The PAID Act would cause car insurance premiums to SKYROCKET


This is not a political post, but rather an economic and financial one.

And please know that I have contempt for about 95 percent of elected things.

That said, there is a very dangerous bill in Congress known as the PAID Act. HR 1270, the Prohibit Auto Insurance Discrimination (PAID) Act, would be the Obamacare of automobile insurance. Just as the so-called Affordable Care Act made health insurance far more expensive than it already was by eliminating almost all underwriting criteria, the PAID Act would have a similar effect on auto insurance.

According to Independent Agent magazine, “this legislation would prohibit automobile insurance companies from using education, occupation, employment status, credit scores, previous insurer information, zip codes, census tracts, or homeownership status in insurance rating or underwriting decisions and give the Federal Trade Commission regulatory authority over some aspects of insurance underwriting.”

Insurance companies are not perfect, and I am not here to defend everything they do. However, their actuaries are like stockbrokers or sportswriters: they evaluate numerous factors in order to forecast outcomes. They don’t just spin out predictions about the hottest mutual funds for 2023 or the winner of the World Series without doing a detailed analysis.

Insurance companies are like any other business: they need to be profitable and price-competitive. Moreover, they are not bottomless money pits with infinite claim-paying resources. Underwriting criteria help them in all three areas. And when these criteria are verboten, they have no choice but to raise premiums dramatically because they don’t know very much about the risks they insure. And if they are not profitable, they can’t stay in business … so they can play claims.

This is what happened with health insurance.

The economics are just the same with car insurance.

Don’t fall for the PAID Act.

You can read the PAID Act yourself by clicking here. It's a fairly short bill.


Doug Newman

30+ carriers ... 40+ states
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