by Don Birkholz

Created on: March 04, 2009

It is not well-known that many insurance companies oppose mandatory auto insurance laws. This was a shock to me, but their arguments now make sense. For example, in South Carolina, they passed a law that if you had a driver's license and walked into an insurance office, they had to issue you insurance. What happened? Most of the insurance companies stopped selling auto liability insurance.

Insurance companies do not want to do any business with high risk drivers (three time DUIs). They would prefer to insure the safe driver.

Mandatory insurance laws are hard to enforce. Low-income people with high cost auto insurance (2,000$ per year, or 200$ per month) will try anything to avoid paying the insurance and many laws require insurance companies to hire more people to report cancellations, while those who cancel their insurance continue to drive without insurance, without driver's licenses, with fake plates, or use any method available to circumvent the law.

State Farm is probably the leader in the opposition to mandatory auto insurance laws. One of their arguments is that poor people will have to go without food if they have to buy expensive auto insurance. (http://www.centspermilenow.org/715oppos.htm This is confirmed in a study done by Dr Maril, head of the Sociology Dept of Eastern Carolina University, in a study which found 44% of those responding said they had to go without food due to mandatory auto insurance. Two studies at http://www.foodstampstudy.com show food stamp increases due to mandatory auto insurance laws. The study done in Billings, MT by the Montana DPHHS showed 12 of the 96 food stamp applicants said auto insurance was a reason for needing food stamps. (I requested this survey thru my local state representative).

Another reason insurance companies oppose mandatory auto insurance is that the state's minimums (for example 25/50/10), are rather useless in a bad accident. If someone with the above 10,000$ property damage, totals a 40,000$ vehicle, the liability insurance will only cover 10,000$ of the 40,000$ vehicle and the person who has the insurance, still has to come up with 30,000$ out of his own pocket. If he injures someone to the tune of 100,000$, he still has to come up with 75,000$ out of his own pocket.

The insurance people have developed collision insurance to protect the vehicle owner in case he gets hit by an uninsured driver. Collision insurance will reimburse the owner the full 40,000$ in the above example, minus the deductible. Fining people for no insurance doesn't work, Collision insurance does work. Why people want to continue methods that do not work concerning uninsured drivers is going down a dead end road, collision insurance works, why not use the method that works.

In Dallas, they are now towing vehicles of those driving without insurance. The vehicle gets towed, the owner pays the fine and costs for getting the vehicle back, and then probably goes on his merry way driving without insurance the next time he can. What good is towing his vehicle?

The insurance industry argues that mandatory auto insurance protects one's assets in case of an accident. Indigents have no, or very few assets, what good is it to buy insurance to protect assets if one has no assets. There is nothing in it for the indigents, and that may be the reason so many are driving without insurance.

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