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Sometimes good ideas prove to be bad ideas and the mark of any good decision-maker is having the humility to admit the error and do something to put it right. For the purposes of this article we need to go back to 1973. This was a period when morality was still a driving force in politics. Perhaps surprisingly, legislators wanted to be seen doing the “right” thing even if it was less than popular. So this year saw Michigan become the only state in the union to introduce mandatory unlimited medical benefits for those injured in traffic accidents. This was the high-water mark for financial responsibility, taking the view there should always be enough money to treat those injured on our roads.

The only problem with idea is the cost. Many people are seriously injured and require long-term care. Worse, without a cap on the spending, there has been a temptation for hospitals to offer an open-ended and comprehensive treatment program for everyone injured. This helps explain why Michigan has one of the highest premium rates with Detroit being the most expensive city in the US (New Orleans is the second most expensive city where average premium rates are one-third lower). The claims for personal injuries have more than tripled in value over the last twenty years. Today, the average driver pays more than $25,000 per year for cover. Such high rates in a state with long-term structural unemployment has forced many drivers to risk running without insurance. The estimate is that 17% of the drivers on the road are uninsured.

State Senator Virgil Smith who represents Detroit is currently drafting a bill to use the city as a testbed for a new approach to insurance, following models in California and New Jersey. The plan is to allow insurers to offer a basic policy to all drivers who earn less than $30,000 per year, drive a vehicle worth less than $20,000, and have a clean driving record. Although the Senator is still to set limits, the proposal looks to set a cap on medical claims, probably around $50,000. The expectation is that those who would be eligible would see their annual insurance costs fall to as little as $1,000 per year. If this is proved effective in reducing the number of uninsured drivers, the program would be rolled out over the state. Again this follows the example of California which tested its Low Cost Automobile Insurance Program in Los Angeles and San Francisco before extending it to the whole state. (more…)

In one sense, it may make no sense to suggest buying a new vehicle for your teen to drive. Something secondhand and already marked by previous brushes with opposing vehicles may seem better value. If you buy a new vehicle, you immediately lose the sales tax and depreciation will be steep if there are accidents. Selling something damaged in a serious crash can be a challenge. You may be forced to keep this vehicle running for many years to get value for your money. Buying something cheap from the sales lot that can be thrown away if there’s an accident is usually the best solution. There’s only one reason you might think about buying something new.

Vehicle design is improving all the time. Go back fifty years and, comparatively speaking, the cars of the day were death traps with poor suspension and worse brakes. They might have looked good but, in a crash, they caused more injuries than they prevented. Modern design is based on crash testing. It has areas designed to crumple and so absorb the energy of a collision. There are airbags to cushion the driver and passengers should there be a more serious accident. Since the statistics tell us that the most common cause of death for teens is driving – beating all the diseases by a long way – you might feel you owe it to your teen to buy the safest possible vehicle, i.e. the latest model with all the safety features.

The first thought might be an armored vehicle or a large truck. This gets the maximum amount of metal between your teen and any other driver. Since they may well be talking on the cell or, worse texting, something strong will protect them. This is true for straight-line collisions. But it’s less true for side impacts and, if a driver loses control of a large vehicle, it can cause a lot of damage. So the better buy is a midsize sedan. This gives you a reasonable amount of protective metal, but it’s also more nimble and easier to drive out of danger, particularly if it has antilock brakes and electronic stability control. New, there are good value vehicles under $20,000 such as the VW Jetta, Kia Optima and Hyandai Sonata. These have consistently performed well in the crash tests and are fitted with all the main safety features as standard. They are also treated sympathetically by the insurers when it comes to teen drivers. If you want secondhand, the results of the government crash tests are available online showing you the safest cars for the last ten years. (more…)