Traffic Tickets Are Big Business
October 12th, 2007 Posted in Insurance Companies, James Baxter, Speed Limits, Traffic Tickets
Traffic tickets are a multi-billion industry. They have virtually nothing to do with highway safety, but they have everything to do with money.
When you begin to grasp the full magnitude of the public and private interests that depend on ripping off motorists through traffic tickets, you begin to understand why this unethical system continues to expand every year.
No one knows how many traffic tickets are actually issued. Many local units of government deliberately hide this information so they don’t have to split their traffic ticket revenue with the state. Not including parking tickets, we can estimate that somewhere between 25 and 50 million traffic tickets are issued each year. Assuming an average ticket cost of $150.00, the total up front profit from tickets ranges from 3.75 to 7.5 billion dollars.
If just half of these tickets result in insurance surcharges (typically at least $300 over a period of three years), you can add another 3.75 to 7.5 billion dollars in profit for insurance companies. This is why insurance companies “care” so much traffic “safety” programs and are willing to donate millions of dollars worth of radar and laser guns to the police. For them, it’s simple: more tickets equal more money!
Realistically, there is no connection between receiving an occasional traffic ticket and the likelihood of being in an accident. So, there is no justification for charging a person more for auto insurance because they were convicted for a random traffic violation. The purpose of insurance is to cover unusual risk. The act of exceeding an unreasonably low limit is hardly an “unusual risk.” That means speeding ticket surcharges are pure profit for the insurance industry.
In total, we’re talking about 7.5 to 15 billion dollars annually from tickets for government agencies and insurance companies. That’s more money than several states take in from all taxes! Worse still, that total doesn’t even include the money that “traffic schools,” attorneys, radar-detector manufacturers, and scanner producers make.
To keep the money coming in those that benefit from traffic ticket revenue have to do several things:
- Pass enough laws so that anybody can be stopped at anytime and be given a ticket for a traffic violation. Trivial or concocted traffic law violations are also frequently used as an excuse to stop, detain, and search persons for whom the police have no other legitimate reason to do so.
- Blow out of proportion the effects of various traffic violations. They constantly talk about “carnage” on our roads, despite the fact that we have the lowest level of traffic fatalities in history.
- Maintain a public relations campaign that claims traffic tickets are only given to bad drivers, and that these drivers should pay for the cost of enforcement. This is how you make it appear logical that the police and courts are funded through traffic ticket receipts.
- Keep the ticket prices below the pain threshold that would compel motorists to aggressively contest traffic citations in court. They know that if fines got too high, motorist would fight heir tickets, and trials eat up all the profit.
- Remove as many due process protections for traffic law offenders as is politically possible. This not only further discourages people from contesting their tickets, but it also ensures that those that do will have a much more difficult time defending themselves.
The police enforce laws that result in direct benefits to police agencies and personnel. Judges hear cases in which a “guilty” verdict would have tangible financially rewards for the court and courthouse personnel. No other class of “crime” is as profitable for state and local governments as is that of traffic tickets. Traffic courts cannot be fair and unbiased when their financial welfare depends on traffic fines. Additionally, local government encourage traffic enforcement practices that rip off travelers to support local government services and to reward government employees. Yet these hypocrisies go largely unnoticed.
A few simple changes can radically alter this unjust system:
- No court or police department should directly benefit from the collection of traffic fines.
- No police department should be permitted to rate its officers based on how many tickets they write.
- No local government should retain traffic fines. The money collected in local courts should be transferred to the state and returned via a local aid formula based on population.
Until these changes are made, you should forget the general notion that traffic tickets are fair and traffic courts are just. The entire system focuses on maximizing income. That’s why most of the people who seriously contest a traffic ticket either win or are offered an good plea bargain. They don’t want anyone “making waves“, that would cost them money. That’s yet another good reason why you should fight your traffic ticket!
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76 Responses to “Traffic Tickets Are Big Business”
By Eric on Nov 23, 2008
“A few simple changes can radically alter this unjust system:
1. No court or police department should directly benefit from the collection of traffic fines.
2. No police department should be permitted to rate its officers based on how many tickets they write.
3. No local government should retain traffic fines. The money collected in local courts should be transferred to the state and returned via a local aid formula based on population.
Until these changes are made, you should forget the general notion that traffic tickets are fair and traffic courts are just.”
BINGO, I think we have a winner. Your facts are accurate, your logic is excellent, and I believe that your suggestions could be productive.
I think that most reasonable people without vested interests would agree with you, once properly informed. The main problem is getting the information out to them, and yours is a good step in the right direction.
Please keep up the good work, and try not to let the hired detractors get to you. Not to overstate the obvious, but our democracy only works when the voters are well informed. Thank you.
By Randy on Oct 6, 2008
James young I am sure you missed this in the report:
“At a time when the cost of operating a vehicle was noticeably higher, State Farm Mutual reduced its overall auto insurance rates in 2007 for the fourth straight year.”
“Policies in force grew more than 900,000 last year”
As far as resurves, if there is a bad year in investments and or a bad year in claims like hurricanes going through I would think you would want the company that you are insured under to be able to pay any of your claims or am I wrong?
By Randy on Oct 6, 2008
James Young says
“Yeah, the chances of that are about as good as Osama bin Laden playing right wing for the Chicago Blackhawks. You don’t understand, insurance companies keep their statistics to themselves unless they want to tout something and even then the chances that we get the truth are minimal. They will not, for example, tell how many of their covered are paying surcharges, or what they have learned about the real relationships that you have suggested.”
Forget about the statistics that insurance companies. You said you had proof that people with more traffic violations do not increase costs to insurance companies. Take your proof that you have to the states. I find it hard to believe though that with so much profit from violators though that still insurnace companies cancel people with a high number of violations. Why would that be if they are not afraid that these people will cost them a lot of money?
Also James companies like SF reduce premiums when they find the prior year that costs were not as much as premiums. They do not want to have to make refunds because that costs money to mail our all those checks. Would you not think that decreased premiums would reduce sales numbers? You are very good with reading numbers but very poor at understanding what they mean.
By James Young on Oct 5, 2008
Randy writes: {James Young since you are a well educated person in finance then how do the books of SF look or are you able to do analysis of finance without any facts?}
For 2006, SF had underwriting gain of $1.691 billion on premium revenue of $31.947 billion or 5.3% of revenue, not particularly noteworthy either direction. For 2007, this dropped to $222 million on $31.664 or 0.7% on sales or pretty crummy. For 2006, they added $3.090 billion in investment income or nearly twice what they had in premium income. For 2007, investment income was $3.611 billion or 16 times premium income. The major difference was elevated claims expense.
As for that return of profit to the owners, in 2006 they returned $1.250 billion or 29.6% of after-tax income and in 2007 returned $18 million or 0.49%. However, they did carry at the end of 2007, some $63.578 billion in “reserves” of various kinds, up from 2006 by some $5.5 billion. This is what we normally denominate retained earnings or profit kept by the company for growth or other internal purposes. In harsher terms, they hosed the owners.
{If you are able to prove that speeding and other violations do not create more expense to the insurance companies it is very easy to go to the states that regulate insurance companies and get the increases in insurance premiums revoked. Take your facts to the commisioners and go for it}
Yeah, the chances of that are about as good as Osama bin Laden playing right wing for the Chicago Blackhawks. You don’t understand, insurance companies keep their statistics to themselves unless they want to tout something and even then the chances that we get the truth are minimal. They will not, for example, tell how many of their covered are paying surcharges, or what they have learned about the real relationships that you have suggested.
By Randy on Oct 5, 2008
Ok Jeff. James does not have anything to complain about if the rates are coming down. It is just hard to tell why costs are going down though. Is it more anti-lock brakes or increased seatbelt use or more enforcement for DUIs or more cars with drls or lower insurance company costs do to more technology or a push by insurance companies to get auto makers to make cars so that their expenses are lower for replacement parts or less medical costs.
By Jeff on Oct 5, 2008
All the insurance companies in Michigan have been lowering auto rates due to lower accident claims. Higher speed limits = lower accident claims.
By Randy on Oct 5, 2008
James Young since you are a well educated person in finance then how do the books of SF look or are you able to do analysis of finance without any facts?
If you are able to prove that speeding and other violations do not create more expense to the insurance companies it is very easy to go to the states that regulate insurance companies and get the increases in insurance premiums revoked. Take your facts to the commisioners and go for it.
By James Young on Oct 5, 2008
Randy writes: { You have been reading so much Cr** that you do not know what is going on. If companies like State Farm are ripping people off then I guess I would want to have insurance with them since I would then be an owner.}
Traffic enforcement for profit reared its ugly head in 1974 when jurisdictions and insurance companies got a windfall from Richard Nixon’s newly-imposed NMSL. While it had a deleterious effect on actual traffic safety, the money was so much that law enforcement and insurance ethics went the way of the dodo. Now we have private companies trying to capitalize on new technology to make a buck or two or a million. Both LE and insurance try to sell the idea that their actions are for our own good but a better explanation – one that explains more of their behavior and accurately predicts their future behavior – is money. “Ripping people off” is hardly new and there are some who are willing to overcome their personal ethics to get in on the financial gains, just as you indicated you would do.
As to the level of my knowledge, my education is in economics and that analysis serves very well in examining traffic enforcement for profit. My graduate training is in finance and accounting so I’m comfortable examining the behavior of insurance and LE agencies, especially as it relates to their institutional behavior. You don’t like what I have to offer but that hardly mitigates its veracity. You should treat the advice of whoever is helping you with a little skepticism and under the question, what does this do for the people, the guys who actually do the driving and pay the bills?
{Then I guess it does not matter if the speeding makes any difference or not they still should be having higher rates because that group is costing the insurance company more. If speeding goes along with more miles and more accidents it should also go along with higher rates.}
You don’t get it. Speeding does not correlate to higher costs to the insurance companies. Now, greater exposure over time may – and probably does – create some higher costs on a macro scale but the speeding is not the cause of the greater exposure.
If you truly want safer roadways, better drivers, less societal cost, an improvement in the peoples’ trust of LE, you would loudly support scientific laws with the goal of improving safety rather than their use to extract ever greater fines for behaving reasonably and rationally.
You and your (enforcement or insurance) industry source are little more than parasites. Every time you post here, you further expose yourself as a shill for people who place institutional power and money above the needs of us every day drivers. Shameful.
By Irina on Oct 5, 2008
And, BTW James, you are moran and loser yourself.
How does that sound?
By Irina on Oct 5, 2008
ok, James calm down
Perhaps you have nothing better to say than insulting other people involved in a healthy discussion. It is normal to have a healthy discussion and different opinions.
I, in fact, had only 1 ticket in 9 years of my driving experience and that was not even my fault.
By James on Oct 5, 2008
Hey, I’ve got an idea. Why don’t you morans just obey the law and follow the speed limit. I checked this website out after I heard someone at working talking about it. Hard to believe so much effort as gone into trying to show people how to break the law and get away with it. Why don’t you also make a website that shows pedofiles how to hide their kiddie porn. What a bunch of losers…
By Randy on Oct 4, 2008
There you go again James. You say ” (or “owners” in the case of SF),”
If the policy holders are the owners who is the one who would benefit from higher rates because of violations? You have been reading so much Cr** that you do not know what is going on. If companies like State Farm are ripping people off then I guess I would want to have insurance with them since I would then be an owner.
If I agree with your statement
” Further, it does not follow that speeders have higher accident rates. It might be that the risk of a claim over, say, 5 years is higher for those with a citation because they also drive so many more miles than ol’ granpa who is diabetic, with cataracts and some dementia but drives only once a week to the store. ”
Then I guess it does not matter if the speeding makes any difference or not they still should be having higher rates because that group is costing the insurance company more. If speeding goes along with more miles and more accidents it should also go along with higher rates.
By James Young on Oct 4, 2008
Randy writes: {James Young again you show your ignorance of the facts. State Farm does not benefit from surcharges. State Farm is not a stock company and is not a privately owned company. The company does not benefit from speeding surcharges. If you can prove otherwise then go ahead and do it here.}
It is naïve – dangerously naïve – to believe that management of a mutual insurance company modifies its behavior and its goals just because it is a mutual company. Any organizational entity will, once its survival is assured, strive for expansion. This is a true of Toyota as it is of the Attorney General’s office of Texas, the Catholic Church or State Farm Insurance. Success and power are measured by revenue, profits, number of employees, assets controlled, number of customers (or “owners” in the case of SF), or geographical reach. Would not the CEO of an organization that returned 15% to the owners be viewed with greater favor than one who returned on 8%? And would not charging more for the very same product produce that additional “profit”?
{Insurance companies match rates to driving behaviors as much as possible. Speeders, dui drivers and their other driving violations have higher accident rates and more costs to insurance companies.}
Not necessarily. Insurance companies work to maximize the spread – premium income less cash payouts – and surcharges are a way to maximize that spread because premium+surcharge less a static payout increases profit by the amount of the surcharge. The insurance industry recognizes this all too well. A couple of lady acquaintances of mine work in an insurance wholesaler in Pasadena. They call those drivers with surcharges but without elevated risk (their term, their analysis) the “cream of the crap.”
Further, it does not follow that speeders have higher accident rates. It might be that the risk of a claim over, say, 5 years is higher for those with a citation because they also drive so many more miles than ol’ granpa who is diabetic, with cataracts and some dementia but drives only once a week to the store.
{This is easily proved through statistics kept by insurnce comanies and needs no speacial interpretation or guessing like most of your other reports.}
We cannot rely on insurance company stats because they release only what they want us to see and often those are filtered or cherry-picked as to be meaningless. I know that you will find it shocking to learn that insurance companies lie. If you cannot understand the academic studies offered here, perhaps you should refrain from commenting from a basis of ignorance.
{Would you have house insurance rates along coastal waters that have hurricanes every few years to have the same rates as inland house insurance rates?}
Now you’re just being silly. You are conflating the risk of events not under the control of the insured with the risk of events that are under the control of the insured. Even beyond that, you seem to want to ignore the blatant manipulation by insurance companies, one of the most dishonest industries in all commerce. Are you truly unaware that they would force very low limits that in turn force drivers up the crash incidence curve but from which the company makes millions?
By Jeff on Oct 4, 2008
Please define “speeding”. If I drove 70 on a freeway 25 years ago was I more dangerous than driving 70 now on the very same freeway with a speed limit of 70?
Why didn’t insurance companies lower auto insurance rates in 1974 when the 55 limit was enacted?
By Randy on Oct 4, 2008
James Young again you show your ignorance of the facts. State Farm does not benefit from surcharges. State Farm is not a stock company and is not a privately owned company. The company does not benefit from speeding surcharges. If you can prove otherwise then go ahead and do it here.
Insurance companies match rates to driving behaviors as much as possible. Speeders, dui drivers and their other driving violations have higher accident rates and more costs to insurance companies. The rates should be higher for such drivers if their costs to the insurance companies are higher. The same type of increase is done for young males and teenage driveres because their costs to insurance companies are higher. This is easily proved through statistics kept by insurnce comanies and needs no speacial interpretation or guessing like most of your other reports.
Maybe you would rather have the group of drivers that cost the insurance companies less to have their rates increased so that everyone pays the same even though their costs are very low?
Would you have house insurance rates along coastal waters that have hurricanes every few years to have the same rates as inland house insurance rates?
By James Young on Oct 3, 2008
Don Miller writes: {Where did people come up with the idea that police departments get additional money/equipment by writing tickets? I don’t know about other states but in North Carolina the fines that are paid go to the state (who knows where the money goes from there). The money does not go to the department or to the city.}
The idea comes from such factual things as their budgets, press releases where they state that they will engage in a special enforcement program from which the proceeds will be used for XX project in their department. In many of the CS little towns in Oklahoma, almost the entire budgeted revenue is from traffic fines. Therefore, there is little distinction between the town budget and the police budget.
Farther afield but equally true is that police departments receive speed control equipment from GEICO, State Farm and/or IIHS. They then use that equipment to cite speeders from which the insurance industry benefits by tacking surcharges onto auto insurance. Thus, they are getting equipment by writing tickets.
Also, we know to a certainty that some jurisdictions fail to report violations and fines to the state, keeping all the money for themselves.
By Jeff on Oct 3, 2008
The local cops still get overtime pay when they have to appear in court.
By Irina on Oct 3, 2008
Even if the fines go to the state (like in North Carolina) it is still money-making operation.
By Don Miller on Oct 3, 2008
Where did people come up with the idea that police departments get additional money/equipment by writing tickets? I don’t know about other states but in North Carolina the fines that are paid go to the state (who knows where the money goes from there). The money does not go to the department or to the city. A police department in any jurisdiction could write 1 ticket or 1000 tickets a month and it would not make one difference in that department or city’s budget. Please, if you’re going to have a website for all to see, at least know what you are talking about.
By Highway on Jul 17, 2008
Yeah, really! There’s never been any laws that trample the natural rights of people, ever, in the whole world! And there certainly haven’t been any arbitrary and stupid laws that are or aren’t enforced randomly by those sworn to uphold laws.
Ok, Sarcasm off.
Laws are extremely fallible. There is nothing inherently sacred about a law. All it is is some people telling some other people not to do something. And the people doing the telling get to make the other people do what they want, at the point of a gun.
This site provides an excellent resource for people to show other people how arbitrary and unthinking laws, even ones that might *seem* reasonable, are in fact not reasonable, and are wasteful and at times counter productive, while allowing those in the government the ability to arbitrarily and capriciously take more money from citizens to further the goals of government.
There IS such a thing as a bad law, and this site points out many.
By really on Jul 17, 2008
I think this site was clearly developed for law breaking citizens to reply to and rant and rave about what they disagree with.
Comments about Police saying well get another job if you can’t handle the pressure is an absurd statement to make, many years ago Police had the most respected job in the world, no citizen would ever think of assaulting a cop, cursing a cop, or disrespecting a cop in anyway, that just shows what society has come to over the years and its only going to get worse with time.
As far as comments on quotas, I don’t know of any department that has quotas, and for your performance evaluation I don’t know of any agency that simply bases your evaluation on the amount of tickets you write, this is an evaluation of an officers overall performance including everything down to an officers safety measures they take when responding to calls.
And yes, a cop see’s more on his or her job than an average citizen ever has to see in a lifetime and has to take this home with them every night. Also, cops are never really off duty and can really enjoy family time, while other citizens can, most agencies require an officer to be issued a pager or a cellular phone and keep with them at all times even when a cop may be at their childs birthday party and get’s called in on a situation that is unfolding, how many citizens have to live a life like this?
When you leave work you leave that day behind and don’t have to worry about how you’ve already put in 12 hrs. and now have to go back in and your pulling 24 hrs. or more.
I am and always have been a supporter of police. To put it simply, if your not breaking the law, you have nothing to rant about, most cops I know are level headed and cut breaks to you law breaking citizens.
Regardless of an agencies size it doesn’t mean smaller departments are the worst at writing tickets, and as far as any comment on this being entrapment, you need to look up statute on what entrapment is defined as and I can assure you that an officer parked on side of road or anywhere else enforcing radar is not considered entrapment.
Thanks to all the cops out there and keep up the good work!
By Brad on May 18, 2008
Antonio, you and the other wing nuts on this site should do research before spouting off:
Federal Motor Vehicle Safety Standards (FMVSS 222), “School Bus Passenger Seating and Crash Protection,” went into effect on April 1, 1977. The federal mandate requires all newly manufactured buses with a vehicle weight over 10,000 pounds to protect riders through “compartmentalization.” This refers to the addition of high padded seat backs and narrow seat spacing designed to keep children in a confined area during a crash. Small school buses, which have a similar fatality rate to cars because of their weight and design, are required to have lap belts.
Because school buses are so heavy, occupants are subjected to a much smaller crash force than they would be if riding in a passenger car, light truck or van, says the National Highway Traffic Safety Administration (NHTSA). Over the past 25 years, the safety of compartmentalization has been confirmed through independent studies performed by agencies such as the National Transportation Safety Board and the National Academy of Sciences. Because compartmentalization is deemed “safe,” the NHTSA has been reluctant to mandate national seat belt laws for large school buses. Instead, individual states determine their own seat belt laws.
By antonio on May 6, 2008
“The Seatbelt Law is a Giant Money Machine for TOWNSHIPS. Ask Lawmakers why are 40 Million Kids are allowed to ride a School Bus twice a day without seatbelts?”