How auto insurers subsidize the killing of cars

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How auto insurers subsidize the killing of cars

It’s cheaper to insure a monster like this than a Corolla.
Here’s a surprising fact that more Americans need to know: the auto insurance industry subsidizes the carnage on the streets.

How is that?

Insurance companies subsidize vehicle violence by charging much less for insurance on SUVs, vans, and minivans, the massive killing machines that have killed pedestrians and cyclists in the last decade, compared to smaller vehicles that aren’t as deadly as vulnerable road users Compact and sedans.

And that’s not the only way: “aggressive drivers” – those charged with violations such as giving way and stopping, driving forward, road racing, crash and run, and reckless driving – pay only 20 percent more on average. than their safe counterparts ($ 1,564 annually versus $ 1,208).

These are two key points from “Insuring the American Driver: Trends In Costs And Coverage,” a new report from Insurify that claims itself to be “America’s Top Rated Virtual Insurance Agent” and “A Valuable Source of Trends on Industry Data, Statistics, Knowledge and consumer education.

According to the report, the average annual cost of insuring a US-made SUV is $ 1,369, a pickup truck is $ 1,297, and a minivan is $ 1,097. Much smaller sedans, coupes, or hatchbacks, meanwhile, cost $ 1,558, $ 1,640, and $ 1,445, respectively, to be insured annually. This means that the three largest vehicle types combined are around 19 percent cheaper to insure than the three smallest.

This is bad from a road safety standpoint, as larger cars have caused increasing deaths on the roads and anything that makes it cheaper to operate increases the death toll. SUVs and trucks have dominated the US market so much over the past decade that industry experts predict they will account for 78% of sales by 2025, up from 72% today.

Annual insurance rates for different types of vehicles according to Insurify.
Annual insurance rates for different types of vehicles according to Insurify.
At the same time, pedestrian deaths in this country have risen dramatically, skyrocketing since 2009 after falling over the past 20 years. Those deaths were estimated at 6,590 in 2019, the highest number since 1988 after falling to the 2009 low of 4,109. The governor’s Highway Safety Association attributes the trend in large part to an increase in the popularity of SUVs and trucks. Driver distraction (think bigger and bigger cell phones and cockpit screens) is another factor.

A bad trend line for a public health crisis.
A bad trend line for a public health crisis.
American road safety advocates have sought to raise awareness of the overwhelming dangers of vehicles only to be shunned by indifferent regulators and manufacturers who make money through violence. Studies have shown that in the event of an accident, SUVs are 50 percent more likely to kill endangered road users, partly due to their high front ends. American SUVs are so dangerous to people outside of them that the European Road Safety Council this year called for a ban on large vehicles in cities.

 

From an insurer’s point of view, car insurance is not about promoting road safety. It is about compensating for the value of the car as property.

“It’s a common misconception that smaller, cheaper cars are cheaper to insure,” said Kacie Saxer-Taulbee, data scientist at Insurify. Indeed, that cheaper price may be part of its decline. Sedans and other small cars are more likely to belong to younger urban drivers (and are therefore riskier) than more expensive SUVs, trucks, and minivans, which are more likely to belong to older drivers in suburban and rural areas. First, small, affordable cars are not only more likely to have accidents, they are also made from cheaper parts that are more likely to cause costly damage in the event of an accident. ”

In other words, in a typical car accident, your Honda Civic is likely to require more bodywork than your Ford Explorer.

The low rates for aggressive drivers also result from the industry’s vision of ownership and profit, Saxer-Taulbee added.

When assessing a driver’s risk of making a claim, insurers rely on a special algorithm based on the number of times that other drivers with a similar history have made a claim in the past.

“It shouldn’t be punitive in itself; Rather, it is an insurer’s best estimate of how much it can cost a driver, “he said.” Different insurance companies look at a DUI belief differently in these pricing algorithms. Progressive, for example, reports that it only increased awards an average of 6 percent for a driver charged with drunk driving. ”

Six percent?

“Surprisingly, insurance companies don’t consider first-time DUI drivers to be as risky as you might expect,” he said. “For all providers, however, it is to be expected that their fees will continue to rise with several registered DUIs.”

How can a driver with multiple DUIs get insurance or keep his driver’s license?

That’s a scratch for a lot of people who are in the insurance industry of people injured by drivers.

“The report tries to make the insurance insurance process rational and related to the behavior and risk of the rider being insured and insured, but that’s not the whole story,” said Steve Vaccaro, a personal injury attorney representing many cyclists injured in accidents . “Even a report from an industry source shows that the premium increase due to a proven violation of the law or reckless driving is equal to or less than factors such as state or location.”

The damage caused by Louche insurance practices in terms of vehicle size and driver recklessness is compounded by the fact that all-car insurance, which is regulated by the states, does very little to offset the damage caused. When crashing, according to Gergory. Shill, an expert at the University of Iowa School of Law on how American law emphasizes and encourages driving.

 

“Government insurance minimums ignore the inherent vulnerability of people [outside the vehicle] to collision with [vehicles] traveling at high speeds,” Shill wrote in a key article on the law. “The median and most common minimum amount for personal injury coverage is $ 25,000, while the strictest amount is $ 50,000, and in Florida and New Hampshire the minimum is zero. In three of the five most populous states in the country, California, Florida, and Pennsylvania, with nearly 75 million residents, mandatory personal injury insurance is unusually low, ranging from zero to $ 15,000. ”

Even the states with the most stringent insurance requirements don’t do pedestrians justice, argues Shill, because “Paying $ 50,000 in hospital bills, lost wages, pain and suffering, and other damage a vehicle does to an unprotected pedestrian. The increase in Pedestrian deaths in a distraction and sport utility vehicle environment have exacerbated this inequality. ”

The industry’s role in fueling the carnage goes unnoticed with insurance regulation being in the province of the states, say Shill and other experts, making it harder to fix than if it were a federal issue. Nor does it help that nonprofits like the Road Safety Insurance Institute and Road Loss Data Institute are themselves industry groups fully endorsed by the industry’s long list of insurance companies and associations. . A typical press release? “The new BMW model does well in crash tests.”

You get the picture.

According to Insurify, its report analyzed data on 25.5 million auto insurance premiums from all 50 states.

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