Sunday, May 12, 2019

Statistical thinking

The earlier post about car insurance touched a nerve.

That prompted this post.

It is often possible to find a proxy or a relationship between behaviors.

For example, insurance companies found a relationship between people whose address-of-record had a Detroit Zip Code and an increased risk of having the car stolen. The difference was large enough that it justified segregating that population from the general population.

The Governor demands that "non-driving" data cannot be used in setting rates.

I am just spit-balling here, but what if insurance companies discovered a relationship between drivers who run red-lights and an increased rate of vehicle theft?

A side issue is that many police are loath to write traffic tickets for things like running red lights. I have seen light changes where they would have to write eight tickets for every red light. But many intersections have cameras for that kind of thing.

There might be pushback regarding the fact that the only place you find many intersections with lights is metropolitan areas and only the large cities have the automated cameras. That does not negate the fact that it is "fair game" for insurance companies to apportion the cost of covering theft risk based on documentation of any driver running red lights.

It also creates an incentive for insurance companies (or their customers) to file law suits against cities if the automatic cameras are disabled. Currently, I don't give a rip whether they work or not.

But I will care if automatic cameras are a statistical link used by the insurance companies to more accurately apportion costs. If the cameras are inactivated either by politics or vandalism, then my rates will rise because those costs cannot be rationally apportioned.

It is what the Governor demanded: That the price of vehicle insurance be based only by "driving" data.


  1. Written insurance for 34 years. People drive like they pay their bills. When that factor is built into the pricing good drivers stop subsidizing bad drivers. Seems fair.

  2. I always wondered why they wanted a credit check for insurance...

    I suspect that educational levels play into it also, since my latest renewal asked whether or not I had a degree.

    The governor says that 'non driving' data can't be used to determine rates - but can it be used to determine coverage at all? i.e., could companies just choose to not cover anybody in Detroit (or other big cities)?

  3. Oh, and my comment on your earlier post didn't show up... sigh; that has bene happening a lot recently, on your blog and on other's.

  4. I write any and all reasonable people. I target college grads. Household lifetime income is on average one million higher. The practical side is there is just more to insure.

  5. No, higher education does not make a reasonable customer. Living within your means makes a reasonable customer. Sweating your cc bills takes a part of your brain that would otherwise process that there is a vehicle in your perifrial vision and therefore already occupying the lane you want. Death and divorce do the same thing, Rob your conciousness.