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On paying for insurance at the pump

The Dallas Transportation blog comes out in favor of an old favorite.

Our newspaper ran an editorial today about fighting the problem of uninsured motorists, those miserable characters who have complicated many of our lives. The news peg was a story by DMN Austin correspondent Terry Stutz on the latest scofflaw figures.

Here’s what the editorial didn’t mention as a possible solution: Putting a surcharge on the price of gasoline as a way to guarantee liability coverage. That way, everyone would pay into a liability pool and it would be impossible for any driver to duck the cost the rest of us must bear.

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Paying at the pump would establish a liability pool so we could lower our costs of uninsured motorist coverage, presumably. Those of us who wanted, could go into the market and buy added coverage against theft and collision and higher coverage limits.

Paying an insurance surcharge at the pump could also lead to a fairer way of charging people for coverage — those who drive more would pay more, and Grandma would pay less if her driving consists mostly of short hops to the grocery store and church. The LA Times writes that kind of coverage is available in a few dozen states now. I didn’t know that.

Scott Henson at Grits for Breakfast has been writing about the pay-at-the-pump approach for awhile. I agree with him that it would be a long shot to get through the Legislature. The current price structure clearly works for insurance companies now, and from their point of view, why change it?

I’ve not written about this as often as Grits, but I’ve been in favor of this idea for some time. In contemplating it now, I can think of one objection, which is that there isn’t necessarily a tight correlation between how much gas you buy and how much you drive. How would you fairly charge owners of electric and hybrid cars for this? Yes, there are public car-charging stations now, and surely those could be adjusted to add in an insurance surcharge, but people can also charge their cars at home. You could add a fee to their vehicle registrations, but to say the least that would be a blunt instrument. Certainly, any connection between how much they drive and how much they are charged for insurance would be lost. And as the new fuel efficiency standards are phased in, there will be more and more serious disparities between different drivers and the amount of gas they buy. There may be some way of dealing with this, but I can’t say I’ve seen it discussed anywhere. I still support the idea, but this does need to be addressed.

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8 Comments

  1. Dan Wallach says:

    If all you had to worry about was the difference between somebody driving an old tank of a car (10mpg) and a shiny new Prius (50mpg), then you’re effectively giving a discount to people with more efficient cars and/or a surcharge to people with less efficient cars. That’s not a particularly bad thing, if you believe in incentivizing people to waste less energy.

    Once you add home “fueling” of your car (electrical, natural gas, etc.), then things get a bit more complicated. At least for electric cars, you could imagine putting more smarts into the garage-side of your charger, where it measures how much juice it’s put into your car, phones that in, and the insurance surcharge appears on your electrical bill. That’s not particularly outrageous, since we already have smart meters, and smart chargers are something that’s ultimately going to be necessary to spread charging load out over the night (versus everybody trying to draw all that juice right when they get home from work).

    If anything, the real challenge is what happens when you cross state borders. If you’ve got “pay as you go” liability insurance in Texas and you want to drive to Louisiana, do you need to buy supplemental “road trip” insurance?

  2. Ross says:

    I have no sympathy at all for those who say they can’t afford car insurance. If you can’t afford car insurance, walk. If you get caught driving without insurance, you should lose your car. Driving is a privilege, not a right.

  3. robert kane says:

    Ross…do you think it’s fair that insurance companies use people’s credit report to determine their insurance premiums, they claim it’s because they are a higher risk.

    Times are tough, I like a scene in the TV show Rookie Blue, where there are 2 cops sitting in a car and they see a driver barely go through a red light, the rookie says lets get them and the seasoned cop says that in this neighborhood the people are struggling to pay rent that a ticket would be a huge burden on them. Shortly after they get a drug dealer that goes blatantly through the light….I liked that mentality…. a little off topic but the same point is… have you ever walked in those shoes?

    I once had someone in another country ask me for a drink of water from my water bottle and I thought that was strange until my friend said, Robert, you’ve never known what hunger or thirst is… it’ll make you rob, sell drugs or worse, he said don’t judge until you’ve been there.

    Houston isn’t exactly a walking city and unless you have hours to get somewhere and then back, not a public transportation city either.

    My car insurance is double what it should be because of uninsured coverage, Texas homeowners pay some of the highest home insurance premiums in the country for the amount of coverage they get… think maybe because our politicians have their interest in mind and not ours?

  4. Ross says:

    Minimum liability is available for $40 a month or less. Give up the cell phone and the beer and the cable TV and the fast food. I know people who don’t buy car insurance because they would rather spend their money on instant gratification, toys, and unnecessary foods and beverages.

    On two cars, we pay $190 a month for 250/500/100 liability, PIP, uninsured motorist, comp, collision, towing, and rental car. Liability is $80 of that. Don’t tell me that car insurance is unaffordable.

  5. robert kane says:

    Yeah, a minimum wage earner (if they are fortunate to have a job) takes home about $1,000 a month, let’s assume they have a child and no money for day care- wife stays home to take care of the kid, kind of like mom’s use to do.

    Minus rent $500, gas to get to that job… $100 month, groceries…. I don’t know how families do it unless they’re on a Ramann Noodle diet…. say 3-400 a month? Clothing, repairs to their crappy car, a basic phone whether home or cell, not counting utilities because they live in one of those fancy all inclusive places. He;s already in the red and I know I’m leaving things out.

    When I use to manage hotels and the Corporate “bean counters” tried to skimp on what to pay housekeepers and dishwashers…. I use to pose the question to them….see if you could survive on what they make. A couple tried to do it theoretically on paper and no one ever could… Lucky for them they didn’t have to.

    Not everyone is fortunate to have gone to college, some maybe didn’t finish high school.

    Try it yourself…. read this:
    http://www.bargaineering.com/articles/try-living-on-minimum-wage.html

    Or remember the movie Trading Places?

    I’m just saying, it doesn’t seem real until it happens to you or someone you love, much like Cancer or any other catastrophe ….

  6. Ross says:

    People making minimum wage have no business owning a car. If you can’t pay for insurance, you have no business owning a car. It really is that simple.

  7. robert kane says:

    Yeah, those minimum wage earners or those that make a little more should stay where they belong, just serving and cleaning up after us, then walk or take the bus to their village.

    PLease read this book by Bill Bryson, “At Home”, he talks about how things have been in history and what really hit me was the differences between the “haves” and “have nots”, how many were servants and prostitutes while the WEALTHY had everything at their disposal. The gap in wealth was astounding and I see America reverting to that becoming more like a third world country.

    Does any of this mean I agree that someone shouldn’t have insurance,no. However I have the compassion and understanding how it might happen.

    Ross, I hope you remember my words when you are faced with something bad because we all do at points in our life, you might be the one looking for compassion or sympathy and wonder how the world can be so cruel.

  8. Ross says:

    Robert, how is it reasonable for someone who can’t afford insurance to own a car? It’s not. Nothing you can say makes that any different. Yes, it’s tough to get by on low wages. It’s even tougher when you make bad decisions that eat up some of those wages. That’s why it’s also stupid for minimum wage earners to have cell phones, buy TV’s and appliances they can’t afford, smoke, drink alcohol, and eat fast food. I’ve had low paying jobs, although it was some time ago. After a couple of mistakes, I learned I couldn’t have everything I wanted, and had to make do with what I could afford. On the occasions where I didn’t have money to pay my car insurance, I didn’t drive the car. I did a lot of walking sometimes.

    This doesn’t just apply to low wage earners. I see people a year out of college, making $50k, buying expensive cars and $250k houses. They then complain about not having any money. The key is to stay within your limits and manage your expectations. It’s not as much fun as having all the toys, but at some point, you realize it’s the only way to live.

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