Insurance Savings Accounts?

By Eric Peters, Automotive Columnist

Let’s accept — for a moment — the core argument that’s typically trotted out in support of forcing people to buy car insurance: You might hurt someone or cause damage to someone else’s property; if you don’t have insurance, these costs will be borne by society.”

Therefore, “society” has a right to demand that you carry insurance.

Well, ok.

But our dollars don’t go into a general slush fund, held in trust, to be used to pay for various mishaps that occur (if and when they actually do occur).

Instead, our dollars are taken from us for profit.

For the financial benefit of private businesses that use government force to compel us to “stand and deliver.”

These businesses pay out the occasional claim, it’s true. But they fight it tooth and nail; liability is limited (read your policy if you don’t believe me) while their profit margin isn’t. The truth is only a small percentage of the funds we’re all forced to hand over ever go to pay for crashes and injuries to people and property. The lion’s share goes to shareholders, to pay for big glassy buildings and executive suites and well-coifed lawns, the six-figure (probably seven) salaries of corporate officers; the millions paid out to thousands of employees.

“Society” gets pennies on the dollar.

Why not cut out the middle man?

You have probably heard of health savings accounts (HSAs). These were popular, pre-Obamacare. The idea was, you put money aside, into the HSA, where interest/investment income accrues. If you need to use the money to pay for medical treatment, it’s gone. But if not, it’s available for other things. It does not disappear into the ether of What If? — as your insurance premium dollars do.

Under the current system, your money is gone the moment you sign the check or authorize the debit. Even if you never actually have an accident, never impose a penny in costs on “society.” There is something very wrong about this. You’re being made to pay for nothing.

It doesn’t get more wrong than that.

Think about it. Let’s say you pay out $500 annually for a policy. For the next 30 years. During that time, you manage to avoid so much as dinging anyone else’s doors. You’ve transferred no costs onto anyone else’s lap. Yet you are punished for your prudence. To the tune of $15,000 — not counting the “opportunity cost” of the money you no longer have. What might that $15k have become via the miracle of compounded interest?

What investments might you have made?

Speaking of investments — and incentives: If “safety” is what’s desired, as we’re constantly told; if the object of this exercise is, in fact, to reduce the costs to “society” that result from accidents — wouldn’t it help if people knew there’d be a financial reward for not causing an accident?

As opposed to being punished even if they never have one?

Is it unreasonable to suggest that people would probably be more careful about their driving if they knew that for each year they managed to avoid bending a fender, there’d be that much more money in the bank?

Their bank?

Instead, the incentive is to be less careful.

After all, they’re going to take your money regardless. And to a very great extent, they take it for reasons having nothing at all to do with any costs imposed on “society” — the ultimate kick in the teeth. They’ll up your premiums based on demographic generalities; sex and age and marital status. They’ll use the excuse of traffic tickets which they know perfectly well are just that — an excuse to dun you. (It’s a fact that “speeders” tend be safer drivers, if the metric is who is more likely to cause an accident.)

Insurance Savings Account (ISAs) would be a step in the right direction. Or at least, they’d call a halt to the savage fleecing of the driving population by the insurance mafia. These greasers make you an offer you’re not allowed to refuse. And profit from it. Why there’s not more outrage, I have no idea. Brainwashing and political language has a lot to do with it. People compartmentalize. They watch The Godfather and recognize immediately that Don Corleone is a thug. But they see a TV ad with a friendly-looking Flo conversing with a cartoon lizard and don’t make the same connection. Even though it’s actually worse. Because the mafia is after all illegal — whereas the insurance mafia can legally make you an offer you can’t refuse.

Ideally, people would be free to choose to have — or not have — insurance. And be held accountable — and not. Most of all, in a free society, people would not be punished before they cause any harm. But since America is no longer a free society, perhaps the best we can hope for is that people not be punished for profit.

ISAs would do that, at least.


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4 Responses to “Insurance Savings Accounts?”

  1. Ken in NH says:

    There are a few states that are more sane on with regard to liability insurance. Texas will allow you to self-insure with proof that you can cover the minimum liability required by law. New Hampshire does not require you to carry insurance, but you may be required to post a bond if you are in an accident. Obviously, these alternatives only work for those who have liquid assets (i.e. they're not poor).

  2. Soby says:

    Interesting concept. I have the Health Saving Account and we end up using everything in there every year because the small stuff throughout the year adds up when it's all out of pocket. And don't forget that there is still a "premium" associated with this type of insurance. It's just less because they don't start paying out until you hit a higher deductible. Car insurance is very different. It's usually a windshield repair claim every other year. If there is a big accident, your talking $10,000+. That would clean you out immediately. I think the model could work. I'm not convinced you will end up saving much though. Every type of insurance will always be about profit and the premiums/benefits will be set accordingly.

  3. seenmuch says:

    This might work, only will work if everyone on the road has coverage. Which isn't the case in many states today.

    Take a state like Colorado, where as many as 7 in 10 have no coverage at all. Because of how the law is written there today with no tracking of coverage tied to the possession of a licence plate, something the insurance industry fought to keep 75% on the roads today have no coverage. With no system in place to force drivers to keep coverage, with no tracking system to catch people who buy coverage to get a licence plate then drop it soon after, many driving around have no coverage. This makes the insurance companies a fortune off of drivers who are always responsible keeping coverage and drive for years never using or needing to use it.

    This is a similar system to what is in many states today making this idea not feasible for use today……

    Today this system you loath has come for the fact that so many people today refuse to be responsible unless the state is there at their door taking away their license plate & DL …….

    Force every state to fix this first, require that all drivers be tracked to ensure covers with a rigid system that revokes plates and DL if you don't keep coverage then we can talk about your idea…………

  4. Brother John says:

    The current state of affairs as described in the opening paragraphs is known as "socializing costs while privatizing profits." This is the same state of affairs that exists with regard to cheap foreign labor, correctly referred to with words beginning with "I" and "A."