The world is not linear. No matter how much we would like to believe that B follows A in some simple predictable manner, it has been my experience that the best that can be observed is some sort of first order differential equation where B is dependent on A but also on itself (B), when it is not dependent on C, D and E. In fact most of my observations fall into the second order non-linear camp. This is true for tax policy (Laffer curve), population dynamics, and global warming just to mention a few.

The lack of Congressional strategic planning ability or the ability to even somewhat accurately project the consequences of policy is annoying. Without even going to Washington DC, you also can observe the problem, which appears to be endemic, in the corporate world. People want simple answers and typically want them in time for quarterly earnings reports or next year’s elections.

Some time ago I wrote about a hit-and-run involving my daughter. That missive was based on the report from a bystander that the driver of the other vehicle (my daughter’s vehicle was parked and she in bed) was “Mexican looking” and presumably illegal.

Now my daughter has been involved in three hit-and-runs and two comprehensive claims where her windows were smashed out. Not one of these were her fault, and in four out of the five claims she was not even present. As a result of these “excessive” claims, my unnamed insurance company sent me a notice that they were dropping insurance on both my daughter and her vehicle. Now as it turns out, on her way to Seattle she did encounter a revenue-needy jurisdiction in Wyoming. After a 200 mile stretch of 75 MPH highway, Lovell has strategically placed 35 MPH speed limit signs with 35 MPH AHEAD signs well short of the necessary typical stopping distance for 75 MPH. Considering that the mimimum fine was $100 for a 1-10 over the limit offense, this burg needs to be listed. So we have five claims and one instance of a seriously dangerous driver at 1-10 over the limit.

It is to no one’s surprise that small towns derive a significant portion of their revenue from speeding tickes. Some juristictions, fondly mentioned in other Angry Man entries, also seem to use tickets as an extended revenue source. So we have the situation where insurance companies are rating driver and vehicles on moving violations, and jurisdictions using those same violations as a major source of revenue, and using the insurance rating process as a justification for setting fines higher and higher. We even have the absurd situation where the legal jurisdictions offer non-permanent settlements, at a higher cost, for clearing the violation. (See Illinois and Missouri DMVs).

So the jurisdictions view the problem as one of revenue with the insurance companies providing a means for extorting higher fines. The insurance companies, looking to next quarter’s revenues, see their policy as a loss control mechanism. Dumping drivers with “bad” records is a loss stopper. Dumping good drivers with excessive claims without regard to fault is a loss stopper. States who pass no-fault laws in auto accidents have succeeded only in changing the limits from x number of at-cause claims to x number of any claims. States have made it illegal to drive without insurance, yet also apply financial responsibility taxes to violations. This is all enabled by the fact that America is now a mobile society rather than a stationary one. (The milkman used to deliver to you.) So to recap:

  • America is mobile – driving is more or less a necessity
  • States require insurance by law
  • Insurance companies attempt to stop loss by cancelling policies with excessive claims
  • Jurisdictions use moving violations as a source of revenue
  • Jurisdictions use the potential loss of your policy as a means of extorting additional revenue by offering cash alternatives to permanent violations on record

Insurance companies offer policies with uninsured/underinsured driver coverage. In my daughter’s case, even though she was not at fault, since the other driver could not be located, the company was responsible for the loss. That this is an endemic problem can be deduced by the fact that comprehensive and under/un-insured motorist coverage now comes with a deductible as high as collision, and the liability limits on this coverage are now as high as on the vehicle underwritten. Translation: There are a lot of accidents involving hit-and-runs or uninsured motorists.

So here is where the strategic planning comes in, or lack thereof. Insurance companies by promoting their loss policies are, in fact, limiting their losses in the short term. People who are dropped from coverage, and cannot afford the “high-risk” coverage, naturally drive without insurance. As their numbers increase, and they will because of the requirements imposed by a mobile society, the pool of potential long term customers shrinks. Further, jurisdictions using the same instrument the insurance company uses as a risk metric (tickets) as a revenue source, drive the number of excessive claims cancels and further limit the pool. Overall, the probability of non-insured-vs-insured collisions increases. This of course flows into the loss limit which further exacerbates the problem. The end result is either a stable phase point of no revenue, or of no market for insurance.

In fact, this is nearly homologous to the dog-flea problem, an example of two first order coupled differential equations in its simplist formulation. In that problem, if there are too many bites, the dogs die out. Too many fleas and they starve for lack of dogs and die out. Stable solutions exist trivially with no dogs and fleas or non-trivially in stationary points in phase space or phase-space limit cycles.

Unfortunately, none of this phase state analysis makes it to the policy makers at the local government or to the risk analysts at the insurance companies. Each is acting as if the problem were purely linear and totally decoupled. At the very least, both should acknowledge that actions taken effect the other and at least jointly consider the long term consequences.

The short term consequence to the particular insurance company mentioned in this specific case was the loss of all policies held with that company (6 or so policies); the douchbags.

Just after having her car repaired following a Seattle hit and run incident, my daughter was sleeping when her roommate woke her up and told her that her car had just been sideswiped. Witnesses identified a white truck with a Mexican-appearing driver and passenger. Rather than stop, as is required by law, they merrily sped away from the scene of the collision. The result: $2800 collision repair bill borne by the insurance company and a $250 deductible covered by the daughter — since the ability to find the other party is negligible.

Unfortunately this seems to be the rule rather than the exception. While there is some large amount of data available on illegal immigration, it is difficult to obtain any specifically on hit-and-runs. Oddly, the Department of Transportation doesn’t specifically compile this particular set of statistics. The associated graph addresses only fatalities not accidents with just property damage. Only recently has the Insurance Research Council (IRC) attempted this where a possible correlation is found here and here.

A Side-By-Side Correlation
Illegal Immigrants by State
State Number of Illegals
California 2,209,000
Texas 1,041,000
New York 489,000
Illinois 432,000
Florida 337,000
Arizona 283,000
Georgia 228,000
New Jersey 221,000
North Carolina 206,000
Colorado 144,000
Hot

Arizona has a hit-and-run problem. California has a hit-and-run problem. “Coincidentally” these states also have a large population of illegals. Whatever one might say about the economic necessity of having illegals in the country, a guest worker program, whereby guests would actually have to obey the laws of the country, obtain insurance, driver’s licenses, and behave in a financially responsible manner would sure beat what we have now.

While researching, I came across this similar post. This guy went to a lot of trouble to document similar findings.

At least one precept of our ‘new’ immigration policy should be adherence to the Rule of Law. Whatever the congresscritters come up with should at least insure that citizens are not saddled with the costs of bad behavior on the part of the unlicensed , uninsured, and undocumented drivers.