jacksonville mortgage refinancing: Auto Insurance Principles

Many Americans rely on their cars to get to work. No car means no job, no money for rent or mortgage, food not. A single mother, struggling to make ends meet in the suburbs with 100,000 miles on the odometer, presumably would welcome the opportunity guaranteed low price of insurance would take care of all possible repairs in your car until the day that reaches 200,000 miles or falls apart, whichever comes first. Especially if the insurance is valid regardless of whether she even changes the oil in the meantime.
So why are not the auto insurance companies writing such coverage, either directly or through used car dealers? And given the importance of reliable transportation, why not the public demanding such coverage? The answer is that both auto insurers and the public know that such insurance can not be written for a premium the insured can afford, while allowing insurers to stay solvent and make a profit. As a society, we intuitively understand that the costs associated with the care of every need of an antique automobile mechanics, especially in the absence of regular maintenance, are not insurable. However, do not seem to have these same intuitions with respect to health insurance.
If we pull the emotions of health insurance, which is certainly hard to do even for this author, and look for health insurance from an economic perspective, there are several ideas auto insurance that can illuminate the design, risk selection, and health insurance score.
Auto insurance comes in two forms: the traditional insurance you buy from your agent or directly from an insurance company, and the guarantees that are purchased from auto manufacturers and dealers. Both are risk transfer and sharing devices and generically refer to both as insurance. For third-party auto liability insurance has no equivalent in the health insurance, traditional car insurance, examine only collision insurance - insurance covering the vehicle - and not the third party insurance.
Bumper to bumper
The following are some of the commonly accepted principles of auto insurance:
* Empty insurance poor maintenance. If ever an owner of an automobile oil change, car warranty power train is zero. In fact, not only the oil needs to be changed, the change must be done by a certified mechanic and documented. Collision insurance does not cover cars driven strongly by a cliff.
* The best insurance is offered for new models. Bumper-to-bumper warranties are offered only on new cars. As they leave the assembly line, automobiles have a low risk profile and relatively consistent, satisfying the actuarial test for insurance pricing. In addition, car manufacturers usually wrap at least some coverage in the price of the new car in order to foster an ongoing relationship with the owner.
* Limited insurance is offered for old model autos. Increasingly limited insurance is offered for old model autos. The bumper to bumper warranty expires power train warranty eventually expires, and the amount of collision and comprehensive insurance steadily decreases based on the market value of the car.
* Some old cars qualify for additional insurance. Some older cars may qualify for additional coverage, either in terms of used car warranties or higher collision and comprehensive insurance for vintage cars. But this insurance is offered only after careful inspection of the vehicle itself.
* No insurance is offered for normal wear and tear. Brushes should be replaced, brake pads wear out, and bumpers get hits. These are not insurable events. As a new car dealer will sometimes cover some of these costs, we intuitively understand that "paying for it" in the cost of the car and "not really" insurance.
* Accidents are the only insurable event for the oldest cars. Accidents are generally insurable events even for older cars, with the exception of some services work is not.
* Insurance does not restore all vehicles to pre-accident condition. Auto insurance is limited. If the damage to the auto at any age exceeds the value of the car, then the insurer pays only the value of the car. With the exception of vintage autos, the value assigned to the car decreases over time. Thus, whereas accidents are insurable at any vehicle age, the amount of accident insurance is increasingly limited.
* Insurance is priced for risk. Insurance is priced based on the risk profile of both the car and driver. The auto insurer carefully examines both when setting rates.
* We pay for our own insurance. With few exceptions, automobile insurance is not tax deductible. As a result, the fear of increasing insurance rates due to traffic violations and / or accidents changes our driving behavior and sometimes select our automobiles based on their insurability.
Each of these principles is supported by solid actuarial theory. While most Americans can not describe the underlying actuarial theories, most everyone understands the above principles of auto insurance at the intuitive level. Of course, as automobiles are indispensable to our way of life, there is a strong movement nationally accompanied by moral outrage, to change these principles.
Unsustainable Market
By contrast, the same principles are routinely violated in health insurance. To demonstrate this, we will return to the same suburban mother from the first paragraph. She is busy working, driving to and from work, and drive their children to school and activities. Finish each day exhausted, sitting on the couch with fast food. She is obese, has a sedentary lifestyle, poor diet, and you have not taken the time to go to the doctor in recent years. After a single injury does not heal for weeks, it is presented in the emergency room and learns she has type II diabetes. Although type II diabetes is controllable, changing diet and exercise habits and properly tracking her condition takes time and effort, and it's never quite successful in implementing the lifestyle changes necessary.
So the visit of the initial emergency room is just the first of a long list of health care related to uncontrolled diabetes and other problems associated with obesity. If she has an individual or group insurance, your insurance pays for each episode of care, without singling out for a premium increase, and without charging cost participation nor charged to policyholders healthy and medically diligent more. Your coverage continues until voluntarily changes insurance company and / or employers, or become eligible for Medicare. If you are covered by insurance group that can not even pay any premium. Your insurance has not diminished, even though the disease was caused by neglecting her body and she maintains her poor lifestyle even after the disease is known.
This would not happen in auto insurance. This scenario is the auto insurance equivalent of guaranteed access to auto insurance low price, which is responsible for all possible repair, including damage already done, until the day the car falls apart as that is completely unsalvageable (death) or reaches 200,000 miles (Medicare), regardless of whether she even changes the oil (takes care of herself) in the interim.
As a society, do not expect this private car insurance-market, but we hope in the private health-insurance market. In addition, there is a chorus of national and state interests, which continuously pushes us further away from the principles of auto insurance.
The current private market health insurance is not sustainable. Prices have been steadily rising faster than inflation for decades. Each year, insureds use more health services than ever before and more people who have no insurance at all. Most actuaries and other people in the market for private health insurance do not want national health insurance with its bureaucracy and the benefits of a one size fits all. However, we are trying to maintain a system of private insurance, which violates the very principles we know are necessary for private insurance markets.

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Monday, November 26, 2012

Auto Insurance Principles

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