Car insurance, you literally (and not the figurative form of literally) can’t drive without it. While this isn’t such a bad thing, it does create a market imbalance – you need it but try getting fairly compensated after an accident – and this is why most of us hate car insurance.

By the way, it is not just the fact that car insurance is government mandated but it is also the complications such as no-fault make it difficult, if not impossible, to understand the ins and outs of your policy. Don’t forget how the insurance companies loathe to payout when there is a claim.

However, it doesn’t need to be this way and some insurance companies are better than others. If you are in the market for a new policy, then check out what their customers have to say – like these Mercury Insurance reviews.

Government Mandated

Given how the debate around health insurance has played out in recent years it should come as no surprise that American’s don’t like government-mandated insurance. But there is good reason for requiring when it comes to car insurance – three.

First, the roads are owned by the government. Ok, they are ‘public’ property but as the government acts as the agent for the public, this gives them (the government) the authority to regulate the conditions by which roads are accessed. For this reason, governments across the country have chosen to require insurance for all vehicles operating on public roads.

Now, if you happen to own a couple thousand hectares, then maybe you can spend most of your time driving on private roads. But for us mere mortals, we have to drive on public roads to get from point A to B and this means following the rules as laid down by the ‘public’.

Then there is the second reason. Cars are dangerous, and this means that we need coverage for any liabilities arising from using them – either via commission or omission. This is not rocket science but what other two-ton machine do you have at home that you can use to harm someone or something.

The third reason is that most of us use bank loans to buy cars and this means the banks have pressured governments to make sure they require insurance as a means to help protect their investments.

Sure, you could by a car with cash or credit cards but these are generally expensive and time-consuming options. As such, the better way to go for most people is to get a loan. However, (and pardon the pun) if you want to drive, then you have to follow the rules of the road.

No-Fault Insurance

You know you are delving into a topic of relative complexity when insurers deem that there are situations when it is impossible to confirm who is at fault. But this is only part of the story. Not only has no-fault insurance become the legal standard in twelve states and territories, it has also led to some of the biggest abuses in auto insurance. Examples of this include widespread fraud in Florida and what many observers believe is a broken car insurance system in New York.

What is no-fault insurance? These laws limit liabilities in certain accidents by preventing claims to other driver’s insurance company in the case of an accident. But these laws go further than this by limiting the ability to sue for additional damages.

The original argument for these laws was to put an end to ambulance chasers whose only motivation was to bring frivolous suits. But with every law, there are always several unintended consequences.

These consequences included rising medical costs, fraud, and rapid increases in insurance cost or requirements for supplemental insurance such as Personal Injury Protection (PIP) coverage. However, even this coverage has it limits and the requirement becomes another double-edged sword that is the auto insurance market today.

While you would think that requirements for additional coverage would be proof that auto insurers are hurting. The reality is something completely different and as such, there is growing sense by industry analysts that the concept of no-fault insurance is good for insurers but bad for policyholders.

The one thing that might bring substantial change to the car insurance market might not be insurance reform – rather new development such as ride-sharing, self-driving cars, and even blockchain.

As such, we could be entering a world where auto insurance will mean something completely different from what our parents or grandparents knew. In fact, insurance might not even be continuous; instead, it might be part of the contract when you hire a self-driving car for a short ride across town.

This would be a positive development as it would reduce the need to have insurance for something that you rarely and maybe this might mean that we will not hate car insurance as much in the future as we do today.