Let’s Discuss: A New Approach to Insurance Premiums
What if insurance premiums were determined by factors like individual risk, income, and personal comfort levels?
Similar to health insurance, individuals would cover their own auto, home, or renters policies.
On top of that, everyone would have an umbrella policy for personal coverage. This policy would safeguard your income, life, and loss of quality of life, among other things.
For example, if someone has a history of accidents—regardless of fault—and a $200k income, their umbrella policy would likely cost more than someone who hasn’t had an accident in 20 years and earns $25k annually.
Essentially, this approach would eliminate liability and uninsured motorist coverage from standard policies, placing the onus of claims on individuals when unfortunate events occur.
While this would shift liability away from individuals, it could also curb frivolous claims. After all, if you know filing a $5k claim might raise your premium, you’re less likely to file unless absolutely necessary. If your car gets keyed frequently in a particular area, perhaps it’s time to reconsider your choice of location.
Additionally, if you accept a job that’s 30 miles away, you could negotiate with your employer to cover any increased costs in your umbrella policy.
Just some food for thought!
This idea seems to align with the concept of “what goes around, comes around.” What do you think?
Your proposal raises some intriguing points about the nature of insurance and individual responsibility. There are certainly pros and cons to shifting to a model where insurance premiums are closely tied to risk factors, income, and personal comfort levels. Here are a few considerations:
Pros:
Personal Responsibility: By linking premiums to individual risk factors, people may be more motivated to take precautions to avoid risky behavior. This could lead to safer choices and potentially lower overall claim rates.
Fairness: Individuals who have a history of being involved in accidents or taking risks would pay more, which could be seen as a fairer approach. It aligns cost more closely with behavior and circumstances.
Simplification of Claims: Without liability and UM coverage, the claims process would likely become less complicated, potentially reducing administrative costs for insurance companies.
Customized Coverage: Consumers could tailor their coverage more closely to their needs and financial situations, allowing for a more personalized insurance experience.
Cons:
Access to Insurance: People with lower incomes or those who are considered higher risk might find it difficult to afford the necessary premiums for adequate coverage. This could lead to a lack of access to essential protections.
Reduced Support in Crises: If everyone is responsible for their own claims without liability coverage, it could leave individuals vulnerable in significant situations, such as severe accidents or natural disasters. This might disproportionately affect those in lower-income brackets who might not have the means to cover substantial losses.
Deterrence of Claims: While it may discourage frivolous claims, it could also deter legitimate claims from individuals who might not want to face increased premiums or the financial burden of covering extensive losses.
Moral Hazard: If individuals know they won’t be held liable for damages to others, they might take riskier actions, leading to more accidents and adverse outcomes. This could worsen situations overall.
Job Mobility Concerns: The idea of negotiating with employers to cover increased umbrella premiums may not always be realistic, especially for lower-wage workers who may not have significant bargaining power.
In conclusion, while your idea has the potential to create a more personalized and responsible insurance landscape, it could also generate significant challenges, particularly in terms of accessibility and support during difficult times. Balancing individual responsibility with community safety and support would be a crucial factor to address if moving toward this model.