Prices regulate activity. Let’s empower insurance companies to save young lives

The memory is hazy as to the exact year, but it seems ten or fifteen years ago an auto insurer offered a new option for drivers: lower rates if the insurer could track the insured’s driving style. Call it a chip, an automatic spy, or whatever you like, but the insurer would install a device in its customers’ cars. If their driving style is tracked as careful, the cost of insurance will decrease to reflect this.

Reactions to this innovation were lightning fast. Readers can perhaps guess what they were. Big Brother had arrived, Big Business was watching us, our privacy had been trampled on…

The reactions were completely ridiculous. The insurer was simply offering a way to lower insurance costs. No one was forced to buy the option, as some could do so voluntarily. Stating the obvious, prudent drivers will benefit financially from being monitored. And no, it wouldn’t be George Orwell’s Big Brother 1984. In the novel, Big Brother watched everything you did and you had no choice in the matter. In the modern insurance case, the decision to track driving style is a choice. It was voluntary. It wasn’t Big Brother or Big Government or anything big.

What was revealed to be too controversial for the overly sensitive has recently come to mind. This was a column by Nicole Gelinas of the Manhattan Institute. She noted that if we want to be honest about car crashes, we need to acknowledge the obvious: young men are often the cause.

As for what Gelinas reported, is anyone surprised? Young men are more than a little rebellious. In various columns over the years, George Will has opined that the civilizing of young men is one of the most important functions of society. As cliche as it is, when they are young men they think they will live forever. They feel armored. These invincible feelings are deadly when combined with cars.

So what is the answer? One obvious legislative response is to delay the age at which men can obtain a driver’s license. Some will no doubt nod their heads against such a simple solution, but the opinion here is that it’s terrible. One-size-fits-all by government is never the answer, as it treats us as if we are all the same, it is a deprivation of liberty and an insult to us. Indeed, who among us should be compelled not to do that which might harm us? Rather than being one-size-fits-all, parents who prefer not to get late-night calls from hospitals will decide with each child when it’s okay to let them get behind the wheel.

As always, the government is redundant on safety issues. All this, and Will emphasized that the death penalty gives the government too much grandeur. So true and it seems to apply to driving as well. Government should decide less, not more. Let’s not increase the power of government even more to solve a problem (young men driving recklessly) that reasonable people can solve. If men are careless, parents should make a decision about driving accordingly. So should insurance companies.

When you think about it, the insurance companies could do so much here if reasonable people could get over their irrational fear of Big Brother. Or stop misapplying it. Businesses that monitor their customers and learn about their customers are as old as business. Thank God for this truth. If anyone doubts the genius of customer surveillance, they need only read books about the old Soviet Union and the state of restaurants. Soviet “restaurants” (and business more broadly) were completely uninterested in their customers, and it shows. Restaurant patrons were told what they would be served, decades-old menus be damned.

Stop and think about what insurance companies can do for road safety. These companies are what Canadian economist Reuven Brenner calls “price takers.” By putting a price on any kind of activity, they regulate the activity. What about young men? How about parents choosing to authorize insurance companies to install all kinds of tracking devices in cars that will be driven by young men? The benefits of this kind of volunteering would be enormous. If young men drive recklessly, insurance companies will know. And accordingly, they will increase the cost of insurance, insurance that is often paid for by parents. Parents control the bag, which means they control whether young people will drive or not.

The thing is, young people want to drive. Which is the point. Price signals will strongly govern their ability to. If they are reckless, the cost of driving will skyrocket. And they will lose their driving privileges. The problem is solved by the free market. This is something to think about.

Leave a Comment