Tuesday, May 11, 2010

Do Traffic Enforcement Cameras Increase Insurance Rates?

As we all know, insurance companies use every available means to determine risk. They price risk based on demographics and on markets. For example, if Carter County, Tennessee has a high accident rate, rates will generally be higher there than for a county with lower accident rate. I believe this is a well known fact.

Some are now speculating that insurance companies are using data from speed cameras and red light cameras to increase rates on certain areas. While individual violators are not reported to the insurance companies, the raw data likely is reported. So, if Bluff City issues 300,000 tickets per year on its speed cameras, the insurance companies will assume that Bluff City drivers are very dangerous and must pay higher insurance premiums (despite the fact that most of the tickets are undoubtedly issued to people who only pass through the town).

In Johnson City and Kingsport, most of the red light camera tickets are undoubtedly issued to residents. What do you think happens when an insurance company sees a lot red light tickets from those two municipalities but sees only a few from Bristol, Tennessee that were issued by actual police officers instead of scameras? Undoubtedly, Johnson City and Kingsport will be assessed a higher risk premium and insurance costs will go up.

Further, study after study shows that the presence of red light cameras causes an increase in the number of rear-end accidents. These are the types of accidents that make insurance companies cringe because they are so open to fraud. Back and neck injuries are notoriously difficult to prove the severity of and notoriously easy to fake. When the red light cameras come to town, insurance companies will have to pay out more money for these types of accidents. Does anyone really think they won't raise their rates to address this increased risk?

While these city "leaders" think they are bringing money into their city by using these scameras, they may be losing more than they realize. The money paid to insurance companies leaves town for good. It provides no jobs here. It provides no tax revenues here. All it does is place an additional burden on our citizens.

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