Tuesday, August 24, 2004

Why Is There No Car Insurance Crisis?

Is there something special about health insurance that makes it crisis-prone? I mean, we never hear about the horrible "house insurance crisis" or the "spiraling cost of auto insurance."

It wouldn't be too hard to create such a crisis though. In fact, let's try to map one out.

Just imagine if politicians resolved that, since automobiles are vital for getting people to work, companies ought to provide for the care and maintenance of its employees' vehicles.

So political pressure is applied to employers-- maybe through the tax code, or perhaps legislation is passed outright; and, before long, auto insurance is restructured to cover not merely accidents, but routine maintenance and service. For a monthly premium and a $10 or $15 "co-pay,"

your car insurance would cover the cost of an oil change, tune up, new tires, whatever it needed.

Something odd would begin happening though. Mechanics would stop hearing the now pervasive, "How much will it cost?"

Why? Because if all you had to do is plop down ten or fifteen bucks and your insurance paid the rest, why would you care what the mechanic charged? Heck, you'd start taking your car in for an oil change every 1000 miles instead of every 3000. Rather than getting your tires rotated, you'd just have new ones put on. And that rear electric window that won't lower, you'd not think twice about having fixed.

The influx of customers seeking what would be virtually free service means, however, you'd have to wait days, even weeks, to see a mechanic.

Costs would skyrocket. Since comparison shopping would be a thing of the past, auto service centers would have no pressure to lower prices.

Moreover, they'd have to buy more equipment and hire more employees to accommodate the heavier workload, driving costs still higher.

Insurance companies would have to raise premiums. Some people wouldn't be able afford it. So politicians would trot out new government programs -- Car-aid, Car-care-- to help the "disadvantaged." We'd see another deduction on our pay stubs. The numbers of "disadvantaged" would swell.

Resultantly, auto shops would have to hire more clerks to manage all the red tape generated by the government programs and regulations, making costs even higher. Perhaps by then an oil change might run $200 and a brake job $1000.

Before long, we'd hear speeches about our alleged "right" to affordable car insurance. Some would even propose putting everyone on the government dole with "universal" car care coverage.

Now in the midst of all this, imagine that some "radical" suggests the

following: that people would be able to afford car insurance and maintenance costs if only government would reverse everything it'd done to cause the mess in the first place.

How would that likely be met? Probably with screams of "You don't care about the poor!" and "Do you expect people to pay for oil changes out of their own pockets? Have you seen how expensive they are?"

See how easy it is to kick off a crisis? Just add a little government control in the "right" area, and the thing practically runs on cruise control.

America doesn't have a health care crisis. It has government crisis. Or, put another way, it has a freedom crisis.

Read this and more from Capitalism Magazine.

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