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There's an interesting podcast episode here[0] (transcript at [1]) arguing that car insurance in the US is actually too cheap because it doesn't cover the costs

There's an interesting podcast episode here[0] (transcript at [1]) arguing that car insurance in the US is actually too cheap because it doesn't cover the costs of car crashes, particularly the ever increasing healthcare costs. It also really gets into how insurance works in the case of an accident and covers some things I hadn't known about such as how subrogation works. Be warned it does start with a very sad story of a toddler who was killed by a driver. 0: https://thewaroncars.org/2024/03/19/122-car-insurance-is-too-cheap/ https://thewaroncars.org/2024/03/19/122-car-insurance-is-too... 1: https://thewaroncars.org/episode-122-car-insurance-is-too-cheap-final-web-transcript/ https://thewaroncars.org/episode-122-car-insurance-is-too-ch...

avidiax 3y ago
> Using figures from 2019, the study looked at the direct cost of car crashes—everything from the price of emergency response, medical expenses, court fees, congestion, the cost of property damage, you name it. NHTSA found that the total hit to the economy in just that one year was $340 billion. > The NHTSA study also looked at broader quality of life costs—things like what happens when a family’s primary breadwinner is killed, or when someone has to adjust to a life-altering injury. Adding those impacts brought the total cost of societal harm from motor vehicle crashes to $1.4 trillion. There are 228 million drivers in the US. Assuming no cost to administer the insurance, just the first figure is: 340 billion / 228.2 million = $1,490/year/driver and the 2nd figure is 1.4 trillion / 228.2 million = $6,135/year/driver Essentially, drivers would need to, on average, pay $511/month to completely cover the damages caused in auto crashes. And that's per driver, so a household with 2 drivers would chip in $1022/mo.
- kelipso 3y ago
  Accounting for negative externalities but not positive externalities...
  - fulafel 3y ago
    Accounting for one kind of externality, but this is missing the climate catastrophe, and other costs of car culture. What are the major positive externalities? (Value enjoyed by the car user isn't an externality)
    - avidiax 3y ago
      I suppose that without cars, there would be less economic productivity outside cities. You would not have mass transit in the countryside, so you'd be limited to horse and carriage, rickshaws, etc.
      - kelipso 3y ago
        And since cars increase economic productivity, car insurance should be subsidized.
        avidiax 3y ago
        The status quo is not that the insurance is subsidized, however. The negative externalities are being born by individual victims. A subsidy would be that the government pays for all those unfunded individual externalities out of taxpayer money, which means that every driver has effectively infinite coverage but pays only the state minimums.
        dzhiurgis 2y ago
        State insurance tax would be nice, but only cover to median car amount. Everything over it - insure yourself if you wish to.
      - fulafel 3y ago
        Is this an externality? It benefits people who own cars. (It's far from clear of course that public transit would be missing, there used to be public transit in small towns before everybody got cars in many places. Horses are also unlikely to replace bikes.)
  - antisthenes 3y ago
    Car ownership for productive economic activity is not an externality, because it is direct, expected, and is captured in GDP and household income figures.
- parineum 3y ago
  Those other services are paid for by taxes. The tempting response to this will be thT those taxes could be lower, saving non-drivers money. However, the taxes may not be paid by drivers but all people benefit from drivers existing such that the economic impact of forcing only drivers to pay for these things will end up being priced into all goods and services. Essentially, government services paid for by taxes function very similarly to an insurance pool.
mindslight 3y ago
The situation it lays out, where the $100k of other driver's liability coverage isn't enough to cover their damages (including what health "insurance" paid out) - isn't that exactly what the "underinsured driver" line item is for? Also isn't the main reason you never cash such a check from an insurance company is that it's an offer for a final settlement, or at least could be construed as such, even though you might be owed much more? I do agree that it's a problem for insurance companies to be able to set upper limits on coverage, after which they walk away. The whole point of insurance is to cover long tail risk. If the area under the chopped off long tail is really that large, then that means a lot of damages are just currently being dropped on the floor.
- nradov 3y ago
  This is not an actual problem. If an insurance company offers a settlement then you can always attempt to negotiate for more. Auto insurers offer a range of liability coverage limits; if a customer selects minimum coverage then that's hardly an insurance issue.

avidiax 3y ago

> Using figures from 2019, the study looked at the direct cost of car crashes—everything from the price of emergency response, medical expenses, court fees, congestion, the cost of property damage, you name it. NHTSA found that the total hit to the economy in just that one year was $340 billion. > The NHTSA study also looked at broader quality of life costs—things like what happens when a family’s primary breadwinner is killed, or when someone has to adjust to a life-altering injury. Adding those impacts brought the total cost of societal harm from motor vehicle crashes to $1.4 trillion. There are 228 million drivers in the US. Assuming no cost to administer the insurance, just the first figure is: 340 billion / 228.2 million = $1,490/year/driver and the 2nd figure is 1.4 trillion / 228.2 million = $6,135/year/driver Essentially, drivers would need to, on average, pay $511/month to completely cover the damages caused in auto crashes. And that's per driver, so a household with 2 drivers would chip in $1022/mo.

kelipso 3y ago
Accounting for negative externalities but not positive externalities...
- fulafel 3y ago
  Accounting for one kind of externality, but this is missing the climate catastrophe, and other costs of car culture. What are the major positive externalities? (Value enjoyed by the car user isn't an externality)
  - avidiax 3y ago
    I suppose that without cars, there would be less economic productivity outside cities. You would not have mass transit in the countryside, so you'd be limited to horse and carriage, rickshaws, etc.
    - kelipso 3y ago
      And since cars increase economic productivity, car insurance should be subsidized.
      - avidiax 3y ago
        The status quo is not that the insurance is subsidized, however. The negative externalities are being born by individual victims. A subsidy would be that the government pays for all those unfunded individual externalities out of taxpayer money, which means that every driver has effectively infinite coverage but pays only the state minimums.
        dzhiurgis 2y ago
        State insurance tax would be nice, but only cover to median car amount. Everything over it - insure yourself if you wish to.
    - fulafel 3y ago
      Is this an externality? It benefits people who own cars. (It's far from clear of course that public transit would be missing, there used to be public transit in small towns before everybody got cars in many places. Horses are also unlikely to replace bikes.)
- antisthenes 3y ago
  Car ownership for productive economic activity is not an externality, because it is direct, expected, and is captured in GDP and household income figures.
parineum 3y ago
Those other services are paid for by taxes. The tempting response to this will be thT those taxes could be lower, saving non-drivers money. However, the taxes may not be paid by drivers but all people benefit from drivers existing such that the economic impact of forcing only drivers to pay for these things will end up being priced into all goods and services. Essentially, government services paid for by taxes function very similarly to an insurance pool.

mindslight 3y ago

The situation it lays out, where the $100k of other driver's liability coverage isn't enough to cover their damages (including what health "insurance" paid out) - isn't that exactly what the "underinsured driver" line item is for? Also isn't the main reason you never cash such a check from an insurance company is that it's an offer for a final settlement, or at least could be construed as such, even though you might be owed much more? I do agree that it's a problem for insurance companies to be able to set upper limits on coverage, after which they walk away. The whole point of insurance is to cover long tail risk. If the area under the chopped off long tail is really that large, then that means a lot of damages are just currently being dropped on the floor.

nradov 3y ago
This is not an actual problem. If an insurance company offers a settlement then you can always attempt to negotiate for more. Auto insurers offer a range of liability coverage limits; if a customer selects minimum coverage then that's hardly an insurance issue.