Posted by
elko-mike on Tuesday, September 15, 2009 9:23:53 AM
Imagine what would happen if the government did to auto insurance what it has done to health insurance. First they would pass laws mandating that the auto insurance policies cover the cost of fill ups, oil changes, and tune ups. That sounds like a good deal -- besides premiums are expensive and the executives in those companies get HUGE bonuses. Lawmakers have to take care of the little guys who can't take care of themselves.
What next? Well since gasoline, tune ups, and oil changes are free (strictly speaking they are not, but appear to be so to the consumer of these services) then people who have auto insurance will use more of these things. Predictably, shortages of gas, oil, and mechanics will occur. Shortages drive up the price, which adds to the cost that insurance companies bear.
In response insurance companies will raise the price of their premiums so that they can make a profit. Fewer drivers will be able to afford insurance. Drivers who can still pay the premiums will complain to lawmakers about its cost. Lawmakers will decide they need to create a public option that sells auto insurance.
The original problem was created by government actions that mandated benefits. The actions badly distorted the free markets and the results were predictable. The right fix is to remove the free market impediments rather than adding more government burden or worse still eliminating the markets altogether.