M42: Freakin' thugs, you won't scare me

T.A. Barnhart

Tony Soprano making threatsI received a threat against my personal well-being in the mail today. Most of you probably did, too, and it may not have been the first. In fact, if you watch tv or listen to local radio, you've been getting these threats for weeks now. The big boys are flexing their muscles, and here's their message: Don't make me whack ya.

I'm referring to the "No on 42" campaign, of course. The insurance companies are funding something they call "Oregonians Against Insurance Rate Increases", yet another of these bullshit "citizen" groups funded by non-citizens, and usually out-of-state, interest groups with a financial interest is undermining our democratic processes. My threatening letter came from J.L. Wilson, who is Oregon Director of the National Federation of Independent Business (which, from their website, appears to be a legit group). I don't know the NFIB, and while they claim to be "The Voice of Small Business," getting a letter from them telling me my insurance rates will go up if M42 passes does tell me one of two things: Either the NFIB is run by cowards who can be bullied by big corporations or that it's run by whores who'll do for the right price.

Here's what J.L. Wilson has to say to me about M42:

Consumers who manage their personal finances responsibly will be forced to pay more for their insurance while consumers who are less responsible managing their credit will pay lower rates.

As we say at my church: WTF?

Credit won't be used to set or renew insurance policies if M42 passes. So how the hell will the insurance company know who is responsible or not with their credit? And where is the provision that says people with good credit must pay more for insurance while those with bad credit cannot be charged as much? You know, when I see a Bill Sizemore initiative, I expect to see a ton of bullshit flowing, but it's usually from Bill and not at him. Welcome to Bizarroworld.

Stick 'em up.  This is a robbery.In many cases, a person's credit rating might give reliable indications about whether or not it might be a good business decision to offer insurance. But Oregon has already set the principle that credit can be ignored for insurance purposes: poor credit cannot be used as an excuse to cut off someone's insurance or raise their rates. There's a good reason for that: Life. And death. All it takes is one medical or personal disaster, the failure of a business, the loss of a job (perhaps your employer's business stupidity), just some damn bad luck; boom, your credit is shot but you're still the same, responsible person you have always been. Being able to keep your car, your home, your life insured is important, even vital, to getting back on your feet and restoring your life — and your credit.

But that's not how life is viewed in the insurance business. They have a much more simple criteria: Can we make a buck off this person? To be more accurate: Can we make a lot of bucks off this person? Gouging the consumer is simply business-as-usual in insurance — spoken as a driver with an impeccable record for the last 25 years and sucky credit that makes me pay rates beyond what the relevant issue — my risk as a driver — should merit.

I find this measure to be very common sensical, fair to the low-income and financially impaired Oregonians its meant to help (yes, Bill Sizemore is doing something that will help those people for a change; God does work in mysterious ways). I believe M42's passage would be a dead cert if left to the untrustworthy mechanics of democracy. The insurance companies, like Howie Rich and the other carpetbaggers trying to use Oregon to shape national policies to enhance their own power and wealth, cannot allow the democratic process to play out. So they are spending big bucks, finding local shills, and doing their damnedest to scare the snot out of individuals and small businesses.

Beg for mercy.  It'll do ya no good.But here's the thing: Their efforts are so ham-fisted, so blatant and dishonest, I wonder if they do not actually want to see M42 pass. Currently, they use credit scores to set rates for new policies because it is, for their purposes, useful. After that, raising rates (which is their purpose for being) becomes tricky. How can you increase your profits from someone already paying as much you could charge when you sold the initial policy? (The usual tactic is lower one policy and try to sell another.) However, if we take credit ratings out of the picture altogether, the insurance companies have to think up new ways to set rates for new policies. They introduce new and clever rate plans designed by the bright young MBA's. With these new plans, they can raise everyone's rates, from policy purchase to renewal to the day they tell your widow she can keep the house if she can afford the new "God took my man and I'm sooo helpless now" rates. So they pretend they oppose M42 while knowing that if it passes, that just opens a new door for big big profits.

Do what we say or you'll get it.So perhaps voting no on M42 might be the best choice: stay with the devil we know. But this kind of thinking becomes a remake of Vizzini trying to fool Wesley into drinking the poisoned cup of wine in "The Princess Bride". I think I'll keep it simple and stick to what I know. Insurance companies are incredibly profitable, and they fight like hell to make the rules that keep them profitable. To put it mildly, I hate the bastards. I really do, and I'm not ashamed to say it. The service they provide should not be a matter of profit margins, anymore than the health care industry should also be a money-printing machine. I'm voting YES on M42 despite Bill Sizemore because as much as I loathe what he does and what he stands for, he's a sweet angel sent from heaven compared to the inhuman cruds running insurance companies.

They don't scare me, and their pissant flaks can kiss my bad-credit ass.

  • (Show?)

    I was with you right till the end. You're voting no?

  • Huh (unverified)

    Hold it, you're not voting yes? I must say, I'm very confused. Not confused about how to vote, I'm voting yes.

    The thing that drives me crazy about 42 is that the insurance companies are trying to scare everybody - including progressives they know can't stand Sizemore - so they use the fact that he's a sponsor in an ad. Argh!

    Please vote yes people.

  • (Show?)

    instead of the line about Vizzini, i was originally going to write a brief "Get Smart" schtick about "You'd like me to do that, wouldn't you?" but i really couldn't get it to work. nonetheless, i confused the hell out of myownself and wrote that i'd vote no. sheesh. i'm voting YES, and i've edited the post to actually say that.

    (Sorry about that, Chief.)

  • Qwendolyn (unverified)

    "Here's what J.L. Wilson has to say to me about M42:

    Consumers who manage their personal finances responsibly will be forced to pay more for their insurance while consumers who are less responsible managing their credit will pay lower rates.

    As we say at my church: WTF?"

    Your 'WTF?' doesn't hold water. If this measure passes then the insurance companies will charge the same to everyone no matter their credit, so if the total amount that the insurance companies presently charge everyone stays the same before and after the measure, then consumers with good credit will see their insurance rates go up from what they are now while consumers with bad credit will see their rates go down from what they are now

    Which is exactly what this J.L. Wilson guy said.

  • (Show?)

    you can pretend the letter says that, Q, but youve added to it significantly. it says nothing about comparative rates. it just makes the statement flat-out. Tony Soprano doesn't whack some people a bit more than others; they all get the same bullet in the head. that's the point of using force to get your way. and that's what the insurance companies are doing here. but we should be used to corporations threatening us by now.

  • Liam (unverified)

    I'll agree that the NFIB tactics are wrong, but I'm still thinking about voting no.

    Bad credit can be restored over time by paying down debt. As a side note, these forums are useful for getting started down the road to financial independence.

    I personally have good credit and I like having lower insurance rates.

    Anyone have any idea what the insurance companies would base the rates on if credit is taken out?

  • B. Tidwell (unverified)

    I have no credit, because I don't use credit cards or borrow money at all. If I don't have the money for something I want or need, I have to save for it, usually by taking on extra work.

    I will have to pay more more if this passes than someone who has "good credit" but is thousands of dollars in debt.

    The poor, who are also usually in debt will pay more too. It's the children that will pay for this, not the parents who may or may not be excellent drivers with lousy credit.

    I'm voting yes.

  • Karl Smiley (unverified)

    I'm voting yes too. It's true that you can't get good credit without going into debt big time. I sure don't believe that the big insurance companies are spending millions to defeat this measure so that they can give people with "good credit" a break. And it sure would be stupid to vote against it just because Bill Seizmore promoted it.

  • pril (unverified)

    "Anyone have any idea what the insurance companies would base the rates on if credit is taken out?"

    Uh.. one's driving record?

  • Gil Johnson (unverified)

    Uh-oh. I was planning on voting yes, but my credit rating is better than my driving record.

    The NFIB portrays itself as an advocate for small business, but primarily is just another knee jerk right wing organization. It actually dupes small business owners into buying into benefit plans that aren't worth the dues and then funnels the money into lobbying efforts that essentially support the super rich.

  • Liam (unverified)

    "I'm voting yes too. It's true that you can't get good credit without going into debt big time."

    Karl, that's untrue. In fact 30% of it is based on your amount of debt versus your debt limit.


  • Terry (unverified)

    Wait a minute T.A. Acccording to your last post on M46/47, it was essentially, "When in doubt, vote no!"

    That seems like good advice for the Sizemore-backed Measure 42.

  • (Show?)


    Actually, it is true. Many of the people with "good" credit have gone into debt big time first. They've had some years to pay it down (mortage, car payment, credit cards, etc.), but they've taken on tens of thousands, if not hundreds of thousands, of dollars of debt.

    In comparison to my parents. Who built their house without a mortgage. Who do not own credit cards. Who've only bought one new car in their lives.

    Could they afford a big mortgage, expensive car, etc.? Yes. Do they want to? No.

    As such, they're considered to have bad credit. Others I know have more than a hundred thousand dollars in debt, plus $10K+ in credit card debt, a car payment, etc. and are considered to have good credit.

    "Credit" is all about your participation in the credit game-- take out big loans, have credit cards, etc. It can be very hard to build up your credit unless you do these things.

    Also, even after you pay off a debt it can remain on your credit for quite some time. Want to buy a car and the dealership shops for the best rate? That can do damage to your credit score because of too many inquiries.

    Even after paying everything off, it's hard to build your credit up without doing things like getting credit cards and such. Personally, my family does not want any credit cards. I don't need to be like the average American with tens of thousands of credit card debt.

  • JHL (unverified)

    All of the insurance industry's arguments against M42 are based on one grand Assumption:

    Whenever an insurance company sees savings, it will always pass the savings on to the consumer. Yeah, right.

    Nobody's rates are lower today because risk is able to be evaluated better on other accounts... those accounts simply have higher rates to offset the unbearable possibility that the customer might actually use the product that they paid for.

    Vote YES on 42! Credit scoring an insurance premium is like kicking someone when they're down... in the balls.

  • Tom Civiletti (unverified)

    Very entertaining post, T.A. I'm voting 'yes' as well.

  • KISS (unverified)

    Sure glad Sizemore-phobia is taking a back seat to common sense. Insurance co.'s have been public enemy # 1 to the working class forever. I'm voting Yes on 42

  • engineer (unverified)

    The insurance companies have found that there is a statistical correlation between ones credit score and the likelihood of a claim being filed. It's math. They have also found a statistical correlation between where one lives, your driving record, your gender, your grades, your age and who knows what else. An insured at least has some control over the credit rating component of your risk rating, as opposed to some of the more arbitrary items just listed. Sure it sucks if your credit is bad and you have to pay more, but it also sucks if you live in a "high-risk" area, or are a male teenager, or have poor grades. It's no different than life insurance, if you're a smoker you're going to pay more, or if you have high cholesterol. If the issue is one of "fairness", than I suggest we outlaw the use of all statistical measures of risk, and charge one premium rate for all drivers.

  • Johnny (unverified)

    Thank you KISS! Exactly!

  • BOHICA (unverified)

    The last time I got auto insurance, I walked in, gave them my info and wrote a check, all in less than 10 minutes. So when did they check my credit score? Just asking.

  • askquestions1st (unverified)

    engineer -

    The insurance companies have found that there is a statistical correlation between ones credit score and the likelihood of a claim being filed

    Factually correct as far as it goes, but that is not far enough because it is an overly simplistic understanding of what is actually going on.

    There are two simultaneous objectives an insurance company has: lowering the overall cost to them of insuring the risk pool, and optimizing the profit they make on the premiums the market will bear for insuring that risk pool. Using credit scores to caculate premiums does not lower the overall cost of insuring the risk pool, but it is a marketing strategy which allows them to optimize their profit by externalizing costs in a fairly generalized way. These are of course general arguments of principle and someone will have to produce numbers they want to argue about for more detailed arguments.

    In general principle, using credit scores to determine premiums does not lower the overall cost of insuring the risk pool significantly because the insurance industry has managed to get government to distort the free market by making some forms of insurance mandatory and the total number of claims largely unrelated to whether or not premiums are based on credit scores. In addition, the industry as a whole has a "priviliged" position with regard to anti-trust laws.

    Measure 42 has nothing to do with that. Measure 42 has to do with the marketing strategies insurance companies choose in pursuit of their second goal: Optimizing the profit made on the premiums the market will bear for insuring that risk pool by offering incentive pricing to people who may be (correlation is not causation) less likely in the aggregate to incur costs and shifting those costs to the higher risk components of the pool. Somewhat counter to the idea of insurance by the way, which is really to shift the cost of an essentially random single event for any person to the pool as a whole because that is simultaneously in the best interests of both the individual and our society.

    I would challenge anyone to advance a credible counterargument against the unequivocal argument that our concern as voters should only be that we don't unduly thwart insurance companies in pursuit of their first goal: lowering the overall cost of insuring the risk pool. And although the market will only bear a certain price for insuring the risk pool, we have no obligation to affirmatively help insurance companies with their second goal: being optimally profitable for their private interest. Particularly as a priority over the first goal. In fact, as a society we have an obligation to make sure that the costs they externalize through any particular strategy are not more harmful to our society as a whole than the costs they would externalize (ideally none by the way) through other strategies.

    In this case, the opponents of Measure 42 have offered absolutely no evidence proving that this measure would in fact result in more costs being externalized to the deteriment of society. And of course they have not address the far more difficult case to prove that this measure would in fact increase the overall cost of insuring the risk pool.

    In fact, they have argued essentially the opposite, that a "YES" vote will simply result in cost shifting to some extent (again because this measure has nothing significant to do with the cost of insuring the risk pool which depends solely on the total amount of claims filed, and there is only a certain price the market will bear for insuring the risk pool and these will not change to any significant degree). That cost shifting may be less than total for a host of reasons, and so the net results would, possibly, be a reduction in insurance company profits, to the possible social benefit of reducing externalized costs. Sounds like a socially responsible tradeoff for individuals and all businesses - except the auto insurance industry special interests of course - to me, how about to you?

    Your point about eliminating all statistical measure of risk is too sweeping but worth at least acknowledging. Do you have any counter to the argument that the responsible path would be to consider each measure of statistical risk and to tradeoff whether the externalized costs are reduced or increased by prohibiting the insurance companies from using those measures for calculating premiums - of course correcting for how allowing or prohibiting the measure would effect the cost of insuring the risk pool or the price the market will bear for insuring the risk pool.

    Vote "YES" because it is the responsible position both for society and for the marketplace.

  • Right Wing Nut Job (unverified)


    I am your typical right wing nut job. For what it is worth, I want to tell you why I think Measure 42 is a bad idear. I am the typical Oregon voter who sees a Sizemore measure and votes yes, but I have thought long and hard about this one, and I am voting no.

    First, I think the insurance industry is nothing but legalized theivery. I used to work for the industry's lobbying organization, I hated it, it drove me nuts because as someone said earlier in this post, no way in hell does the insrance industry pass on savings to its customers. The savings go right into the pockets of CEOs and shareholders. I hate insurance companies and rarely trust them.

    But T.A. and the rest of you, please consider this argument. Just as the insurance thieves (that is what I call them in my house) won't pass on savings to their policy holders, they WILL pass on additional costs to their policy holders.

    Like I said, the insurance industry is nothing but theft and gambling that has been legalized by the government. Combine the fact that Oregonians MUST have auto insurance to drive, and it is COMPELLED gambling and theft.

    The way the insurance companies make their money is through the actuarial tables and basic laws of probabilities. We all know that 16 year old males pay the highest insurance rates - why - because they are the most likely to get in an accident and therefore the most likely drivers to cost an insurance company - therefore, being a greater risk, 16 year old males pay a higher rate.

    The determination that 16 year old males are high insurance risks is based upon years of studies, statistics, etc. A 16 year old male's insurance rate may go down based upon a series of factors such as GPA, type of car he drives, where he lives etc. All of these factors are "predictors" that go into the insurance theives calculation of risk (understand, by risk, I mean the risk to the insurance company that the driver will get in an accident forcing the insurance company to lose money).

    For older drivers such as myself, there are a number of factors that go into the calculation of risk I pose to the insurance companies such as my age (35), my marriage status, my level of education, whether I have kids etc. Also, in recent years, the insurance theives have developed statistics that go into their calculation of risk that show that people with bad credit tend to be higher risks to insurance companies. Ergo, bad credit for many insurance companies means higher rates for the policy holder.

    If measure 42 passes, insurance companies cannot use this predictor in their calculation of individual insurance rates. But make no mistake, the insurance company WILL NOT assume additional risk on their own. Instead, the insurance company will pass the cost of the additional risk (which the company would have normally passed on to the policy holder with the bad credit) to ALL policy holders. Driving up the cost of auto insurance for all of us.

    Now, how much will insurance rates go up? Who knows, it may be negligible. It may not. The increase may be substantial - that is the beauty of the insurance industry - they get to make things up as they go and steal from the rest of us (I really hate insurance companies, can you tell?).

    But, if you take a risk predictor away from the insurance thieves, the increased risk (aka cost to the insurance companies) will be passed on to the rest of us, I guarantee it.

    Sorry for such a long post. I hate the insurance thieves, but I hate Measure 42 even more.

  • Nutmeg31 (unverified)

    I am far from "progressive". However on this one I must wonder why an entire industry finds it important to roll out howitzers for a squirrel hunt? The insurance industry is too keen on defeating this. Normally that alone would make me want to vote in favor of it. Then again I have to overcome Sizemore's notorious poor writing skills.

  • Kevin (unverified)

    Echo what the first several respondants said. Great rant and one that I very much agree with except for your rationale for voting against M42.

    I absolutely agree that the insurance companies ad campaign is hamfisted. But rather than interpreting that to mean that they are actually in favor of it... it seems to me that Occam's Razor points us to them thinking that progressives are so easily manipulated that using the whole "Bill Sizemore" shtick would yield the desired knee-jerk reaction.

  • (Show?)

    After much agonizing, I also voted no.

    All the talks of "fairness" can't hide the fact that there is a well known statistical correlation between bad credit and bad driving. Not no credit as some are arguing here. That's a different category. Bad credit.

    Nor does all the talk of "externalities" hold any water. It's the left wing equivalent of right wing claims of "waste, fraud, and abuse" in government. Insurance companies aren't making out like bandits in the market; the industry is highly competative, and their stocks are firmly in the middle of the road. So anyone who thinks they'll just absorb the costs associated with being forced to take high risk drivers (no doubt out of the vast pile of cash both they and the gov'ment secretly burn at midnight) are simply in their own economic fantasies.

    Besides, the current system is already fair. If you lose your job and your credit rating goes to hell, insurance companies are already prohibited from raising your rates. That's the law today.

    There is only one real argument for this Measure, the moral one. Health insurance has all sorts of risk factors associated with it, and yet with a few lifestyle exceptions (such as smoking), I believe healthier people still have an obligation to subsidize people with higher risks. Why do we punish teenagers twice, by both forcing them to pay the costs associated with the true risks of their driving, and at the same time force them to subsidize health insurance costs associated with Alzheimers, a disease they can't possibly get?

    My answer is that Health Care is different because it is a human right. Driving is not - no matter how much gas-wasting Americans consider it to be. There are Americans who not only don't drive, they prefer not to.

    So the moral argument fails as well. And that's why I voted no.

  • JHL (unverified)

    Steven - not even the insurance companies will claim that there's a correlation between bad credit and bad driving. The correlation in question is between bad credit and the likelihood that the policyholder will file a claim.

    So in essence, the insurance companies are charging people more based on their propensity to actually use the product they bought.

    I heard another argument run thusly:

    Movie theaters make profit off the concession stand... not the ticket sales (most of which go to the movie studios). Should they be able to charge people a ticket price based on their weight? After all, a skinny person should pay more, because they are generally less likely to buy candy and popcorn. A heavy person should pay less for their ticket, because they are generally likely to spend money at the concession stand.

  • Joe12Pack (unverified)

    Interesting take on 42, Steven. That's a new one and perhaps the most thoughtful, articulate position I have heard from either side on this measure.

    Admittedly, I'm still on the fence. My "when in doubt, vote no" default setting and generally Laissez-faire attitude will probably result in a "NO" vote, but this one bears further contemplation.

  • (Show?)

    Consumers Union, who produce "Consumers' Report," is advocating for a Yes vote.

    The insurance industry is spending millions to confuse Oregon voters about what’s at stake in the debate over Measure 42, which bars insurers from using credit information to set premiums. But can you really trust insurance companies to tell you the truth about how credit scores affect your rates? Consumers Union has been fighting this practice in states around the country because credit scores are often based on inaccurate information. It is neither fair nor necessary to use them to price insurance. There’s no proof that consumers with lower credit scores are more likely to get into an accident, and studies show that this practice disproportionately harms low income and minority families. Even consumers with good credit can be penalized with higher premiums because of the peculiar ways insurance companies weigh credit behavior.

    Steve, you miss the point in saying the system is fair. you refer to existing policies; M42 is about new policies. the simple fact that the insurance industry feels the need to spend millions to fight this tells me all i need to know: vote Yes.

  • engineer (unverified)

    AQ1st Re your post, in your opinion is using credit scores as a component of setting insurance rates fundamentally different than using any other measure of probability of filing a claim? How is it different than using age, gender, driving record, place of residence, etc?

  • Madam Hatter (unverified)

    This was in an article by the O:

    "Credit scoring is not allowed in California," says Norman Williams, spokesman for the California Department of Insurance. "If companies want to use it, they have to prove it's not discriminatory, and no one that I know of has taken on that case."

    California's ban on credit scoring has not sent premiums soaring. Despite industry claims that auto insurance rates would rise, Williams says rates are dropping as competition for market share increases with the advent of new state rules. Insurers are now required to reduce the weight they give to a driver's home address in setting rates. Instead, they must base rates primarily on safety record, driving experience and number of miles driven.

    So if rates aren't going up in CA due to their initiative, why would they go up here? Isn't looking at another state's experience more valuable than speculation?

  • MCT (unverified)

    If we take away insurance companies' ability to jack up prices based on poor or no credit, well gee then their profit margin will have to be based mainly on how many claims they pay out, and how much they can increase the premiums of those who have filed a claim...got tickets, etc. If more people are affordably insured, then more claims may be filed, but perhaps not. Many people with poor credit also drive older cars...not worth full coverage, they buy liability coverage only. they can't file claims for hit and run parking lto damage, theft, etc. As it stands, any time a person with good credit buys a policy they are paying for an "uninsured driver" clause too. So if 42 passes, not only will those with poor credit be able to shop around for insurance rates to find the best price, if they DO have an accident they are the cause of, THEIR policy will pay out...not the other party who pays for the uninsured driver clause. It seems to me Measure 42 is more fair to both those with good credit and bad credit.

    I see this point being missed by so many anti-42 voters: You are ALREADY paying for uninsured drivers! Why not give those with poor credit a chance to afford their own insurance, so they won't have to be written into your policy as uninsured drivers?

    On the other hand does anyone here REALLY think policy holders will get a reduction on uninsured driver clauses, if Measure 42 passes? Do you have that much faith in the fairness of the big insurance business plan? Hmmmm? And if you DON'T think they would be fair about reducing rates on uninsured drivers clauses, why on earth would you think insurance lobbies are being honest about the BS they broadcast as fact, regarding Measure 42?

    We are captive consumers when it comes to auto insurance. We have to have it, and the state should not allow insurance companies to rake in profits based on bogus statistics, spoon fed to voters in warm and fuzzy "I'm just a working guy but I am better than someone who has bad credit" ads by huge lobbies and big-bucks campaigns.

    And all you guys with affordable insurance and an I've got mine attitude.....try to imagine how much of your money-turned-to-profit is being spent by insurance companies on anti-42 campaigns. They are not spending that money to make YOUR life better. Wise up.

    Oh and...YES ON 42.

  • (Show?)

    A few comments, in order.

    JHL, the correlations are for Liability. So me to believe that claims is not the same as bad driving, you'd have to convince me that people whose cars (and bodies) are clobbered by rich people are less likely to be sued than people injured by the poor. "Why, it's an honor to be hit by a Mercedes, I couldn't possibly hold you accountable"? Unlikely.

    Madam Hatter, the average auto insurance premium for residents in California is $950 in 2003; the average California auto insurance premium in 2000 was about $767, an increase of about 23.86% in just 3 years. Perhaps Norman Williams, a spokesman for the California Insurance Department, prefers to avoid calling this "soaring", but I think a lot of Californians would disagree.

    MCT, the amont of money insurance companies are spending on this is a pittance, about a single dollar for every insured driver in the State. And there is absolutely no reason why they can't (or won't) simply pass the costs of this bad policy on to their customers. But you make a more fundimental mistake, equating my position to an "I've got mine" attitude. Actually, it's much "worse". It's an "I don't want you to have yours" attitude. I don't want bad drivers - a danger to everyone on the road - to be driving, unless they can fully pay for the risks they're imparting on society. Every single month more Americans die in preventable auto accidents than did on 9/11. In the face of that statistic, it is up to you to put forth a moral reason why driving needs yet more more hidden subsidy that dwarfs the meager funds we put into public transit.

    Repeat after me. Driving is a privilege, not a right.

  • askquestions1st (unverified)

    engineer -

    Re your post, in your opinion is using credit scores as a component of setting insurance rates fundamentally different than using any other measure of probability of filing a claim? How is it different than using age, gender, driving record, place of residence, etc?

    I think I clearly answered this. But in a word: from first principles of the macroeconomics of the insurance market, credit scores are different from some of the other factors. And the insurance industry has provided nothing to contradict the basic argument from first principles.

    Right Wing Nut Job -

    Your willingness to comment here is appreciated. In all sincerity, though, your argument simply is not supported by the macroeconomics of the insurance industry I describe in my earlier long post. And no matter how you argue, unless you address the macroeconomics of how the industry actually works, you don't have a valid argument.

    Stephen Maurer -

    You're a pretty bright guy, but in this case you too don't really understand how the macroeconomics of insurance works. And your comments leave little doubt about that.

    The costs of insuring the risk pool are inelastic because it is a pool that includes all drivers. Also the costs our society will bear for insurance are also relatively inelastic. And remember, we have the ability to legislate rates because insurance is not a free market even close to being driven by the rules of supply and demand as I discuss above. That is pretty much all that matters in terms of how insurance works. Whenever we allow the industry to play games with partitioning the risk pool in ways that don't structurally address these two inelastic bounds, we are only helping them to increase their profits by allowing them to externalize costs in the form of other impacts on our economy and productivity that you may not understand.

    The insurance industry has not provided a single scrap of argument or data to contradict this basic economic argument in this election season to contradict this.

    The only major thing that passage of Measure 42 will do is to negatively impact the huge profitability of the insurance industry (unless, of course, the people are propogandized by the misleading arguments of the insurance industry to forego our legislative power as already described in the unlikely event the need arises.) And I have absolutely no problem reducing the unearned income of investors in exchange for improving the personal economics of working people who earn their pay.

  • askquestions1st (unverified)

    Steven Maurer -

    I'm going to reply to this comment, and there is no polite way to put this despite the fact, as I said previously, you have always seemed like a pretty reasonable guy, because it is just plain dumb:

    Nor does all the talk of "externalities" hold any water. It's the left wing equivalent of right wing claims of "waste, fraud, and abuse" in government. Insurance companies aren't making out like bandits in the market; the industry is highly competative, and their stocks are firmly in the middle of the road.

    No, the talk of "externalities" is what trained economists on the left, right, and center do when they measure and explain how our economy works. So your comment is not only wrong, it comes across as nothing more than excuse making for a possible inability to talk at a serious level about economics. (Not that Wikipedia is authoritative, but at least this definition is readable to a layperson and reasonably accurate):


    Pay special attention to the lack of partisan viewpoint in the explanation of the theory of how markets work.

    And not that you care at this point, but it really is a fine line between offering guidance and just being arrogant when one offers positive or negative "moral" arguments without having previously evinced an exceptional degree of wisdom.

  • (Show?)


    I very nearly got a Minor in Economics, so I might be a little less ignorant than you think. And one of the things I notice is that when people start claiming that utility will come out of thin air from some market manipulation they're in favor of, they'll start talking about vague "externalitities", without ever actually naming them. (Usually the next sentence shows they're entirely unclear on the entire concept, because they immediately start talking about cost-shifting.) And yes, it's exactly the way Republicans talk about eliminating "waste and abuse" in government, without ever mentioning what exactly they'll cut, and why it's supposedly wasteful.

    Insofar as the idea that the insurance pool is inelastic, that's nearly as silly as the notion put forth by some economists in the pre-oil-price-shocks 1970's, that the gasoline demand was inelastic.

    Of course it wasn't.

    People like to drive, yes. We all understand that. But if - for any one of a number of reasons - it gets too expensive, they stop. That includes the price of gas, and yes, expenses due to being in a high risk accident pool.

    If, on the other hand, we force companies not to differentiate based on clear actuarial criteria, but instead insist that people in low risk pools need to subsidize people in high risk pools, we will - inevitably - have more high risk drivers who can afford to be on the streets. And this will, by definition, lead to a higher accident rate.

    There's an Externality for you. A real one.

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    Here's some political economics for you: if the insurance industry is willing to spend a few million dollars trying to beat 42, there is no way that passage is being seen as a revenue neutral prospect for the insurance companies. That's what they're selling--that the companies will simply even out the premiums, shifting burden onto good customers. But the reality is that choosing an evidentially spurious basis for rates is good business for the industry. Believe that they are not interested in protecting the "60% majority;" they are seeking to protect the bottom line.

    Consumers Union has never deviated from its focus on seeking the most power and savings for consumers as a group. Their opinion, Sizemore and all, is that 42 is a net benefit for insurance consumers.

  • (Show?)

    You're partially right, torridjoe. Insurance companies won't be able to shift all costs associated with being forced to take high risk drivers onto their low risk customers. They'll only be able to shift most of the cost, due to the fact that there's a tiny bit of elasticity in the even the low risk pools. It's probably around 90%/10% (our costs vs theirs), but they feel the 10% more directly - say if they have to pay out 20 million in additional claims, 18 million spread over all the State drivers is only $50 per person, but $2 million from their own company.

    But I guarantee you that this isn't "spurious basis" for them or us. Otherwise they wouldn't do it.

    Here, let me turn the argument around, so maybe you'll see why there has to be a real actuarial basis for this. Assume for a moment that it was actually profitable for insurance companies to make up some totally spurious criteria for charging higher auto insurance rates. Why on Earth do you think they'd stop with only this one? Why not make dozens? Or hundreds? "We're charging you double because your eyes are blue, you were born on Tuesday, and your favorite color is green - pay up, bub, because with those things on your record, no one else will insure you in the State." Absurd, huh?

    Of course it is, because they'd be undercut by some competator who wanted the business more than the fleeting profit. Maybe one with an animated Gekko as a spokesman, whatever.

  • (Show?)

    I never insinuated it was spurious to industry profit, only that it was spuriously correlated.

  • (Show?)

    I can't figure out what you mean by "it" in your sentence. Are you talking about using an actuarial basis for deciding risk pools? Or the ability of insurance companies to pass additional claims costs onto their consumers when an acturarial measurement is declared illegal?

    And spuriously corelated to what?

  • askquestions1st (unverified)

    Steven Maurer -

    1) As I said, practicing economists use externalities in a very technical way, and that you seem to not want to acknowledge others may understand at least as well as you, if your throwaway lines are a guide.

    In this case, one important class of externalities are uninsured or under-insured motorists that result from pricing based on a specific criteria (credit-score based pricing in this case.) The insurance companies have not offered any proof in this campaign that credit scores have anything substantial to do with reducing the actual cost of insuring the risk pool, which is simply determined by the total number of accidents involving all of those who drive (insured, under-insured, and uninsured).

    2) Your argument about inelasticity misrepresents what was said: The argument was that the pool is relatively inelastic with regard to the cost of insurance. Comparing elasticity due to the cost of gas (you can't drive without gas because physics says so), but you can drive without insurance is just dumb. As is your comment:

    we will - inevitably - have more high risk drivers who can afford to be on the streets. And this will, by definition, lead to a higher accident rate.

    There's an Externality for you. A real one.

    I'm not going to take up the minor detail that not even the insurance companies have argued there would be a higher accident rate if they couldn't use credit-based scoring beyond just mentioning it. The reason is that your argument has even less substance than that.

    Here's a news flash for you: We already have a large proportion of those higher risk drivers of all types on the road. They just drive without insurance or without enough insurance. And that's why your comparison is so moronic: Nobody can drive without gas because the car won't move. Plenty of people drive everyday without insurance because, given the "choice", they chose to put gas in the car to make it move, rather than buy insurance which it will move without.

    Does that explanation rise to a high enough level of abstraction and precision to allow you to understand why your comment comparing those who talk about seriously about "externalities" to those who propagandize about "waste, fraud, and abuse", says a lot more about your propensity to make assumptions than anything else.

    All -

    In considering the "'no' on 42" arguments given here, it may serve you to understand one fact about insurance: In the business model of most insurance companies, the cost of insurance the risk pools (i.e. for the most part the cost of paying claims), is not directly and necessarily subsidized by premiums. Nor is the profit made by an insurance company the difference between premiums and the cost of claims.

    In reality, most insurance companies are just financial investing companies for whom premiums are just one source of investment capital for their investing activities. Just as paying claims are just one type of cost they bear in the course of their investing activities.

    The price at which premiums are set is the result of a complex optimization problem whose selfish goal (in the value neutral way Ayn Randian Objectivist's like to misuse that intrinsically values-laden term) to optimize the overall profitability of the company. And finding any rational for pricing premiums which increase how well they achieve that overall goal that they can convince the public to believe, whether or not it reflects the reality of their business activities, and regardless of whether it reduces their actual cost of insuring the risk pool, is what they are about.

    Folks like Steve Maurer can go on and on talking simplisticly about "actuarial bases", and competition, without even starting to address how insurance actually works. Insurance is not the type of product, and insurance companies are not the type of independent entities just deriving income from premiums and incurring costs paying claims, described in the idealized simple suppy-demand/price-consumption market models they are introduced to in undergraduate economics classes.

    Bottom line is this: In this election cycle, the insurance companies have yet to produce a comprehensive enough picture of how using credit scores to determine premiums actually figures into their overall business model for anyone here to argue that there is a fair and good basis for using credit scores in this way. Much less whether it actually is in the best interest of our society and our market economy, or just in the best interest of those who derive unearned income from the investing activities of the insurance industry.

  • askquestions1st (unverified)

    I think it is important, and quite justified, to hammer hard on one more point in this discussion. Namely how this current thread provides an illustration why VBM is so very bad for our state in which the initiative system already provides an undue appeal to impulsive and emotional behavior by voters.

    If we are to take him at his word, Steven Maurer has apparently has already marked his ballot, sometime after he got it after Oct. 20, and before he posted this on:

    After much agonizing, I also voted no.

    on Oct. 21, at 11:14 AM.

    It is a fact that most folks don't even start thinking about politics and how they might vote until late October, which in Oregon is just shortly before ballots are received. People don't actually starting making their voting decisions, and changing their minds to vote differently than might have been their first impulse, during that period between late October and election day as they finally start paying attention to the campaigns and the campaigns start making their best arguments to sway intellect and emotions. (We're not talking about truly rational decision making here because voting isn't).

    Because people get their ballots two weeks early, VBM introduces the completely negative aspect of allowing and encouraging people to vote their first impulses in a specific way that doesn't arise in a polling place election. And it offers no corresponding positive aspects (arguments that VBM meaningfully increases turnout and participation have been soundly refuted in other threads on Blue Oregon.)

    Steven Maurer provides the scenario (if not the fact, since we don't know if he actually has marked his ballot as his words suggest), why this is undesireable. Someone who votes any time before election day because he or she thinks that he or she knows all that he or she needs to know, (put another way, he or she doesn't know what he or she doesn't know), in fact votes before hearing other arguments that he or she may not have heard before, and which may have changed that vote. Steven's posts read to me as being as much about defending a mistaken vote, as they do about providing a substantative and persuasive reason for others to vote the way he suggests that he has already done.

    That's what the failed leadership Phil Kiesling gave us with VBM, and the supporters mindlessly swallowed, and it is nothing to be proud of or to defend.

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    yes, Steven--there's been no evidence provided to substantiate the claim that FICO scores are correlated to increased claims. The insurance company doesn't use FICO scores in the first place; they use a modified scale. And that also presupposes that people's FICOs are accurate, which they are not in many cases--too many, in fact.

  • Anon (unverified)

    You know what I like? Words. Plenty of glorious, glorious words.

    Point of fact, though: Steven, when you say, "the correlations are for Liability," I want to note that this conflicts with what the insurance companies were telling the Senate in 2003 when SB260 was making its way through committee.

    If they could get their story straight, I think they'd have a better case.

  • MCT (unverified)

    Steve: "I don't want you to have yours". ? You have yet to convince me that bad credit = bad driver. Where are the stats? Show me the formula. Bad drivers already pay higher premiums. Bad credit with a clean driving record shouldn't have to. You do not seem to take into consideration the monies that will be paid into insurance coffers by drivers who are currently driving uninsured, when the credit scoring rate boondoggle is removed. How will that dump some sort of crippling financial load on your fine life style? How do you figure the weight will be carried soley by privileged people like you?

    "I don't want you to have yours" sounds pretty greedy and self-serving, and socially irresponsible. Did you mean to come off that way? Do you ever give anyone who has less than you a break? Do you pat yourself on the back when you write a check to your favorite charity? I'm guessing some of the recipients of your largesse have bad credit, so you better knock off that sort of noblesse oblige. God forbid someone with financial hardship get any consideration from you. And if you aren't writing those checks, as privileged as you seem to be.....well shame on you. I don't have much but I manage to give to those less privileged.

    You could consider voting yes on 42 a sort of charity of the heart, because if California's experience with doing away with credit scoring for insurance rates is an indicator...voting yes on 42 won't cost you a dime.

    Driving may be a privilege in your eyes, but it's how millions of working poor get to their ridculously low-paying, high stress jobs. They pay taxes that help build and repair roads. I say give them a fair deal by allowing those with good driving records to purchase affordable insurance, and shop at will for a better price than their existing policy, without being penalized.

    YES on 42.

  • (Show?)

    Well guys (and gals), I think it's come time to just agree to disagree.

    I've cited verified facts showing that California rates have gone up dramatically after passing a similar law; you've stated in response your unsubstantiated belief that "if California's experience with doing away with credit scoring for insurance rates is an indicator...voting yes on 42 won't cost you a dime".

    I've quoted elementary principals of competition from basic Econ 101; you've stated in response that "the cost of paying claims, is not ... necessarily subsidized by premiums" - an economically impossible statement, that if ever was really imposed on the insurance industry, would cause them to quickly exit the business.

    And above all, you've demanded "proof" to your satisfaction that this Initiative will make things worse, when the real onus is on you to show that this law will make things better overall - not just for one particular group of people.

    Instead, you've made ad-hominem attacks, accusing me of arrogance (apparently any disagreement with your manefest wisdom qualifies as such), being motivated by selfishness, and petulantly "defending a mistaken vote" because apparently I'm simply too proud to admit I've been persuaded by your unsubstantiated assertions and black and white thinking. Insurance companies are always thugs, so anything that hurts them, must be, perforce, good. All hail Hurricane Katrina!

    In all, the only actual new argument I've read is the assertion that this Initiative should decrease the number of uninsured motorists in Oregon because more people who don't pay their bills will be able to afford to make themselves legal. But if the effect is there, it certainly doesn't seem to be significant. Oregon's uninsured motorist rate is without this kind of law presently 10%, compared to California's 14.3%.

    But again, it seems like we're beyond fact based argumentation, and we've all got better things to do than to argue this measure. I'm going to be focusing my efforts in the next few weeks on getting out into the real world and electing Democrats. So have at it kids. The floor's all yours.

  • askquestions1st (unverified)

    Steven Maurer -

    Well guys (and gals), I think it's come time to just agree to disagree.

    I totally agree with you.

    As I said at the outset, I do find you to be a bright person, and your posts to be some of the best on BlueOregon. This is in large part because they are reasoned, and in more cases than not I agree with you. I think it is far more important to not contribute further to any kind of environment which could even remotely cause this blog to lose your contribution. So I for one certainly hope to be able to continue reading your posts on any and all threads that interest you.

    And I agree with you wholeheartedly about this:

    I'm going to be focusing my efforts in the next few weeks on getting out into the real world and electing Democrats.

    I know I am going to be one unhappy person if we don't take at least one chamber of U.S. Congress this fall. And I remain very concerned that we won't because we just don't get very comprehensive data on where voter sentiment really stands.

    <h2>So let's all wish each other the best in accomplishing that overriding goal.</h2>

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