There is near-universal outrage when an individual is treated as a member of a group when that group is racial or ethnic in composition. More than that – it is illegal to, for instance, refuse to rent to a black person, or charge a black person higher rent, or require him to put down a larger security deposit – because “black people” are more likely to commit crime, cause damage or fail to pay. It offends our sense of justice – and so, has become an offense under the law. 
Yet when the insurance mafia does exactly the same thing – when they charge rates based not on an individual’s record of causing loss but on generalizations made about the group to which he belongs – it’s not only legal, it’s accepted.
It shouldn’t be.
Your age, your sex, your marital status; where you live, what you drive – what your credit rating is. These are all generalizations; statistical probabilities that suggest a might or could be.
Not an actuality.
It is also a statistical probability that you’re more likely to be mugged by a young black male than a middle-aged white woman (or even a young white male). Yet the law – and the rules of political correctness – refuse to countenance even a whiff of differential treatment of any individual based on these statistical, generic, probabilities.
Well, bully. What’s good for the goose should be good for the gander, too. If it is outrageous – an affront to decency – to be more wary of, say, that young black male walking toward you for no other reason than that young black males generally – statistically – can be said to be more “crime prone,” then surely it is just as outrageous, morally speaking, to hit a 22-year-old single male driver with higher insurance rates merely because generally – statistically – young single males seem to be involved in a higher-than-average number of automobile crashes. Or get more tickets. Or whatever.
Thomas Sowell – and Neil deGrasse Tyson – are black males. Should they be treated as presumptive Mike Tysons or Bobby Browns? No? Then we do we permit the insurance mafia to treat individual people who have given no cause themselves to warrant it as though they had in fact given cause to warrant it – by dint of the fact that nebulous others have given cause?
You drive a “fast” car. This gets you tagged for special treatment in exactly the same way – and on exactly the same basis – as a young black male wearing a hoodie gets tagged for special treatment by the police. Neither need actually have done anything. Merely to fit the profile is sufficient. Yet in the case of the “profiling” done by the insurance mafia, there is no outrage. It is perfectly legal for them to charge the owner of the “fast” car 20 – maybe 50 – percent more than the driver of an ordinary car. 
And this is accepted.
You are older. One day, you open a letter from the mafia and find you are paying more for insurance – even though you’ve not caused an accident or had any claims filed against you. Your only offense? You are now in a demographic that’s said to be – statistically, generally – more “accident prone.” How is this any different, fairness-wise, than charging a black or other minority a higher rate of interest than a white would have been charged?
Perhaps your credit is not the greatest. Maybe for the simple (good) reason that you prefer not to use credit at all and instead pay-as-you-go (the credit scoring companies will downrate you on this basis). But you have always paid your debts – and, more to the point, you’re a good driver who has never cost the insurance mafia a cent. Quite the opposite, in fact. You’ve paid them premiums ever year – for years. Yet the insurance mafia charges you significantly more to insure your vehicle than they charge another person with “good credit.” How is this any less arbitrary, any less prejudicial group-guilting than real estate red lining?
Yet the one is massively illegal, the other everyday practice.
Well, it was also once everyday practice to deny service to blacks – to treat every black as a member of a pariah group. It was also perfectly legal. Eventually, it was decided that probably this was not right – and thus, it became illegal to do such things. A similar awakening is needed to confront the group-guilting routinely engaged in by the insurance mafia. People need to become as furious about what the insurance mafia does as a previous generation did about what Strom Thurmond and George Wallace did.
Until that day, young singles – especially young single men – older people, people with “poor credit scores” – and the like, will be consigned to the back of the proverbial bus. Treated differently – and forced to pay more – not because of anything they’ve done as individuals. But on the basis of some statistical assertion that they might do something – because others who fit their general demographic have.
Throw it in the Woods?
Chronological profiling next?
http://abcnews.go.com/blogs/health/2012/08/30/how-old-is-too-old-to-drive/
Wow Eric, this article really hits me. 🙂
Good job! I’ll be spreading the word.
THE KEY
Making the Idea known as the United States of America a reality must begin by ruthlessly enforcing both the rights that are explicit and those that are implicit in the unamendable Unanimous Declaration.
The insufferable System of Precedents that has supplanted the legitimate Law of the Land must be destroyed in detail.
Lawyer and politician jokes aren’t funny, so, the People ought to stop laughing at them. Would you laugh at Bataan or Katyn jokes? How about some Andersonville and Gulag jokes.
tgsam
Careful Eric. Calling for fairness is how these folks got where they are. After all, why should I pay medical high medical insurance premiums because you won’t wear a bicycle helmet? Somebody ought’a make a law!
The abuse of statistics have allowed insurance companies and other bookies to identify theoretical risk groups. If they’re theories are right, they make money. If they’re wrong, they make money. Like other organizations involved in the game, they’ve learned to exploit the “sin” tax method; fast car? More tax. Don’t pay your bills? More tax. They have learned you can be punitive as long as you choose your criteria well. You’ve read the good Pastor…
Not paying your bills could be one they lose on in the near future.
Bad example. Bicycle helmets, foam hats really, are very limited in the protection they offer. Insurance wise I doubt there is much difference between the two groups. What forcing bicycle helmets does, is reduce bicycling. Reduced bicycling accounts for all the reduced injury and cost.
I did intend it as a *valid* example Brent, and I won’t argue it is, but it’s an example of the argument for “laws”and increased premiums based on perceived risk. Most claim some sort of safety benefit and are justified by making insurance premiums more “fair” for those who don’t participate in the “high risk” behavior.
I just heard that in California, parents can be sued (by whom I’m not certain) if their kids under 18 are caught not wearing a bike helmet. Shocked the hell out of me.
Perception of risk is the key. A bicycle helmet is called in some bicycling circles a “magic hat”. It is magic, illusion, perception.
The end game is control. The tool is to leverage the risk takers desire to have their downside covered by other people. Exploit their greed to force everyone in the system. Once everyone is in the system exploit the collectivist nature of it for control.
I dated a neurosurgeon in college — his joke was, “What do you call a bicyclist who doesn’t wear a helmet? A vegetable!” So they may be “magic hats” but neurosurgeons would rather scrape off the insides of a bike helmet than try to recover brain matter from the curb, or something like that…
Just because someone is neurosurgeon doesn’t make him an authority on drop testing or risk analysis or product design.
The bicycle helmet standard is a 6′ drop. I’m 6’4″ tall. That’s just to start.
Every helmet study done, those that compared injury before and after a law forcing people to wear them, once corrected for the reduced amount of bicycling that the law brought about, showed no positive effect. Simply put these helmets do what most any hat would, protect against scrapes and minor injuries.
Then there is the risk analysis. The risk of injury bicycling per unit time is so low as that if I consider bicycling worthy of a helmet I must then logically and rationally accept wearing a helmet to climb stairs or drive a car or climb a ladder. Those are just a few things, there are many more. Bicycling isn’t a dangerous activity. It simply is not.
If I were to be hit by a car, the foam hat, a bicycle helmet is a piece of vacuum formed sheet plastic over an inch or so of foam. It’s protective abilities will be exceeded. A motorcycle type helmet is needed for that.
If you’re worried about that off angle head hit to a curb that kills now and then? Well that happens just walking around too. This is why people with various motor-skill disabilities wear these helmets. Bicycling simply isn’t that risky and the primary risk that does exist, being hit by a car, a bicycle helmet isn’t much use.
Also, I find that tired old ‘a vegetable’ comment less than polite, uninformed, and nothing more than relying on social pressure, ridicule, etc instead of engineering and science.
LTLFTP (’09 is when I started lurking via LRC maybe?)
I came here in a quest to see what modern reporting I could find on auto insurance “cartel”-style behavior. I found Eric’s article to be totally shitty. Shitty Eric is still good. I love Eric, though. Seriously, I’ve read tons of your stuff. This one feels stretched out and sloppy.
But Brent P, making it to your comment and reading it was the highlight of my week. Fucking solid.
Eric, RE: this article. You didn’t even get to the real potential issue of “cartel” behavior. You danced all around it (and then barfed all over the floor and then passed out) .
And for the record, we both already understand that auto insurance is compelled by an illegitimate state apparatus (sometimes even if you don’t own a vehicle) and insurance companies suck up to their teat constantly and use the cop’s tickets as justification for raising rates which is bullshit, etc.
But we’re still talking about the simple concept of pricing risk. It’s called insurance. It serves a function, and most people would still attempt to carry some form of automobile liability insurance even if it wasn’t compelled. This is a praxeological observation, a variety you should be intimately familiar with.
So here’s the point. I came here looking for support of the idea that the auto insurance industry was ‘cartel’ in nature. Your article did a horrible job providing any evidence of that. But, it got me thinking! Fucking valuable!
So here’s the point. Really. Remember, we’re talking about pricing risk. We call it insurance. The business model exists even in areas of life where it is not compelled.
Okay, so here’s the point.
Auto insurance claims are high frequency insurance claims; this yields copious volumes of data to analyze, and low and behold auto insurance claims are shockingly predictable when claims meta-data is filtered in certain ways.
Is using credit scores, age, and zip codes as factors in weighing potential for future loss (i.e. premium charged) a horribly unreliable and “unfair” method of pricing a policy? Refer to the former paragraph again. Okay.
So now the question is, lets suppose I wanted to take a different approach and offer auto insurance to people using a method I had devised that I thought was more “fair” (please Eric, please tell me how you would price automobile liability insurance for fucks sake, you didn’t even hint at an alternative) – are the barriers to entry so high as to essentially make my attempt to start a competitive insurance company impossible?
There are over 130 auto insurance companies in the USA.
Is it possible that the similar price amongst all auto insurers is simply a function of the fact that the data shows extremely strong correlation for frequency of claims and types of claims based on certain measurable factors, and that the “market” is still working here to come up with the most accurate (“fairest”) way to price auto insurance liability risk?
I’m truly trying to answer that question for myself.
It’s clear players in the industry are trying to find even better and more useful data to more accurately price policies as manifested in the form of Snapshot and the like.
Which is totally fucking creepy and you’ve well documented the criminal invasion of the state into our personal vehicles.
But the simple fact that access to the data obtained from such a device would help an insurance carrier more accurately (fairly) predict which “customers” were more likely to have a claim is undeniable.
As with most things in this world, the state is all mixed in here and fucking everything up. But I think it’s short-sighted to see the auto insurance industry players are purely criminal.
The problem for them from a business perspective is that they’ve all figured out the most accurate (“fair”) data points (legally obtainable) to use in pricing the risk of a potential claim and so coming up with other ways to break the nut is the challenge.
In this context, I see Snapshot devices and the like as an organic and natural attempt from the insurance company to obtain more specific and actionable data.
In the business of pricing risk, is there anything more valuable?
I don’t think this article was really so much on the cartel nature of insurance but rather how state uses grouping people to various political and economic ends and it’s apparent inconsistencies in doing so.
Auto insurance operates as cartel as evidenced by
1) state licensing.
2) state control of prices (to a degree)
3) state specifications or minimums of coverage.
4) state requirement to purchase insurance.
The state may not allow factors like credit scores to be used. I’ve seen outrage about that, think it went somewhere. I think for auto insurance age and gender are still ok. Anyways the state interferes with the pricing in this manner. The state also says the insurance companies can surcharge based on traffic tickets. Problem is Mr. Magoo hasn’t had a traffic ticket in 30 years but has near misses every few minutes. But as we know other people manage to avoid hitting Mr. Magoo so he has low low rates. Meanwhile those who drive late at night regularly can rack up tickets really fast just for driving the same speeds people do in the morning commute.
Cartels can be identified because they are licensed by the state, the state specifies or approves the service/product, and the state regulates prices in some manner. A forced purchase isn’t that important for identifying a cartel but it can be part of it.
The cartel wasn’t really Eric’s point, but the way the state behaves in a very arbitrary manner. As we see with Obamacare in the years since this article was written, a totally different way of having people grouped for pricing purposes and a disaster it caused for some for the benefit of others. The nature of politics.
What you fail to point out is: The reason Insurance Companies are able to raise rates based upon your Credit Rating or how many Tickets you have had is because there are no Privacy Protections/Laws in the United States. Looking at anything other than how long you have driven, how many Claims you have had, if the car is garaged and Incidents of Claims on the Type of Vehicle you drive are the only things Insurance Companies SHOULD be allowed to base their Rates on. Anything else is tantamount to them placing cameras in your home and periodically going through your Bank Safety Deposit Box.
What Violations of Privacy these Businesses are allowed to legally get away with is unthinkable in Freer Countries and in Germany, would land them in jail. But don’t expect anything to change. There’s too much money to be made by both Government and Private Industry when they are allowed to snoop into your Personal Life, Actions and Affairs. In fact, both Political Parties are scanning US Citizens Personal Information right now hoping they can find likely donors for their Election Campaigns.
You are kind of like a Battered Housewife. The only difference is: After the Husband smacks his Wife around, he will apologise and she will find a little tranquility when they kiss and have sex. The Government and Friends smack you around while screwing you. To Hell with the kiss. They don’t give a shit about you.
The problem once again is fascism. The major bankster corporations essentially own the gun-vernment. The banksters are in bed with the insurance companies. Hence the AIG bailout fixed it so Goldman-Sachs could renege on their gambling losses at OUR expense. Until the deeds of these evil men are widely exposed to the light of truth nothing’s going to change. So keep up the good work Eric and maybe our ranks will grow to the point that Joe Average and (consequently) his congress-critter won’t be able to ignore the stench of this rotten system anymore.
There’s a time and a place for everything.
Dolf Lundgren will never be mistaken for Louis Armstrong nor will Phoebe Cates ever be mistaken for Whoopi Goldberg.
*****
Would it be just for the state provide equal tax funded insurance for all?
tgsam
I’m not so sure. If you can provide statistical causation with certain demographics, car types, age, etc., I’m generally all for them, in a fair, open, competitive market. I think you’re arguing the wrong point. The insurance industry is a cartel that uses the gov’t to require folks to buy its product, a point you’ve made before. Take away all the compulsion and insurance companies would be forced to really compete. Companies would then have all kinds of premium increasing factors and decreases–and folks would be free to buy their products or not.
Let the market decide what’s acceptable.
I agree, Damon –
I was just trying to point out another of the endless hypocrisies we have to deal with.