UKC

For the insurance industry to be profitable it must cost the user. Therefore we'd all be collectively better off if no one had insurance. 

Insurance is a legal requirement. If the law dictates that I need insurance then I think there should be a government insurance policy which runs not for profit. Private companies essentially get to set the price for something which the government makes obligatory. This seems foolish to me. The companies have no incentive to keep prices low, hence they don't really look in to spurious claims, and they don't really care about getting repairs done affordably. Cars are written off unnecessarily and wastage is completely accepted. 

It’s not exactly, or only, related to car insurance, but since coming to NZ I think the ACC system here is great. I’m amazed it ever managed to be set up, even in NZ, but it often seems to be such a sensible and for the greater good idea, but also so much against a lot of vested interests of those with money and power, that chances are against any country elsewhere adopting it.

For those unfamiliar with it, it’s a no fault, taxation funded compensation system for all accidents that happen within NZ, covering all medical expenses and a certain amount of loss of earnings. It means that you waive the right to litigate against someone in the case of an accident (except for loss or damages to possessions.)

It has a large number of positive outcomes: recovery times for injuries like neck injuries in car accidents are much better, access to physio etc is very easy for accidental injury, car insurance is not compulsory and something like a 5th of the cost compared to the UK,  there is very little litigation culture etc, and it is probably the main reason the “adrenaline” sports industry works here.

Like everything its not all upsides (it is probably one of the reasons that work related health and safety still lags behind many other countries)  but the pros appear to far outweigh the negatives.

So it’s not quite what you’ve suggested, but I think that lack of compulsory car insurance does result in far cheaper costs for it here.

To me the best way would be a fixed rate cover for third party only based on your age, sex and no claims discount. This would cover the medical expenses and loss or earnings for the person you hit but not you. I would also include a maximum number for repair to the car you hit that would cover the cost of replacing an average car. This would be the mandatory minimum cover. 

If you have an expensive car and you want it fully covered that would require a separate policy.

If you want medical cover that would require a separate policy. 

The counter point is that many firms are vying for your business, thus creating competition, and providing the best price for the consumer. This idea is borne out in that insurance companies don't tend to make excess profits. 

If you nationalised it there would be no competition and therefore no incentive for economic efficiency

While they are setting it up they can start a tyre company, the law says they have to have tread so there should be a no-profit supplier. And seat belts, lights etc, etc.

Why stop at cars, what about all the rest of the stuff the law requires us to have like clothes?

Economic efficiency for the industry is not economic efficiency for the motorist. 

https://www.thisismoney.co.uk/money/cars/article-3281637/Aviva-apologises-s...

Economic incentive for insurance industry as a whole is to make larger profits in a larger industry which requires lots of claims and lots of premiums. Selling on crash details promotes growth.

Economic incentive for motorists as a whole is for insurance industry to be as small as possible.

This is where it falls down, in my opinion. I can see private companies being far more interested in spurious claims and fraud than a state run industry.

Take the NHS. I have friends who used to be fraud investigators for the NHS, their small unit recovered tens of millions per year, far more than it cost to run the unit. It was closed down to "save taxpayers money". Public services have been cut to the bone, and now the bone saws are coming out.

It shouldn't be that way for state run industries, but sadly it is.

But as an industry the prices creep up and it's mutually beneficial for all companies to be on comparison sites and then gradually increase prices. 

They appear to be competing but in reality they're price fixing amongst themselves.

They also have any number of ludicrous reasons to increase the price. No claims being the most apparent.

Good point, but it's not helping my case so I'm going to ignore it. 

Insurance companies won't investigate in much detail for a small claim. Because of this a faulty party ('s insurance policy) has to pay. It's cheaper for them to do this without a fight and then pass the cost on to the customer rather by increasing premiums than to actually investigate. If all companies do this then it inflates prices for everyone regardless of fault

Having a car isn’t a legal requirement though. I’d counter that it’s more important for nationalisation of modes of public transport. 

I can't see how a state monopoly would do any better. The sheer volume of claims coming into what is guaranteed to be an understaffed and demoralised organisation would mean that there would be minimal checks. We don't even fund the police to adequately investigate anything other than serious crime.

I can see that a system of increased tax on fuel, for example, could be used to compensate people injured by uninsured drivers. I can also see that some services, such as utilities which are used by everyone and are necessary to a basic standard of living, should be provided by the state. But cheap car insurance?

Edit: James has just hit the nail on the head. Improved public transport would be a far better system, rather than subsidising car owners.

That's not a fair comparison though. For all those other things there are budget or secondhand options available. If you're young and you want to drive you are legally obliged to pay an obscene amount of money to a private company for the privilege. 

I totally agree with the OP. I'm old now so it's no longer a problem for me, but I remember the days of paying twice the value of my vehicle every year for 3rd party only cover. 

That's a red herring.

Most of the profits for insurance companies come from a small return on the money they 'hold' in premiums. Not from a 'premiums in vs payments out' balance. 

That's because, generally (there will always be counter examples) they make minimal profit from the premium due to competition.

Don't get me wrong, I hate the insurance industry and their ridiculous exclusions, additions and micro segmenting (what is the point of insurance if not to pool risk with others, rather than be sliced off into your own tiny risk segment) - but they don't make huge profits.

Indeed, if ever there was a case for nationalisation of any industry, something to further subsidise private motoring has to be way down the list of priorities.

Another option could be some kind of Levy, akin to the Flood Re scheme for home insurance. Every policy comes with some kind of levy and that is used to provide more affordable insurance to those having high premiums through no fault of their own (i.e. someone crashing into them).

But again, flood re subsidies those who have houses in areas at high risk of flooding where the home was built at least X years ago. And, whilst you have a mortgage at least, home insurance is a requirement so it comes back to the point that a car is a privilege (albeit necessary one in many areas) and whether this should be subsidised or not.

Classic false dichotomy.

They aren't alternatives, you could have a national system of car insurance and nationalised public transport.

Personally I think the legal minimum third party cover should be bundled in, at a flat rate with 'road tax', most would top it up but for younger and older, poorer road users it would be a real enabler and their gain would be at very minimal cost to you and me. Don't allow opt out of this basic cover so it becomes purely the poor man's choice and prices are forced up by low demand and concentration of riskier users in the scheme.

Jk

This sounds like communism, which hasn’t worked out too well. I agree something should be done. Stricter pricing strategy? No loyalty fees you get by not switching every year? 

What baffles me the most is that UK has a mentality of needing to switch providers every year because the prices just keep hiking up. Virgin Media broadband went from £28 to £42+ per month over few years. Insurance is the same. Why is this the norm and people don’t seem to be bothered? 

Great idea.  

The car insurance industry is the epitome Corporate Britannia with endless marketing brands slapped over relatively few providers, massive over-segmentation of the market and clear anti-competitive conduct through colluding to be equally shite, creating a "hassle barrier" for the customer so that whilst there is choice, using it well wastes far to much of the customer's time allowing a technically legal mechanism for price fixing that works on some fraction of the consumers.   Same old same old as the energy and telecoms markets.  

We could auction off the delivery contract of nationalised insurance to people like Serco, Capita etc.

Okay, maybe not a great idea.

I don't think there is the same "collective good" imperative for nationalisation that exists with healthcare for example.

There was/is (?) an alternative to car insurance, which is to place a £500,000 deposit with some government office - useful for billionaires with a great many cars I suppose.  Last year there was a consultation going on about removing this alternative provision.

My take - given the increasing prevalence of autonomous safety features and eventually autonomous driving, the insurance industry as we know it is living on borrowed time.  It's better to accelerate the move towards more autonomous cars than to stick a band aid on a terminal patient.  As per the Balad of Heisenberg: "Ese compa ya esta muerto.  Nomas no le han avisado."

The simple answer is to move alter the law on negligence etc and to switch to a no fault compensation scheme. It would have a big effect on the cost and kill off the ambulance chasing culture that has developed which premiums ultimately pay for.

Your assumption on insures not controlling motor vehicle repair costs is way off the mark.

The assumption the insurers collude on prices does not reflect the intense competitive pressure  in that market and also the fact that it is illegal.

if you wantr to see how expensive m,otor insurance can get, speak to people in Europe where its generally alot more expensive.

There are lots of spurious claims that are investigated , you just do not hear about them.Its not something that people get excited over.

I seen to remember, when I spent a year out in Western Australia years back, your road tax covered you for third party injury, and that was the legal minimum requirement.

Made it very easy for a young person in a low paid job to get transport to that job - buy an old banger, tax it, off you go until it becomes uneconomical to repair.

The insurance companies are then left to compete for the custom of those who want to ensure an expensive piece of property rather than those who just want to get on the road.

Seemed like a pretty sensible set-up to me.

Were we communist when the royal mail was state run?

Admittedly I'm quite lazy and I am making assumptions. But my point on price fixing is that it's mutually beneficial to all insurers to raise the price. Many insurance companies are just a brand underneath a much bigger umbrella and so the "competition" is actually a bit farcical. 

European insurance has anecdotally been cheaper as far as ican tell. France for instance insurers the car and not the driver. Therefore a family group (or friends sharing a car) is cheaper. It also makes more sense to me

This is very convenient but I have often wondered why their insurance market works that way? Is it the law that this is how car insurance has to work there? Seems surprising someone doesn't set up a company that only insures say over 30s and can offer much lower prices (since I'm sure the UK is alone in finding that younger drivers have more accidents)

You have completely missed the whole point of insurance.

We already have the short term medical treatment side of the insurance covered by the NHS. 
 

You are only insuring against the loss of someone else’s valuable property, loss of their earnings and/or their catastrophic long term injuries/death.

You are only legally required to have third party cover in the event you can’t pay out £5m quid when you crash into a bus queue or cause a pile up on the motorway. 
 

A scheme run by the government would cost all taxpayers equally regardless of whether they drove or not. Doesn’t seem any fairer. 

 Seems surprising someone doesn't set up a company that only insures say over 30s and can offer much lower prices (since I'm sure the UK is alone in finding that younger drivers have more accidents)

IIRR it's illegal.

That pink insurance company for girls got hit by the same thing. (drive like a girl?!)

Wouldn't everything you mention above apply to a taxpayer run sceme too?

I've often thought about if this could be possible. Maybe an insurance band for the value of your car (like road tax bands) plus additional bands for high claim rates that are your fault. I'm sure someone could work out a fair algorithm. The vested interests would stop any proceedings under this government before they ever begun. 

The problem with this is that it provides no incentives towards driving more safely. If your insurance is a flat rate, unaffected by points on your licence, or previous poor driving (through your no claims bonus), or even general criminality, then there are fewer incentives for people to behave well when driving. Inevitably this would lead to more insurance claims, subsidised by all drivers. Can't see it being ideal for cyclists and pedestrians either.

I imagine this system works in Western Austrialia as it's mostly empty.

I think cross-subsidisation is essential when the risks are pretty exogenous, for example health or unemployment. None of us know whether we'll get cancer next year, or whether our firm will go bust. But driving risks are mostly endogenous. We can choose how we drive, how fast we go, whether we live in a high crime London or a low crime Llanberis.

Ok, maybe you do it on years of driving experience rather than age directly. But anyway the question is about the French market not the UK market (which is I think what you're talking about with the pink insurance company - apologies if I'm wrong)

Does risk of increasing insurance premium really make people drive safer? Isn't the hassle of avoiding an accident incentive enough? Might be true but seems weird. 

No. Private motoring is already heavily subsidised by the taxpayer and we don't need to add further to that.

Driving a private motor vehicle is a privilege that benefits no one but the person doing the driving, so I don't see why the government should set up another organisation to support that.

Not if it was bundled with road tax. Of course there are already lots of things our taxes fund that we don't as individuals necessarily ever directly benefit from but this needn't be another unless we chose to cross subsidise it for the public good (hard to argue given many see cars as a blight).

jk

It's certainly not simple but personal transport is not simply of personal benefit, it has far wider economic value (and cost of course).

jk

If three points just meant a hundred pound fine, and not a few years of extra insurance costs, then I suspect people would be a bit more casual about getting caught. A small percentage change in behaviour across millions of drivers could still be a pretty big negative for society. And if you knew there was no financial cost for, say, minor accidents, then inevitably some people would be a bit less careful.

On a similar line, this is the whole reason we can choose to have larger excesses on our insurance. It's a way of drivers self-selecting into more or less risky groups. If you think "I'm the sort of person that is accident prone" (obviously hardly anyone admits to being a bad driver), then you would be less likely to take a high excess. So the idea that financial incentives and driving quality interact is fairly well entrenched in the insurance industry.

Bundle with road tax, with a heavy discount for e-vehicles?

I simply don't believe relatively minor financial incentives are a significant driver of driving standards. I could be convinced by a good study but until I see one it doesn't fit with my understanding of how people (myself included) work. I've never once in 20 odd years thought of the potential impact on my premiums whether I was being a hooligan or driving sedately. It has weighed on my mind a few times when deciding what to do about hit and run crash damage on my vehicle. Maybe I'm odd, no I am odd, maybe others behave significantly differently in this respect. I'm willing to be convinced.

I'm not sure I follow, it seems to me you could extend that argument to not having any insurance but I doubt you would.

How fast we go is regulated by law and enforced, likewise careless/dangerous driving. Car crime doesn't factor into this, we're discussing basic public liability insurance. Crash for cash fraud is a different matter but a relatively minor one IMO.

I'm not talking about cross subsidisation from general taxation, just a basic level of cover for taxed cars, funded through a flat rate levy when the vehicle is taxed. Done right this also drives down the cross-subsidisation we already have of un and underinsured drivers by simplifying policing, if it's taxed it's insured and the cops are already well equipped to detect untaxed vehicles.

jk

The main incentives for driving safely are surely safety and keeping hold of your licence. 

Actually, Western Australia is mostly one big city - Perth has nearly 2 million inhabitants, the rest of the state only a quarter of that. It's a bit more spread out than most UK cities, and I don't know the accident statistics, but probably the main difference between here and there is they're very hot on policing the roads. People stick to speed limits and drive very conservatively. Spain is pretty much the same since they cracked down heavily on speeding a few years back... There's no reason why we can't make the same changes to driver behaviour here too, if we want.

If you know everyone on the road is covered for third party injury, and you want to insure a better car fully comp, you can still choose how to drive it, how fast you go, etc. to get a competitive premium quote... It would just just lower the barrier of entry to the roads for the less well off.

Convictions could still drive up your supplemental insurance costs if companies saw benefit in that and there is no reason fines couldn't be re-considered in parallel if it was proven a perverse incentive was being created.

Or into groups of differing ability to afford luxury. I protected my no-claims discount when I added my partner to my policy because I occasionally like to insure very fast cars, I don't want my ability to do that impacted by her, how do I put this delicately, parking. My protected policy doesn't make her parking any worse (actually it's pretty good these days, I should review this).

jk

There's a strong argument for the compulsory element of car insurance to be provided by government and funded from fuel duty and/or car licence tax.

It would mean the cops wouldn't need to spend time acting as enforcement agents for insurance companies and it would mean there were no uninsured drivers so blame free parties would always be sure of getting paid.   It would also mean young people could access the roads without unaffordable insurance premiums.

They could go further and put a maximum liability limit on the 3rd party payout on damage to vehicles so they don't need to pay out ridiculous sums because somebody's rolls royce  got dinked.

In the medium term cars will have so much assisted driving or self driving technology that accidents involving new vehicles will be rare and we won't need a huge insurance industry.

I know. Higher claims resulting in holding higher premiums gives greater returns.

Motorists as a whole benefit from low claims and low premiums supporting a cheap insurance industry.

Insurers as a whole benefit from high claims and high premiums supporting and expensive insurance industry.

I don't entirely agree on this. The whole Fixed Penalty Notice system does exactly this - fines (and of course points) for offences does affect the way I drive. To be honest the points is probably more of a factor than the £100 speeding fine though.

As a younger/new driver (20+) years ago, the potentially massive increase in insurance premiums for even a minor prang certainly focused the mind somewhat.

We have a poster above saying how expensive he found insurance as a young man, so clearly it's not a minor financial incentive but quite a major one. I have no idea how much insurance costs after you've had a short (say three month) ban for drink driving, but I suspect it is awfully expensive.

https://www.jstor.org/stable/10.1086/422978?seq=1

"We analyze a panel of 50 U.S. states and the District of Columbia for 1970–98, a period in which many states adopted compulsoryinsurance regulations and/or no-fault laws. Using compulsory insurance as an instrument for the proportion of uninsured motorists, we find that auto-mobile insurance has significant moral hazard costs, namely, reducing pre-cautions and increasing traffic fatalities."

Ie when insurance covers the cost of you having an accident, you are more likely to have an accident. People's insurance status impacts on their driving standards. 

In the interests of fairness, I should note that other papers on insurance and risk, looking at a range of insurance markets, find less straightforward links between insurance and behaviour, but clearly this is extremely complex as many risk factors are unobserved.

The population of WA is 2.5m, that of London 9m or so. Clearly there's not much of a difference in WA between driving at 40mph and 60mph because there's hardly anyone, whereas there's a huge difference between those speeds on the North Circular. So the social costs of relatively minor variations in driving are huge in the UK, tiny in WA, hence they can offer flat rate insurance to everyone, including the bad drivers, because bad driving isn't such a problem with respect to third party risk.

Edit: just saw Ciro's post so clearly this is incorrect! But as he explains, they use strong enforcement to ensure a greater homogeneity in driving standards in Perth. (And presumably it's not such an issue outside the city.) So to some extent the other aspect still stands: insurance is highly segregated because people drive very differently. Remove those differences, and insurance companies don't have to weed out the less risk-averse.

At any one time on the motorway I can be driving alongside people doing both 60mph and 100mph+, this is extremely common which suggests that much about driving is decided by the driver. Enforcement is relatively lax. The only way we can get exogenous driving styles, outside of self-driving cars, is to have average speed cameras for long stretches. When we do that (driving back to London from the Peak on a Sunday night) we get broadly similar driving styles dictated by an outside power, ie our driving style becomes exogenously determined, not endogenously determined. This is what makes driving - and hence driving insurance - fundementally different from health or unemployment insurance schemes, which have to be government run for this very reason.

As for location, you're right about car crime of course, but the costs of third party insurance are inevitably going to be higher for those of us who live in big cities. There are just more things to bump into, and in third party terms it is much worse to scrape a BMW than it is to roll your car into country ditch.

I think the bigger problem with cross-subsidisation is between drivers who are careless and those who are not, which is why insurance companies go to great lengths to separate out drivers, but I could be wrong.

Protecting a NCD costs a bit more, right? And you have chosen to take on that cost because there is a risk that your partner might have a small accident which would make already expensive to insure cars even more expensive. So basically, you are paying to cover an increased risk.

I would suspect that self selection for risk is likely to be in the opposite direction in regards to excesses. If I am a careful and prudent person I would be more likely to be willing to pay extra to minimise the risk of a larger financial cost to having an accident. If I am more happy to accept additional risk I would be more likely to think I probably won't have an accident and will be happy with risking pay out with additional excess if it happens.

It probably works in terms of claims because people don't claim because it would cost then more to claim than to pay themselves. Can't make my mind up that this is good because it allows a certain amount of small scale self insurance, or just defeats the object of insurance in the first place as you no longer share the risk, and gives an incentive to hide your real accident risk by keeping things under the radar. 

True, but of course it all depends on the reduction in policy vs the size of the excess.

Consider it as bet. My insurance is coming up, if I have an accident I could lose £100 or £300, depending which excess I pick. So say I'm paying out say £30 for a lower excess to "win" £200, where winning here means being better off than I would otherwise be in the case of an accident. But the chances of that win are - if I'm a careful driver - pretty small. Many careful drivers go ten or twenty years without an accident that's their fault. So it's an expensive gamble to undertake if I think the chances of me having an accident in a given year are small.

I suspect someone on these forums that works in insurance will be along in a minute to tell us how it really works, but my understanding is that higher excesses work as a signalling device for the insurance company to alter the information balance in the transaction.

Efficiency at providing a service, or efficiency at making a profit? That one can buy shares in insurance companies, to me suggests that absolute value for each pound may not be being delivered to the person buying insurance, because some of their pound is going to share holders. 

I appreciate it won't be black and white, in that a lack of competition may breed complacency, but that could depend on the institution itself, unless I'm wrong, it seems inarguable that some of what one pays is going into people's pockets who ultimately want to make money from company customers*.

* Why else would other countries own shares in the UK's railways?

Yep you are making assumptions.

Just ask yourself why insurers advertise on the telly and compete for your business.

Car insurance is a function of a number of factors ranging from car, driver, location,statutory requirements, investment returns etc etc. Same in other countries.

Issue is that we want it for free and for somebody else to pay for it.

Yes, agreed, I was oversimplifying.

On the whole though, if someone is travelling somewhere on their own in their own car (which I'd guess covers the majority of car journeys) then that individual is the one benefitting the most and the cost to society is already much higher than if that journey was covered by public transport, so I'm not keen on a suggestion that that cost should be further increased. 

Normal profit. Not rent seeking or supernormal profit. 

The extent of profit doesn't change the truth of what I said, I don' think?

I'm the son of a business person BTW who sold up their half and retired, so I'm not against private enterprise and a reward for one's efforts. I dare say the buyers of shares provide the capital for a company to grow and provide a service, I guess it may depend on the final equation. 

If it was nationalised like a public service, though, there could be benefits along the lines of social mobility in the cost of living being cheaper, and it 'may' turn out to be better value for each pound, if efficiency could be maintained?

I haven't a scooby.

My point was about premiums, not criminal sanction. Again though, there is no reason why suplemental insurance couldn't and wouldn't be discounted for experience and good behaviour. I'm talking about basic minimum public liability cover being available and provided to all road users (ideally via the vehicle facilitating easier sharing) at a flat rate as a public good.

Well now we have two different data points, as I said, I could be odd. Did it really modify your behaviour or is it a case of in hindsight you think it should have because I can concur with that but we don't have timemachines? As a young driver twenty years ago I was a hooligan having the time of my life without a care in the world.

jk

But we have compulsary insurance covering the cost of having an accident. This study appears to be comparing insured vs legally uninsured. We're already insured.

Indeed.

2M of them are in Perth, they're not all driving utes around the outback!

I genuinely don't follow how you're getting to that conclusion.

That seems increasingly uncommon. 20 years ago it was everyday, it's now pretty rare to see someone really steaming along on the motorway, most round me have gantry cameras every mile or so and regularly have vans on the bridges.

The only way we can get exogenous driving styles, outside of self-driving cars, is to have average speed cameras for long stretches. When we do that (driving back to London from the Peak on a Sunday night) we get broadly similar driving styles dictated by an outside power, ie our driving style becomes exogenously determined, not endogenously determined. This is what makes driving - and hence driving insurance - fundementally different from health or unemployment insurance schemes, which have to be government run for this very reason.

Health? We have basic minimum cover including for self inflicted illness and injury at a price determined not by individual risk (within or without our control) but by ability to pay. It's really not very different. If we excluded Smoking/Drinking/Obesity/Sport cover then we get closer to socialising the cost of insuring risk beyond our control but we don't.

Why, we cross subsidise health insurance between the risk takers and the cautious. I bet these arguments were happening in '47 when the NHS was new.

Again, I'm talking about universal basic public liability cover. Commercial supplemental insurers would still be free to incentivise, discriminate and nudge behaviour as they saw fit and felt able to get away with.

jk

But I'm not proposing increasing that cost to society, just flattening it across car users.

This isn't to my benefit, I'm a middle aged man in a low premium region with a clean licence, 20 something years of no claims. My basic premium would be subsidising other people.

jk

Yes. My point is it does not alter her ability or willingness to park (for better or worse). Mine either for that matter sine of course I too have additional cover which I hadn't given a single moments thought to since the day I took it out several years ago. By your reckoning we should be more willing to scrape the neighbours' cars or risk a spin because the cost to us is better controlled but it doesn't work like that, money is way down the list of motivators behind safety, shame, respect for others' possessions, pride...

jk

You've missed my point. If it was nationalised, the economic cost of it, to the British economy, would be more than as an efficient private sector industry. As it stands it is an efficient industry, and not one where participants can extract excess profits. 

I think what you are proposing it a version of wealth distribution through taxes and cross subsidy!  

Of course money is way down the list of motivators. But you're missing my point - these things affect behaviour at the margins, not necessarily of everyone. If your wife was a really appalling driver, really terrible at parking and lots of other things, you might not be willing to take the risk of having her drive, and if you did, it might end up costing you more, as the insurance company began to price that risk better. Might that change her behaviour? Well, it might - that's certainly what the study I linked to above suggests. Given that getting an advanced motorists certificate gives cheaper insurance and either involves learning, or acts as a signal that one is a careful driver, we can assume that price changes alter behaviour.

You're assuming here that there is no free riding going on, ie that having cheap, easily available insurance won't make some people sloppier drivers. (At the margin, remember.) If people take advantage of insurance whose cost does not alter according to your bad behaviour, then this is going to cost everyone.

It's totally unclear this is a public good. There'd be a huge loss for large numbers of people (I would rather spend my money on things I like rather than subsidising 20-something hooligans) and for what? To have more and worse drivers on the roads. You make the comparision with health insurance vs public health system, but there we can see - thanks, America! - that not accepting a level of free-riding leads to overall dramatically worse outcomes for everyone. As I said, bad driving is way more within my control than bad health outcomes.

You're probably right, that was a thought in the back of my mind. How does one know that it is efficient, though, how could one determine that?

I won't bother checking up on the minutiae but it is broadly a small % (to account for risk) return above the risk free return (generally seen as the central bank interest rate) on the amount of capital needed.

So if you have £100 and you buy government bonds you get a yield of about 0.2%. (currently, historically it has been very different). This is seen as risk free. Normal returns would be a few % points above this. More than that and someone is making some supernormal profit. 

Economic efficiency is a result of market structure. The most "efficient" markets are ones with perfect competition. This means that all the participants are price takers (ie no monopolies which can dictate prices), all parties have perfect information (I know how good your product is, or you know whether you're selling insurance to a boy racer or a careful driver), there is free entry and exit, and products are homogeneous.

Clearly, no perfect markets actually exist. But the nearer your market comes to that, then the more efficient your market is going to be, and market participants won't be making excess profits, which is a rate over and above the "typical" rate of return. Conversely, the further you are from that, the more likely you are to see excess profits. Sometimes we encourage those excess profits, such as giving patents to encourage innovation, but generally in modern, developed economies policy makers try to reduce them if possible.

This is obviously a gross simplification of what is a very complex subject...

It's interesting to see people complaining that nationalised insurance would punish the safe drivers. By that logic the NHS should charge more for people breaking their ankles doing the dangerous extreme sport of climbing when they could have been doing a much safer sport like indoor swimming. 

We accept a degree of moral hazard in health care because generally it’s hard to apportion blame in medical cases. Plus there is a speed aspect to A&E that makes it simply impractical. Of course everyone needs healthcare, whilst for a small number of us the costs are truly astronomical, making it far more practical to have the type of system that everyone but America has. 
 

Driving is, for reasons explained elsewhere in the thread as well as here, quite different. 

So if I take up sports car racing and break every bone in my body that enormous cost should be paid for by the tax payer.

But if I accidentally damage someones car on the way to my job in the civil service that should be a rip off private insurance job. 

Yeah?

Why is the insurance company ripping you off? It’s totally unclear that is happening. 

And yes, it is clearly socially beneficial to pay healthcare for people who endanger themselves, because the alternative is a series of ever creeping encroachments upon what counts as purposefully endangering oneself, to the point where ones health service is a bare bones affair or hugely expensive, as per the US. 
 

Cross subsidy is essential for healthcare to work. It’s clearly not essential for car insurance.

If you change the words "sports car racing" for "climbing" does that change your opinion?

As soon as a state starts to restrict access to healthcare for people on the basis of how they acquired injuries it's a very slippery slope. 

Nope, I used climbing in my first example.

UK car insurance is the US model. High excesses, claim avoidance, unavoidable personal situations resulting in high premiums. Every reason you give for car insurance to be private could be used as a reason to privatise the NHS, many countries don't have nationalised healthcare so why should we? Personally I love nationalisation of core services, but if you were going to nationalise one service surely you would choose the (unavoidable for many) task of driving to work over dangerous hobbies and unhealthy lifestyles. Why should I have an enormous car insurance bill because I need to drive to work so I can pay my taxes and support the economy so an overweight guy can have a heart attack whilst he's soloing and need tens of thousands in medical care? 

No, I disagree. My experience of State run enterprises is that they are not great. My heart tells me that it would be great, but if you did this people would have less incentive to drive carefully, they would have more incentive to make claims, and I could imagine major corruption in the car repair side of things.
 

Drivers externalise enough cost, ie the damage to the climate and the impacts of oil production on people, I believe your suggestion would be retrograde.

There seems to be a belief that its a Human right to drive, and I do not think it is.