This time, safe drivers are subsidizing high-risk drivers. Auto insurance-providing Arbella Insurance Group is suing the Massachusetts insurance commissioner over the new managed-competition rules, specifically the one that allow companies that begin to sell insurance to the Commonwealth's to avoid issuing high-risk policies for two years.
Arbella claims that this puts incumbent providers at a disadvantage. Issuing high-risk policies adds as much as $150 to safe driver policies, it says.
That's outrageous. Forget about the inequity between incumbent insurance providers and newcomers. What about the inequity between high- and low-risk drivers? If Arbella's claims are true, insurance companies are forced to cover high-risk drivers at a loss on each high-risk driver. In order to make a profit overall, insurance companies raise rates on low-risk drivers.
In other words, low-risk drivers subsidize high-risk drivers.
One might reasonably ask why a pedestrian and bicycle advocate cares about the distribution of insurance costs among car drivers. Three reasons:
- I live in Newton, not New York City. I am also a driver. (A very safe driver, in fact.)
- I don't have access to numbers right now, but I supect high-risk drivers are also more likely to be involved in crashes that involve pedestrian and cyclists.
- We need to get to a system where private automobile travel is not subsidized, where each driver pays his or her fair share of all the costs related to his or her travel.