Having seen my Elephant Auto insurance premium more than double from one year to the next in 2016, a company with whom I had made no claims since joining approximately 5 years earlier, and having committed no traffic offenses in about 20 years, and having attempted to negotiate a reasonable reduction in my bill with Elephant Auto representatives, and having discovered that automobile insurance rates in general have recently become inexplicably wedded to credit scores, I decided to contact in writing my state governmental representatives, roughly 6 in number as well as I could determine, for redress. I have no credit history and, until the above, have seen no reason to establish any. However, I do like the idea of being allowed to drive.
Out of the six officials, I received brief responses from three: one from Del. Christopher T. Head, two from Rep. Bob Goodlatte, and three from Sen. Mark R. Warner. All three passed my inquiry along to the State Corporation Commission. All 3 assured me that they would pursue the matter and keep me informed. Warner lost me with his third and final response in which he thanked me for showing an interest in the Clean Water Act. Say, what? I like clean water as much as anyone, but my letter about being forced to pay grossly inflated insurance rates in order to drive was the only time I ever wrote to Warner. Needless to say, it was to the point and I made no mention of environmental issues.
I subsequently received two separate responses from James R. Heretick of the SCC, one prior to and one after an investigation, which basically stated that insurance companies have a right to charge any amount they wish, so long as it passes some sort of guideline he called “file and use” rating laws, which didn’t strike me as being very stringent, to say the least. And although these rates “may not be excessive”, among other things, he evidently didn’t consider a 105 percent rate increase, per his calculations, excessive. Along with other cryptic expressions offered as excuses for massive rate increase, considerable attention was paid to a process encompassed under the term “algorithm”, a new magic word that I’ve seen a lot of lately and which basically provides large business concerns justification to jack up their prices. Sounds very scientific, doesn’t it? At least as much as snake oil. As to that I will say this: You can prove just about anything with an algorithm, using carefully crafted statistical parameters and mathematical formulae, especially with negligible to nonexistent oversight. Say you want to increase profits. You know that if you increase them too much on everyone you serve, there will be outrage, people will abandon your business en masse and, unless you are part of a business model considered “too big to fail”, you might even end up out of a job. Enter the algorithm. You pick a demographic; obviously, it has to be a minority. People who wear plaid shirts, golfers, left handed people? Nah. Not selective enough. How about people who don’t use credit? Bingo! Just about everyone and her brother has established credit so that they can live beyond their means. Luddites who haven’t indentured themselves with electronic usury and credit serfdom should be punished for their effrontery! Also, since this can be implemented on an industry wide basis, what can they do about it? They’re a minority. They’ll have to pay up—if they want to keep driving.
The pseudo-scientific approach can always be expected to wow those officials and politicians who supposedly represent the interests of the populace, because these individuals are much too busy vying for promotion and/or campaigning to bother with trying to decipher the jargon, or the authenticity, of the algorithm. Also, it doesn’t hurt when these individuals benefit directly in some way from the profitability of the industry, whether through investments or campaign contributions. In addition, there is an obvious incentive for combining the insurance and credit industries in such a way, especially if the two are already intertwined, so that their profits, à la the ACA, can be government enforced.
In his initial response to my complaint Heretick informed me that auto insurance in Virginia isn’t mandatory. He called this a “financial responsibility” state, pointing out that you can opt to pay $500 per vehicle, which provides zero insurance coverage, to the state for permission to continue driving. And there are other negatives imposed on such a one who would make that choice. Most sane, rational people would consider this $500 per vehicle fee a punishment for not acquiring insurance. Aversion therapy. Applying the same logic as Heretick uses, during the witch trials you also had options: you could continue to be dunked in the water, or you could confess. Come to think of it, that does make a pretty effective business model, doesn’t it?
I have no aversion to the concept of insurance; in fact, I think it’s a good idea. But I take exception when the premium more than doubles from one year to the next for no legitimate reason. And as far as “financial responsibility” is concerned, I have always made sure my vehicles had adequate coverage, and that the bills were paid on time. In fact, my sense of financial responsibility even extended to other areas of my life, such that I was never enticed into living beyond my means by acquiring credit.
But, according to Heretick, “Many insurance companies believe that credit-based insurance scores help them to underwrite their risks more precisely.” He went on to describe in considerable detail the importance placed by insurance companies on an individual’s “credit-based insurance score.” To me, the word “score” implies some sort of game. Since I have never played the credit game, I don’t suppose I have a “score”, and I fail to see the logic of including me in a game I have never played, which is to my disadvantage since I have no score.
Of course, I shouldn’t be surprised about all of this, and I wasn’t. After all, the federal government stays in debt by borrowing money from the Federal Reserve. Why should a mere individual be afforded the luxury of attempting to live debt free?
-Submitted by R. A. Palmieri
