Disappearing Insurance

First it was health insurance, dysfunctional as it was, being replaced by the health coverage plan welfare program known as Obamacare.  Now auto insurance is under attack.

New York financial regulators have banned the use of education and occupation as factors in setting auto-insurance premiums….

Never mind that these are useful, if imperfect by themselves, correlates with driving skill and so of insurance risk. The companies accepting the risk transfer by selling a policy don’t get to know that information, they don’t get to assess the level of risk being accepted.  They can’t charge an accurate premium.  That hurts the driver as much or more than it does the insurer.

When insurers are not allowed to learn all the factors that go into the level of risk an insuree is seeking to transfer to an insurer, the policy being agreed ceases to be insurance.  New York’s auto “insurance” program isn’t yet approaching State welfare status, but it is ceasing to be insurance.

One thought on “Disappearing Insurance

  1. It simply means that ALL policies written will carry high enough premiums to cover the increased risk to the issuer. Information allows (more) accurate pricing. Lack of information requires additional protection from adverse outcomes, since their likelihood cannot be properly estimated.

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