Insuring drivers rather than vehicles will not work. It makes some auto coverages impossible to offer and does not match risk to the premium rate. The actual risk cannot be measured, and it is subject to cheating. It is unfair because it must overcharge some drivers while undercharging others. There are theoretical reasons why it doesn’t work, but the easiest way to show this is with examples.
Grandma is a sweet old lady who only drives 5 miles to church once a week. She owns two cars: a red 1964 Ford Mustang in cherry condition, which she got from her late husband’s estate, and a 20 year old Toyota Corolla. Which does she drive to church? Since the cars are not insured, there is no way to know. Driving the Mustang is much more risky because of its fast pickup and its lack of seat belts. It’s also more expensive to repair. But since Grandma is insured rather than the cars, there is no way to take into consideration which car she is driving. In any case, her children buy the insurance and don’t tell the insurance company about the Mustang – as far as the insurer knows, she drives the old Corolla 5 miles to church every week. But Grandma left the Mustang on the street one Saturday night, and it got stolen. She wasn’t even driving! There can be no coverage if the car isn’t being driven by someone insured – no miles, no premium.
But, you might say, comprehensive (which covers theft, vandalism hail damage and the like), can be available for the car. It could, but there would have to be two pricing schemas: one for the driver, and one for the vehicle. Why bother? It builds extra costs into auto insurance prices, and we all know that it costs too much as it is.
Grandma is a nice lady, and she meets a nice man at church. He doesn’t drive, and doesn’t own a car. He doesn’t have auto insurance, which is why he can live on his pension. One night they go to the church social, and Grandma dances so much that she is too tired to drive. Her friend offers to drive her home, and they get into an accident. Since he was driving, there is no insurance. Miles as a passenger is not factored in to the rates, so Grandma’s coverage doesn’t apply – she was not driving.
Grandma’s beau moves to a town 50 miles away so he can be closer to his grandchildren. Grandma visits him every week. Suddenly Grandma is driving 110 miles a week rather than 10. Does anyone tell the insurance company? Be honest now, even if the children are not. The insurance company won’t catch up for a major portion of the year, and maybe not then. Risk and premium are completely out of whack.
How can we address these problems? The easiest way is to insure the car. Then, any authorized driver has insurance. The nice gentleman would have been covered for their accident on the way back from the church social, but the joyriders who boosted the Mustang would not be. This is a much easier way of insuring any authorized driver. Most auto rates assume a minimum mileage, typically 2,000 per year. Grandma’s longer trips are still covered, and even priced reasonably. She is not necessarily overpaying when driving only 10 miles per week, because there has to be a minimum charge to cover fixed costs.
These examples show how easy it is to cheat the system with an “insure the driver” schema, and how difficult it is to offer coverages that we take for granted under the current system. Insuring the car makes it possible to determine accurately how much the car has been driven, which is important for calculating the risk. The driver is already insured; changing auto insurance would accomplish nothing, add extra unnecessary costs, and be grossly unfair to everyone.