September 1, 2005
For years mandatory auto insurance has been strongly opposed by major insurance companies. They correctly argue that requiring insurance, which they sell as a cost of car owning, has little effect on the number of uninsured cars, is expensive to administer, and hurts the poor. Auto insurers also argue that it makes premiums go up.
Nevertheless, in response to public demand legislators in nearly all states have passed mandatory auto insurance laws. But legislators acknowledge that so far these laws despite increased enforcement have failed to reduce insurance prices and the number of uninsured cars.
The reason for this failure was addressed in 2001 by Texas HB 45, the cents-per-mile choice law. As introduced, the bill would have mandated that all auto insurance companies after a two-year phase-in period offer as an alternative to each of their dollars-per-year prices the choice of an equivalent cents-per-mile price.
As passed, however, HB 45 made offering cents-per-mile prices voluntary for insurance companies. The law's intent was to encourage industry cooperation in making mandatory insurance work. Unfortunately, the companies are still not cooperating and effective September 1, 2005 the law is no longer in effect. (It was passed with a "sunset" provision.)
Fortunately, companies in Texas and in all other states can still voluntarily offer the cents-per-mile choice under existing insurance law.
To gain company cooperation, it will be necessary that legislators, reporters, and consumers see exactly why this free-market and cost-based remedy is uniquely essential to achieving the goals of mandatory auto insurance laws. Advancing this understanding is a major purpose of this website.
Patrick Butler, Ph.D.
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