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Mandatory car insurance is essentially a welfare benefit. The benefit is just administered by insurance companies, because they are believed to be more efficien

Mandatory car insurance is essentially a welfare benefit. The benefit is just administered by insurance companies, because they are believed to be more efficient than the government. (This is pretty common for all kinds of benefits around the world.) Mandatory insurance is not a private contract two parties have reached at their own initiative, and the usual business considerations don't apply. If an insurance company wants to provide mandatory car insurance, they must follow government policies, not their own policies. If someone drives recklessly and causes excessive damage, the government has other tools beyond insurance premiums. They can, for example, revoke the license and confiscate the car. Or issue a fine or put the driver in prison.

hansvm 2y ago
Mandatory car insurance, in theory, moves money from drivers (proportional to the risk they represent) to victims (proportional to the damages caused), plus a cut for the insurance company. I'm missing something in your flow of ideas. Is it a welfare benefit because that idealized theory of insurance is itself a welfare benefit or because when insurance is mandated it doesn't live up to expectations?
- jltsiren 2y ago
  The insurance is mandated, and the focus is more on guaranteed benefits to the victims than on fairness for the people paying them. If you can't afford to pay for the damages you caused, that's your problem. You took the risk, and now you face the consequences. There is no reason to make the insurance mandatory to prevent that. But if the victim doesn't get any compensation because you can't afford to pay, that's a public problem. Now there is a reason to make the insurance mandatory, and it's particularly important that the riskiest drivers have insurance. If you make it too expensive for them, they may choose to drive without insurance. Which is exactly what you wanted to avoid in the first place.

hansvm 2y ago

Mandatory car insurance, in theory, moves money from drivers (proportional to the risk they represent) to victims (proportional to the damages caused), plus a cut for the insurance company. I'm missing something in your flow of ideas. Is it a welfare benefit because that idealized theory of insurance is itself a welfare benefit or because when insurance is mandated it doesn't live up to expectations?

jltsiren 2y ago
The insurance is mandated, and the focus is more on guaranteed benefits to the victims than on fairness for the people paying them. If you can't afford to pay for the damages you caused, that's your problem. You took the risk, and now you face the consequences. There is no reason to make the insurance mandatory to prevent that. But if the victim doesn't get any compensation because you can't afford to pay, that's a public problem. Now there is a reason to make the insurance mandatory, and it's particularly important that the riskiest drivers have insurance. If you make it too expensive for them, they may choose to drive without insurance. Which is exactly what you wanted to avoid in the first place.