying out citing whatever excuse they can throw at you. Most of the time you cannot do anything about it without getting a lawyer.

If you're between the ages of 16 and 25, you're placed into a group the insurance companies love because they can charge you more than $300 a month on the basis that people in your age range are more prone to risky driving. Okay, this is kinda of justifiable, but what if we're not risky drivers? What if we never get into at fault accidents? It doesn't matter, because you're just giving away your money for no reason whatsoever. Think about it, every year you pay a ridiculous amount of money for essentially nothing. You don't get any type of refund. When you get into an accident and it's not your fault, your insurance company doesn't pay diddly-squat, but instead goes after the at-fault's insurance company for a payout.

Paying over $200 for insurance is not uncommon in Ontario, Canada and this is if you have a clean driving record and are not within the 16-25 age range. It also doesn't include comprehensive coverage. That's $2400 a year, or $4800 in two years. I can buy a nice car for $4800 if I search long enough on kijiji.

All this money you pay goes directly into the pockets of the greedy chairholders. Insurance companies should not be a for-profit business, period. If you're paying the value of your car on auto insurance within 4 years, something is wrong, and that something is with the rates these insurance companies makeup.

You should be eligible for a partial refund if you did not get into an at-fault accident every year. I think this is fair. If you get into at-fault accident your insurance company is going to pay for the repair or replacement of the victim's car.

Here's what I think a good auto insurance model would be:
  • Pay every month $50-$100 until you have paid for your car's value. The insurance company should keep track of this and put it into a reserve.
  • Continue paying $50-$100 a month and if you don't get into at-fault accident you get 90% of your money back, with the remaining 10% going to pay administration fees, like worker's salaries and whatnot
  • If you get into an accident and it's your fault the insurance company will use your reserve to pay for some of the victim's car repair or replacement. They'll increase your rates by $10 a month and your reserve to 110% of your car's value
This model is fair for both the driver and the insurance company. What do you think? Leave your thoughts in the comments below.
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