Raise the Hammer

I think it is an interesting concept. But there are some things to consider. For example, a couple of thoughts...

• Where I drive, not just how much, influences risk of a claim and therefore the rates I should pay
  • A 10% drop in driving distance in the GTA might be associated with a larger risk reduction than would a 10% drop in driving distance in more rural parts of the province (and I recognize that people in certain areas may not be able to cut back on their driving as much)
  • Would insurance companies try to account for this? They're good at rating premiums based on risks associated with where people live, so there's an argument for rating them based on where people drive too.
    • We're probably talking about GPS tracking technology though, and that will cost money (and likely create discomfort among some drivers)
• We have to keep in mind that under Ontario's system, insurance companies are corporate, and do have a profit motivation
  • If average km driven does drop, risk will be reduced and presumably save companies money on payouts for claims, which they can pass along to customers - this is the reason drivers can save money by driving less
  • If average km driven does drop, what will happen if the associated drop in payouts combined with reductions in premiums cuts too deeply into corporate profits? Will that mean the rate reductions will not last long? Will high-km drivers face massive increases in their rates to compensate?

Forgive the cynicism, but those will be real concerns, and there are probably more.

Many people pay a lot of money for insurance, while never (or rarely) filing a claim, yet they end up paying more and more because of factors beyond their control. Unless this kind of system is context specific and there is some reasonable expectation of a long-lasting benefit for cutting back on driving, I think it will be viewed with skepticism.

Comment edited by ScreamingViking on 2013-05-02 08:50:39