Suckers List: How Allstate's Secret Auto Insurance Algorithm Squeezes Big Spenders (themarkup.org) 123
Insurers are supposed to price based on risk, but Allstate's algorithm put a thumb on the scale. From a report: Seven years ago, Allstate Corporation told Maryland regulators it was time to update its auto insurance rates. The insurer said its new, sophisticated risk analysis showed it was charging nearly all of its 93,000 Maryland customers outdated premiums. Some of the old rates were off by miles. One 36-year-old man from Prince George's County, Md., who Allstate said in public records should have been paying $3,750 every six months, was instead being charged twice that, more than $7,500. Other customers were paying hundreds or thousands of dollars less than they should have been, based on Allstate's new calculation of the risk that they would file a claim. Rather than apply the new rates all at once, Allstate asked the Maryland Insurance Administration for permission to run each policy through an advanced algorithm containing dozens of variables that would adjust it in the general direction of the new risk model. Allstate said the goal of this new customer "retention model," which it was rolling out across the country, was to limit policy cancellations from sticker shock.
After questions from regulators, the insurer submitted thousands of pages of documentation on the price changes -- including data showing how they would affect each individual customer, a rare public window into details of its auto insurance pricing that have otherwise been kept behind a wall of privacy, labeled a trade secret. When The Markup and Consumer Reports conducted a statistical analysis of the Maryland documents, we found that, despite the purported complexity of Allstate's price-adjustment algorithm, it was actually simple: It resulted in a suckers list of Maryland customers who were big spenders and would squeeze more money out of them than others. Customers who were already paying the highest premiums, of about $1,900 or more every six months, and were due an increase would have borne price hikes of up to 20 percent. But drivers with cheaper policies, who deserved price jumps that were just as big, would be charged a maximum increase of only 5 percent. Customers in the 20 percent group were more likely to be middle-aged.
After questions from regulators, the insurer submitted thousands of pages of documentation on the price changes -- including data showing how they would affect each individual customer, a rare public window into details of its auto insurance pricing that have otherwise been kept behind a wall of privacy, labeled a trade secret. When The Markup and Consumer Reports conducted a statistical analysis of the Maryland documents, we found that, despite the purported complexity of Allstate's price-adjustment algorithm, it was actually simple: It resulted in a suckers list of Maryland customers who were big spenders and would squeeze more money out of them than others. Customers who were already paying the highest premiums, of about $1,900 or more every six months, and were due an increase would have borne price hikes of up to 20 percent. But drivers with cheaper policies, who deserved price jumps that were just as big, would be charged a maximum increase of only 5 percent. Customers in the 20 percent group were more likely to be middle-aged.
Isn't this what every business does? (Score:4, Insightful)
Find the price insensitive spenders and convince them of the "value" you provide - while competing with the rest of the market for the low margin masses at the just barely profitable point ?
Or is there some social ethics that says insurance cost must be actuarial tables + 10% overhead + 5% profit (or whatever) ? Is this the "should have been" price referenced in the summary?
It seems like there actually is the reverse happening here where we have a progressive policy to charge more to the wealthy and lower the premiums for the masses.
The price you should have been paying is the price you agreed to pay - there are plenty of auto insurance options on the market.
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"Or is there some social ethics that says insurance cost must be actuarial tables + 10% overhead + 5% profit (or whatever) ? "
Yes there is. We require anyone who wants to drive to buy auto insurance. The usual consumer tool to avoid paying too much ("That's too expensive I am not going to buy it") is not available to purchasers of auto insurance.
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The usual consumer tool to avoid paying too much ("That's too expensive I am not going to buy it") is not available to purchasers of auto insurance.
Say what?? Auto Insurance is a highly competitive industry with lots players. If you current provided tells your rates are going up and there isnt a reason - like you just wrapped a car around a telephone pole or maybe traffic patterns in your area have changed a lot because of new development you should ask questions! Oh and don't ask your current provider questions. Contact your broker/general agent! If you don't have one stop being a tool, don't EVER purchase an auto policy directly from a provider!
Se
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There's also a danger in fixing profit as a percentage of cost, because the only way to increase the amount of money you make is if you can make the costs go up across the board. Normally this is bad for a company because people don't want to
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We require anyone who wants to drive to buy auto insurance.
Or prove financial responsibility. But just try to present proof of a bond placed in escrow for this to the officer when they pull you over. The state makes it very difficult to do anything other than paying the traditional for-profit insurance companies. Holding a bond of the requisite liability amount can be a good idea. Once purchased, you are covered for life (or until you have to pay out) and you collect the interest payments. Not the insurance companies.
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None of those are options where I live,
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Re:Isn't this what every business does? (Score:5, Interesting)
People think insurance is like savings. They pay their fees and at some point they make a withdrawal. In reality it's more like some strange credit system where you pay an interest payment on a balance that doesn't exist and if you dare to withdraw the money you paid into it for any reason you risk having your service canceled due to increased risk levels determined by algorithms that may or may not have any real world accuracy.
Largest fucking scam in history.
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My Statistics instructor at the college was an actuary in his day job. He told the class, "The insurance industry is the largest form of legalized gambling in the country, and in the US the house has rigged it so that everyone is required to play."
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This isn't charging the wealthy more. This is charging idiots and suckers more. Maybe there is an argument to be made for letting scumbags fleece the ignorant, but anyone with a functional moral compass will not be making that argument.
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No, it's charging the expensive more.
You don't pay $7500 every six months for car insurance if you're a good driver. It usually means you're a risky driver and already have had a few at fault accidents and that's why your premiums rose.
These are the people the insurance compa
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Wrong. Simply wrong, please at least read the article. This is charging more for the same risk level, depending only on willingness to pay more.
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Fuck people are stupid here. I've been avoiding slashdot but today I was dumb enough to come back.
what a racket they have there (Score:2)
$7500 every 6 months? (Score:3)
Who the hell can pay $1300 a month for car insurance?
Re:$7500 every 6 months? (Score:4, Informative)
Who the hell can pay $1300 a month for car insurance?
Do you really expect to pay the same amount for car insurance for a $12k Nissan Versa as for a $338k Ferrari 812 Superfast?
Even if the driver risk was the same, the replacement costs are not exactly equal.
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Sure, but how many people actually own quarter-million dollar+ cars?
My street's full of BMW's and I doubt any of them are paying more than $2500 a year for insurance.
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More importantly, why not just save that $15,000 a year to buy a new car every year? Is this someone who tends to total their car every year?
Comprehensive auto insurance only makes sense to me when you can't afford to replace the car if it's wrecked. Otherwise it's just a bad gamble where the best you can hope for is to break even.
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You can get away without collision or comprehensive insurance, but you definitely don't want to (and legally, can't in any state I'm aware of; it's grounds for revocation of your license at a minimum) drive without liability insurance. Sure, if you crash your car into a boulder and all that's hurt is the car and/or you, insurance need not be involved. But if you're at fault in an accident that causes massive damage to others and/or medical bills for others, you'd better be able to pay.
How would you feel if
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I'd be more interested comparing with other states (Score:2)
I was paying about $650 a year for my high deductible no accidents (that were my fault) with Allstate, but in (non-NYC) NY.
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According to the first search result [iihs.org], "In 2018, the rate of crash deaths per 100 million miles traveled was 2 times higher in rural areas than in urban areas (1.68 in rural areas compared with 0.86 in urban areas)." Assuming non-fatal accidents aren't too wildly opposite, why would auto insurance companies charge 20% as much for living somewhere with 200% likelihood of an accident?
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Assuming non-fatal accidents aren't too wildly opposite
That's a hell of an assumption. If I was guessing, is bet that volume of non-fatal accidents is exponentially higher in urban areas. It would be interesting to see a similar "per 100 million mile" comparison for non-fatal accidents, but my quick search didn't find one.
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One of the drivers of increasing insurance costs is how much a fender bender costs to fix with current cars. Bumper get scratched, $3k+, Airbags get triggered, same thing. And it's getting worse with sensors all over the car. Those type of accidents happen a lot in the city.
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Because you're not comparing the right numbers. "Crash deaths" doesn't say there was another car involved, and if the policy holder is dead... I'd imagine there are more accidents not involving another car, which means anyone without full coverage is costing them nothing. I also doubt the overall number of accidents is higher. There are simply more deaths due to there being no one around to report the accident and no medical care within 20 miles.
Buyer beware? (Score:2, Insightful)
"Adulting" means staying on top of your finances, and that means reevaluating services like these at least once a year.
Allstate is just doing what any company SHOULD be doing; making as much money as they can over the long term. If I have any criticism for them, it's that they were oblivious enough to trigger a negative emotional reaction unnecessarily.
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"Adulting" means staying on top of your finances, and that means reevaluating services like these at least once a year.
Allstate is just doing what any company SHOULD be doing; stealing as much money as they can over the long term. If I have any criticism for them, it's that they were oblivious enough to get caught.
FTFY.
Hyperbole can be satisfying, but it's usually wrong. Did consumers have choices? Did they willingly stick with the company, despite the alternatives ( which were no doubts cheaper )? Then it's not theft, it's consumer choice.
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If I show up at a hotel that should have been priced at $100 a night, and the night manager says, "Yes, we should have charged you 100 a night, but there was an error in the computer and
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"Caught" in the sense that it triggers public outrage, thus harms the company's ability to compete.
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It's different because the government didn't tell those people they'll lose their license if they don't buy that plane ticket or hotel room.
Fake outrage clickbait (Score:3)
If you're paying over $20000 a year in insurance then either they've assessed you as an accident magnet or you're driving a rather expensive vehicle and they're probably right to assess you as not very vulnerable to sticker shock. The note about the policy holders being middle-aged tips it towards the second. Whence the outrage?
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You like commercials. Stupid. (Score:2)
-I like a serious insurance company whose commercials are actually about insurance instead of cheap shock humor
Oh yeah I'll bet commercials are a good way to pick insurance companies. You must save a ton of money with all the honest and useful information you glean.
I've always felt like Allstate must be a great company. I mean why else would award winning actor Dennis Haysbert have to fight back tears talking about homeowners insurance.
I fucking hate this site anymore
You should be mad but ur dumb. (Score:2)
My mom buys overpriced crap and if there is a chance for a bunch of stupid add-ons she'll grab those too.
Her insurance rates have always been higher than mine despite the fact I'm younger, male, get speeding tickets, crash into wildlife and all that jazz.
She pays more because she is dumb.
I'm a sucker (Score:2)
After feeling a little better, I noticed the steepness and sought a quote from a competitor. I cut my insurance by more than half. Shame on me, I guess.
"Liberty Mutual customizes your car
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Hey now... someone has to pay for those new Emu commercials.
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All for the Profit (Score:2)
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that doesn't solve it, though. Every company with "mutual" in the name is owned by the policyholders, yet they show the same behaviors.
I used to have Amica, a mutual insurance company.
Then they started jacking things up 20% every year, and I saved a fortune by switching.
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Every company with "mutual" in the name is owned by the policyholders
Huh. I was not aware of that fact. In spite of my best efforts, I learned something new today.
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YOU should have to pay out of pocket.
One of two things will happen. One: Nobody aside from the wealthy will drive. Two: Everyone currently on the road keeps driving. And when they run you over riding your bicycle, they just walk away from the damages, not having sufficient funds to pay.
The first option really isn't that bad. It'll get the shit-boxes off the road and put most commuters on transit systems. But the poor will scream, "No fair!" The second isn't so bad either. You carry a no fault policy to cover injuries and damages that you migh
If you're paying $7500/year for insurance (Score:2)
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scourfish opined:
You really have to to go out of your way to be a bad enough driver that you pay $7500/year in insurance.
Or else you drive a McClaren (or a Masarati, Lamborghini, etc.) and have a collision damage rider ...
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Don't assume that someone who owns an expensive car is necessarily able to afford the high insurance on it.
I can't find it right now but I think the excellent YouTube channel VINWiki did a video specifically talking about such an incident.
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Pretty sure the argument there is, if you're in that situation, you can sell your car for a car half the price, and afford insurance.
Cars aren't some sort of unsellable resource.
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If the bill to replace the mirror was $3500 then someone got screwed.
I know a bunch of panel beaters quite well. If I walk in with a dented door (1 panel, reasonably easy work) seeing a bit of work then paint, the bill will be about $200.
They quite happily tell me that if I put it through insurance, they will charge the insurance company over $1000.
Why? because they can.. and it is never questioned.
And these are people who have been in business for a long time, treat customers well, stand behind their work
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>I had artist friends who charged me a fraction of what they charged others for pieces. If you have a new even near luxury car, paint matching is non-trivial.
I worked with a wide variety of paints for years and people are lying to you although probably not intentionally. It probably feels difficult to them because they don't understand paint.
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Like an Amazon Go grocery store (Score:2)
Once the database learns what you prefer, it jacks up the price enough that you still buy it, but they maximize their profit, and they "price" things you won't buy cheaply, so that you don't realize you're getting ripped off.
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Does Amazon Go really do that? I've heard rumors, but haven't seen any test (either performed and published or self-performable) that confirms that. In fact,most tests seem to indicate the opposite.Otherwise, does anyone have good ideas to mitigate this?
Google "Price Sensitivity" (Score:2)
This is fairly old news, but it bears worth repeating since this common business technique is unintuitive to most people.
The intuition of most people is that loyalty to a single company means that they should be treated better. In the insurance world, this "better treatment" is usually expected in the form of "lower rates".
The reality is that insurance companies price the bulk of their service based on something called consumer price sensitivity. That is, they charge the same person more money on a (usually
Once again (Score:2)
Insurance is nothing but a scam. All insurance, not just car insurance.
Insurance is not there to protect you. It's to make the companies money.
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Auto insurance companies generally make around 5% profit on a good year
According to this [investopedia.com], Allstate's profit varied between 6% and over 12% in successive quarters in 2017.
Regardless, the OP's point still stands. Insurance, in all its forms, is a scam. Someone further up gave a better example of you paying for something which doesn't exist and if you try to use it, are charged more for using what you've already paid for.
I've been with Allstate for 15 years now. (Score:2)
The only thing I can say about them is they raise their rates every year despite my never having a ticket, or an accident, and the value of my vehicle going down.
Algorithm (Score:3)
"Allstate asked the Maryland Insurance Administration for permission to run each policy through an advanced algorithm containing dozens of variables that would adjust it in the general direction of the new risk model. "
This is called Predictive Modeling. I work for an insurance company and we do the same thing. Every time a policy gets rated their are 99 different variables that get run through the Predictive Model. Their are only a select few that know what all the 99 variables are (all Actuaries). I know one of them is credit score (yes we check individuals and companies against their Experian Credit score). We also take into account past payment history (have they paid their bills with us), We also take into account the number of and amount of claims. The Predictive Model then sends back a singe digit (Model Rate Factor). This number is then multiplied by the base rate and that is the persons premium. So. if the number is positive their premium goes up. If it's a 1 their premium stays the same, if it's a negative number their premium goes down. New customers go through the same Predictive Model but variables vary slightly since they are not current customers.
I think pretty much every Insurance Company nowadays are suing Predictive Modelling systems. Ours is home-grown and built upon SAS.
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Very informative, hope someone mods this up.
We are sometimes naive (Score:2)
Speaking as a middle-aged guy, it's easy to be naive about companies. Time goes by fast, and you want to simplify your life, so you aren't continually shopping around for the best offer.
Mobile phone provider? ISP? Car insurance? Whatever it is, you once picked it for good reasons. You want to believe that companies will value loyal customers who don't swap providers at the drop of a hat. So you stay with the companies you once picked.
Then some unscrupulous MBA-type with his spreadsheet gets clever. That's w
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Are you trying to claim that the Republicans are going to regulate ANY industry, ever? Flat-earth levels of reality-denial right there, folks. Marked troll for trying to make this partisan, when the real problem is that, whatever their very real differences, both party's insiders line up to fellate the very wealthy and fluff their tools, the multi-national corporations.
The answer is simple. We need to get money out of politics. Buying things is not the same as free speech.
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Are you trying to claim that the Republicans are going to regulate ANY industry, ever?
It seems you believe regulation is the only way to stop such practices. What is the basis of your belief?
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But they have stopped child labor, the twelve hour work day, and the seven day work week. They have made meat safer. They have made factories safer. They made the air and water cleaner. Laws, passed by the working class, have made modern life better.
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Actually, no, laws did NOT stop the 12-hour work day and the 7-day work week. Neither did the labor unions.
What stopped them was the Early Adopters seeing dramatic INCREASES in their profits when they went to 8-hour work days and 5-day work weeks. They did it out of humanitarian reasons, figuring they could afford to take the profit hit they expected. They were apparently as surprised as their competitors at the actual outcome.
What actually happened was that their scrap, rework, and accident rates droppe
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If that was true, why did the capitalists fight against those policies tooth and nail? Why were labor organizers massacred? Why do the rich still fight against regulations that would, according to your logic, make them more profitable? I need to see some sources for this ridiculous rewrite of history, pal. Your word is shit. Don't feel bad, that's true for every thing on the Internet.
The fucking rich sociopaths don't just want to be rich. They want you to be poor. They want to have power over you, and that
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Are you honestly arguing that we should make murder legal? I mean, if laws change nothing, then why not?
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No - I'm merely pointing out that Bernie and the Democrats want the rich to pay for your largesse - same as Allstate is doing here.
And yet you think Allstate is criminal but Bernie is a hero.
https://slashdot.org/comments.... [slashdot.org]
In point of fact, US taxes are absurdly low. It only feels unfair because those taxes go to the military industrial complex, farming subsidies, and propping up failing banks. I mean, people in Europe pay more in taxes than we do, but they feel they are getting their money's worth because the taxes actually go to infrastructure and social programs that benefit them.
Simple answer: taxes are what buys civilization. Without a strong government paid for by taxes, you'd just have barbarism, chaos and oppression.
And before you start down that road, no. That rich guy did not create anything. The workers did.
I yield back the floor
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Letting corporations gouge people based on their prior spending is not the same as taxing the rich.
1. You don't know that the sucker paying $3K is actually rich. They're just getting scammed.
2. The Dems want to change the tax laws to ensure the rich are paying their share
3. The additional tax revenue would be used for the betterment of society (medical care for all, more affordable education, sheltering those in need)
4. The additional insurance fees are used to increase the wealth of the rich (stock holders
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They are both criminals.
Nothing wrong with some higher taxes if they do actually go to infrastructure, but why should the taxes be excessively scaled / penal based on spending or income rather than flat?
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Sorry, bad analogy. None of Bernie's plans differentiate by wealth. We all pay, wealthy and poor, and we all reap the benefits of our collective bargaining.
Some complain that we regular folks will be sending rich kids to college for free. But Bernie's plan sends everyone to college for free, just like high school. If you are against public schooling, I suggest you look into the abysmal record of charter schools. Unregulated schooling just turns into a race to the bottom. How can the free market fairly alloc
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Not like high school. Fortunately, Sanders hasn't proposed abolishing university entry requirements. We already have community college as the high school after high school.
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State college was supposed to do that. When I went to school, it was $50 per semester credit for in state students. Think about that.
Why can't we have the things that all other first world countries have?
If k-12 education paid for by taxes is a good idea, please explain why pre-k through college paid for by taxes is bad?
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That's just talking about taxation, which is already progressive. Back in 1954, the top marginal tax rate was 92%. All we are doing is asking to go back to the good old days, when we had a middle class and we taxed the wealthiest to create it.
I was talking about the benefits, which are not means-limited in any of Bernie's plans.
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It was a facetious reference to conservatives' pining for the good old days. Just a sort of wake up call, if you will. In the good old days, we taxed the rich and had a middle class. It wasn't all just the beating of women and minorities that you seem to want to go back to, you know.
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Marked troll for being an obvious Russian troll.
Shame on slashdot. They let it happen. (Score:2)
At this point Slashdot should be ashamed of itself for allowing it to go this far. I know msmash thinks it's funny to troll these guys with articles that will piss them off.
Except they're not pissed off it's a chance for them to air their talking points, they're happy.
MSMASH has been fooled into doing the bidding of russian shills.
Moderation was neglected as the population of legitimate posters and moderators dwindled the once innovative y2k era moderation system was unable to keep up in the era of
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Seven years ago, Allstate Corporation told Maryland regulators it was time to update its auto insurance rates.
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Except that this WAS regulated capitalism.
Seven years ago, Allstate Corporation told Maryland regulators it was time to update its auto insurance rates.
And the regulators denied Allstate. FTA:
Are you Fucking Kidding Me? (Score:2)
$250 to get full coverage on my 2006 car, including liability only on two others.
WTF is wrong with Maryland?
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Mine is about $450/6 mo for a 13 Tacoma 4x4. Do these dumbasses not realize there are other insurance companies?
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They're relying on the fact that people hate shopping for insurance. The reason why they gouged the people with the expensive policies and not the ones with the cheap policies is because the latter is likely to shop around if their cost goes up 20%, while the others are probably already overpaying because they never compare prices.
It's not just because people hate shopping (Score:2)
There's a reason folks tend to be conservative. It's because for most of us things have gotten progressively worse for about 40 years now. It makes it hard to convince people that change can be good, and they start pin
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You should always get at least five bids (ten is better) on insurance every year. Insurance companies are random in how they assign risk and seek profit. It pays to change every year.
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You know that different drivers have different risk profiles, right? What cars were these high-premium owners driving? Perhaps Lambos or Ferraris?
One anecdote is pretty much pointless. And your Tacoma is close to junk status for insurance purposes. You should not be paying much.
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With costs like that? I'm going to guess that the person in question lives inside the beltway, has had several accidents/tickets and has a car they're still making payments on.
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$106 per month for full coverage on a 2012 model in Las Vegas, which I've long understood is one of the more expensive places to have to insure a car. I can't imagine spending $600+ per month on car insurance; that's more than I've ever spent on a car payment.
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In Maryland, yes, but what about other states?
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Yes, when the criminals tell the government they are updating their rates, rather than the other way around, that certainly indicates effective regulation and not regulatory capture. /s
Markets (Score:3)
Regulatory capture is not impossible to control. However, as the cost of compliance with regulation increases, it begins to meet the cost of lobbying to change the rules of compliance. Ditto the cost of changing the rules to keep out competition. The goal is to make effective regulation while keeping it simple enough to comply with easily. This also makes it more difficult to skirt the rules, as simpler rules are easier to enforce.
A good example of this is the National Electrical Code. It's clear, concise,
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Good point. Any effective regulation, if it is to function as a regulation and not a barrier to entry, MUST include a path to compliance that is easy, and not burdened by unfair costs. If only large corporations can afford to implement regulations, those regulations act as a barrier to competition from smaller companies.
I would love to see more laws include a progressive tax credit for compliance, making it easier for smaller companies.
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In the case of the insurance companies I think complexity is inevitable. They will deliberately write convoluted and sometimes self-contradictory policies to make them impossible to understand and easy to deny. It's not accidental that almost none of their customers know that damage due to broken plumbing is only covered by flood insurance not by their homeowners policy, for example.
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If this algor