Driving without insurance

A loyal S&M reader asks:

Why should driving without insurance be a criminal offence? Surely it's no business of the state to compel us to enrich private companies. And the individual is the best judge of what risks he wishes to take or not. It's not a criminal offence not to buy home contents insurance. What's different about car insurance?

The answer is that if we were free to buy car insurance or not, the people who wouldn't buy it would be those for whom insurance is expensive: young people, bad drivers, or those with a record of accidents or driving offences.
Worse still, these would be the sort of people who are disproportionately unlikely to be unable to compensate other drivers, should they hit them - which is where the parallel with home insurance breaks down. As they are likely to be young, or to have spent their money on an expensive car, they are less likely than the average to have the cash with which to pay compensation. And they are less likely to be able to borrow the money too. People who are reckless drivers are likely to be reckless in other areas of life. Which means  they will disproportionately be bad credit risks, perhaps even bankrupts.
And then there's the moral hazard problem. Emboldened by knowing they will be unable to pay others for their accidents, these people will become even more reckless drivers, and so even more likely to have prangs.
Forcing these people to buy insurance ensures that they pay others for their recklessness, whilst handsome no-claims bonuses and excess payments reduce the moral hazard problem.
Indeed, the problem might be that the penalties for driving without insurance are too small. The sort of people most likely to drive without insurance are precisely the reckless and those with short-term time horizons who are most heedless of criminal penalties. Perhaps we need savage punishments to deter them.
This raises a broader political point. Perhaps a minimal state would lead not to responsible people governing themselves well, but rather to the feckless and irresponsible predating upon others. It's not just welfare claimants who are parasites. Maybe a libertarian world isn't so attractive. after all.

Comments

[Kit]

In a libertarian world the roads would be owned by "responsible people" as they would have an incentive to keep the roads safe from the "feckless and irresponsible". Their incentives would be far greater than the incentives in the current state system.

[kinglear]

Harsher penalties? Pull the other one. I live in Scotland where we have Sherrifs that deal with most criminal cases, several of whom I know personally. Their current complaint is that they put away people for 8 years or so for GBH, only to find the same people back in front of them 2 years later on the same charges. As theSherrifs say, the politicians have let the criminals out to make way for the people who are to serve 3 or 4 months for minor offences. Its a serious problem north of the border.

[Mike Woodhouse]

It should not necessarily be compulsory to have insurance. One could, for example, be permitted to place an approved sum in escrow as an alternative (a couple of million, say?). Or we could allow the death penalty in civil suits. Or slavery for those unable or unwilling to pay compensation. Lots of alternatives are available if only politicians had a little imagination.

[dearieme]

Cut their goolies off.

[ad]

"Perhaps a minimal state would lead not to responsible people governing themselves well, but rather to the feckless and irresponsible predating upon others."

Perhaps a minimal state would include a police and judicary. As in Victorian times.

Mike: "Lots of alternatives are available if only politicians had a little imagination."

How true.

[Sam]

Mike:

One can, no? (Road Traffic Act 1988 as amended: one may lodge 500,000 quid with the Accountant General of the Supreme Court in place of compulsory insurance).

[Don]

ad,

I'd personally stray away from suggesting the Victorian approach to crime and order was somehow better than ours. If someone style your property in Victorian times, you'd probably stand a better chance of catching the thief employing a bounty-hunter than contacting the police. I think I would prefer just paying my premiums.

That said, I am sure there are any number of ways that the insurance system could be made fairer.

[Chris B]

The questioner misses the answer to the question by omitting the fact that you're only compelled by law to have *third party* insurance in order to compensate other people; if you wish to destroy your own car and have no means of replacing it then you're free to.

Moreover, you're obliged to carry out an MOT in order to drive on the road, which also enriches a private company (the garage that carries the test out) so that bit is wrong too.

[Jim]

"It's not just welfare claimants who are parasites."

Wash your mouth out, you sorry excuse for a left-winger.

[Bruce]

Isn't "safety" always the reason that our liberties are eroded? We give up some liberty to guard us against the feckless, the irresponsibly and outright nasty? From ogligatory car insurance to CCT cameras to 42 days' detention without charge. Finding the right balance is the real issue and about that there will rightly be an ongoing debate.

[f0ul]

There is no excuse for forcing the entire population to have insurance because those who are the biggest risk, (the unisurable, criminal and feckless) drive without insurance anyway!

Why should I, with my 10 years no claims bonus have to buy car insurance by law, when I am able to drive over 300,000 miles without incident?

[reason]

Because it ensures other people that when you are now too old and feeble to drive they will at least be compensated for damages when you run in to them.

If the roads were all private (and so the others we subject to private suits), I'm absolutely certain either the rules would be tougher still, or you would have to enter at your own risk (like a paraschute jumper).

[GeoffH]

"And the individual is the best judge of what risks he wishes to take or not"

The questioner must be mad. It's not "the individual...that bears the risk" but the poor, unknowing sap he drives into.

[Charlieman]

An interesting post that makes you think about bloggers who drive without insurance and the value of their comments.

Classical liberalism requires us to regard third parties when we act; if our acts harm them, we are responsible for reparation. Most of us don't have millions in the bank so insurance is the way that we maintain our obligation to repay victims. When motorists have not thought about their personal responsibility, compulsory insurance provides protection for third parties. We don't have a state insurance company in the UK; there are thousands of insurance bodies who will provide a quote "based on you and your risk".

[Greg ohio municipal courtlaw]

I believe the intent of the statutes were good. However, they have gone to far. We now make criminals of everyday citizens who are otherwise productive, contributing members of our society. I believe the statutes should be graduating offenses with increasing penalties and sanctions for the number of offenses.

[Greg ohio municipal courtlaw]

I believe the intent of the statutes were good. However, they have gone to far. We now make criminals of everyday citizens who are otherwise productive, contributing members of our society. I believe the statutes should be graduating offenses with increasing penalties and sanctions for the number of offenses.

[Car Insurance]

While driving with out insurance is considered as crime and maximum penalties for driving without insurance are: 6-8 penalty points and discretionary disqualification; and £5000 fine.