A Plea For Car Insurance Reform

The U.S. car insurance industry needs reform just like health care did. A federally regulated car insurance program could create lower rates and better coverage.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Mar 23, 2021

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Here's what you need to know...

  • American car insurance is in need of reform just like health care went through
  • A federally regulated car insurance program could make lower rates and better coverage possible
  • Simplifying car insurance by providing information in layman’s terms would help people get properly insured

Dear Government Legislator,

I hate to sound dramatic, but this is a plea for reform: car insurance reform. You’ve been able to make changes in the health care system via your health care reform, and even in the credit card industry via the CARD Act. Now you need to direct your attention to an industry that is simply begging for change: the car insurance industry.

Fortunately, I’ve got some great ideas on what can be done to make the system better and give affordable car insurance to all Americans!

Government Official, have you ever considered that nearly everyone has to have car insurance to own an automobile? That’s a lot of people; and for these people, the system appears to be broken with no repair in sight. We need to come up with some ideas on how to change this.

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GREAT IDEA #1: Cars with pre-existing accidents cannot be denied car insurance collision coverage.

If someone gets into an accident, it’s probably going to happen again. Unfortunately, I’ve got to share the road with some people that don’t know how to merge, cannot drive in the rain, or enjoy sending “mad LOLz” from their smartphones while driving and eating a cheeseburger.

So if you screw up while driving and total your car, shouldn’t you be able to apply for car insurance right after the wreck and have the company pay for the damages? You’re taking responsibility now, which is what really matters, right?

It’s only fair. We can’t let those mean car insurance companies go around and discriminate based on well – you know, if a car is drivable or not. So what if the owner wants to buy their car insurance after the wreck and then have the insurance company pay to fix the car?

All of these old fuddy-duddies that think you have to buy insurance before something happens are the same type of people that say I should be responsible and buy health insurance before I have large medical bills or that I shouldn’t max out all of my credit cards – and what do they know right?

(I mean come on, being responsible and buying car insurance before you actually need it is just so pre-bailout thinking – I mean, why can’t they just get with the times? I personally own 6 houses that I purchased in 2005 with no money down and Uncle Sam is paying all six of my mortgages for me. Irresponsible is the new black.)

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GREAT IDEA #2: Children age 26 and younger should remain covered under a parent’s policy.

I’m going to start this one with a scenario. If, for example, little Bobby has failed his driving test four times, flunked out of school, and run over the mailbox — he should be eligible to stay under his parent’s car insurance policy, right?

Well, what if “little Bobby” is not so little? Say, 26 years old? For car insurance purposes, children should be considered anyone age 26 and under, just like for health insurance purposes. Because who makes good decisions under that age, except for the dude who started Facebook?

If it is determined that you are under the age of 26 and make good decisions, fine, but for those that don’t (also called “the majority”), they should be covered by their parents’ car insurance policy.

So what if a 26-year-old can smoke, drink, go to war, rent a car, get a tattoo, get plastic surgery, get a credit card, and get a student loan? If the health care reform bill says that children age 26 and under can stay on their parent’s health insurance policy, then our car insurance reform bill should be the same.

GREAT IDEA #3: Make all this junk simpler to understand.

I mean, come on – why use the term “deductible” when all that means is “money you gotta pay”? That sounds a whole lot simpler. Getting information on car insurance is easy enough thanks to the internet, but understanding it is still a challenge.

And why use so many words? The average person speaks several thousand words per day, yet the average car insurance policy contains tens of thousands of words, most of which will never be read. You know what? People like lists. How about you create lists out of these policies:

  • Do pay your insurance on time.
  • Do have a valid driver’s license.
  • Do have full coverage if our car is leased or loaned by a banking institution.
  • Don’t let your coverage lapse, because we won’t cover you if there’s a problem.
  • Don’t expect the insurer to pay for everything.
  • Don’t be stupid while driving. Accidents lead to higher premiums, which means less money in your bank every month.

Maybe you can make it a Top 10-type thing, and have a special guest count them down, like on Letterman. because let’s be honest here, just between you and me – you know that none of us is going to actually read what’s in whatever car insurance reform bill we come up with anyway (except for maybe some of those self-righteous jerks at Fox News but that’s another story) – so shorter is better, right?

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GREAT IDEA #4: Federally regulate car insurance.

As I’m sure you’re aware as an astute lawmaker, the car insurance industry is currently regulated by individual states. And being the “legal eagle” that you are, you know that U.S. states possess political powers in relation to the federal government, as guaranteed by the Tenth Amendment of the Bill of Rights.

The health care reform bill didn’t do anything to allow more competition among state lines but maybe our car insurance reform bill can. After all, since I am free to roam in my car from state to state as I please, these state laws change.

For example, Michigan is a “no-fault” state, meaning that accidents are covered by an insurance company, regardless who is at fault.

However, if I travel to a neighboring state, say Ohio (it’s for lovers. Or is that Virginia?) or Indiana (the crossroad for America; I looked that u), no-fault laws don’t exist. How wack is that, Mr. Lawman? Why don’t we standardize some of the regulations in this here car insurance industry?

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GREAT IDEA #5: Listen to me.

Here’s hoping we can continue this discussion. As you can tell, I’ve mirrored a lot of this from health care reform so since that went over so well — well, never mind.

Anyway, we could really save some money on some of these ideas. That money could be better spent elsewhere to help our deflated economy. So please get back to me on when we can get started drafting this bill.

Lawmaker Responses So Far:

Response 1

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