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Law Educator, Esq.
Law Educator, Esq., Lawyer
Category: Family Law
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Experience:  Experienced attorney: Family law, Estate Law, SS Law etc.
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Hi Paul! I have asked you a question before. Here is my new

Customer Question

Hi Paul! I have asked you a question before. Here is my new question:

I read a blog about insurance, car insurance in particular. It forwards ideas, concepts that seeks to "change" the car insurance industry as we know it today. The blog's site is: http://theinsurancecrusader.com.

I plan to join this blogger's "crusade," but before I spend time and possibly money, I'd want to know a lawyer's (such as you) opinion as to the feasibility and potential, if any, of the ideas, concepts. being forwarded. Please read the article in the blog I mentioned above including a few relevant comments which the author replied to, and tell me what you think.

Thank you,

Leo Blanco
Submitted: 1 year ago.
Category: Family Law
Expert:  Law Educator, Esq. replied 1 year ago.
First off some of what he is saying is not new and actually is being done. There are insurance companies that give customers rebates every year they are not in an accident or reduce deductibles every year they are not in an accident. As far as driver insurance, the problem is that your Mercedes and my Corolla have very different values, so why should I pay more to drive my Corolla on the odd chance that someday I may drive your Mercedes one time (facetiously, but you see the point). There are some similar concepts to this driver insurance, such as many policies would cover you on any other car you drive besides the cars on your policy. For example, if you are driving a rental car or a friend's car, your policy would cover you for doing so.

Before you invest any money here, which I wouldn't suggest, also realize that the insurance company is tightly regulated and insurance companies have to comply with both federal and state regulations on what they can and cannot do and in many cases you would not be able to change the state laws, so this guy's very nice sounding theories would not ever be able to happen. For example, forming a non-profit with a bunch of other people and pooling your money, fine you can try that one. How much are you willing to pool? Say you want to pay $500 into the pool, you would need 20,000 members just to have $10M in the pool. Now $10M sounds like a lot, but it really is not in the insurance game and many of these insurance companies actually have "reinsurance" which is a policy the insurance company has against a large loss. So what happens if you have a catastrophic event in AZ, such as a wild fire and 10,000 of the 20,000 members of your pool each lose their $30,000 car, where does that $300,000,000 come from because your pool only has $10,000,000. So in reality his alleged pool would have to be immense and the buy in could be tremendous for it to work.


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Customer: replied 1 year ago.

Hi Paul, thanks for your answer.


 


I have discussed over and over, argued back and forth with the author of the blog and so I thoroughly understood where he is coming from.


 


There are some points in your answer I would like to argue a bit further. For instance, rebates. Yes there are some companies that give rebates when you have no accident in the year. But once you get into an accident, they raise your premium, right? So they're taking it back! But this guy is not talking about rebates - he is talking about getting your money back after your driving life is over; meaning at age 70, 80, 90 or for some other reason you can no longer drive and you have money left in the pot (your individual account).


 


One other point is about the Mercedes vs. Corolla. I see your point there. But the guy (I should refer to him as the "crusader") had specifically said that your premium will be based only on one car, which is the most expensive car. If you have other cars no matter how many but of lesser value, you don't pay a cent of premium on those because his idea is "driver insurance," not car insurance. Yes you may be driving your friend's Mercedes one day, but that is between friends to talk about since "driver insurance" is individual insurance in nature. However, as I understand it, in terms of liability, the "Organization" works in exactly the same way as a conventional insurance company today. As for a car rental company, they should ask the renter what his liability coverage is and they'd match that with a car that does not exceed in value.


 


I can't help but say that a "catastrophic event" like you mentioned is a bit of pessimistic view. Of course anything can happen. But suppose that kind of event happens, wouldn't these companies we are dealing with today suffer the same calamity that would force them to declare bankruptcy thereby avoiding payments to their policyholders?


 


Now let me take the opposite view. Suppose the "organization" survives the first year and up to the tenth year with only minor claims from less than one percent of the members, don't you think the crusader's concept would work? Suppose again, that the membership doubled, tripled or even hundredfold; don't you think the government would pay attention to this guy? I suspect though that this crusader is thinking of a government subsidy to start his organization. Perhaps it's a pipe dream! But with technology today, anything can happen too. Look at Facebook - it spread like wildfire all over the world even though there was no monetary benefit in being a member of it.


 


Well anyway, I'm not overly optimistic about this but I sure like the idea of getting back my money when I can't drive anymore. However, by the time this idea would see light, if ever, I'd be a dead ball.


 


I won't expect any more elaboration from you but if you do, I will appreciate it.


 


Thanks again,


 


Leo Blanco

Expert:  Law Educator, Esq. replied 1 year ago.
I am not denying that any of these things do not sound like a good idea, but what this guy wants to do has to be approved by the insurance commissioners in each state as well. Keep that in mind. If he is not approved by the various states, this does not count as insurance as far as the state is concerned for mandatory insurance coverage. What he is talking about is not much different than a self insurance type bond, but the problem is this "group" will have to be bonded and licensed to be approved by each state.

As far as the catastrophic issue, ask the people of Louisiana, Missouri, Alabama, MS and even California and Arizona and Nevada where between floods, tornadoes and wild fires there was catastrophic loss and it seems to be happening with much more frequency in the last several years and you have to be prepared for that and the insurance companies in existence, like I said, have special "reinsurance" where they are covered in these types of catastrophic events with the other reinsurance company picking up the payment.

States are very vigilant on insurance issues to where they will make sure a company is financially sound or has a bond to prevent them from going bankrupt.

The crusader's ideas are very good in theory and I am not saying they are wrong and they could work if he is properly regulated and licensed in the state.
Law Educator, Esq., Lawyer
Category: Family Law
Satisfied Customers: 88627
Experience: Experienced attorney: Family law, Estate Law, SS Law etc.
Law Educator, Esq. and 5 other Family Law Specialists are ready to help you
Customer: replied 1 year ago.

Paul, I am quite satisfied with your answers so I want to give you a bonus of $25 to be taken from my account balance.


 


By the way, my question was not about family law but rather insurance law as you have seen. But there was no insurance law category in the list. Anyway I might be coming back in the future with more questions on this subject and I would like to introduce you to the author of the blog we are discussing. Thanks again.


 


Leo

Expert:  Law Educator, Esq. replied 1 year ago.
Thank you very much that is much appreciated.

That would be great, we would love to have you as a return customer.

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