How car insurance underprices the risk to pedestrians and cyclists
Washcycle mentions an insurance case in Alaska, involving an accident between a pickup truck and a cyclist, where it was stipulated that the truck driver was at fault. The insurance policy limited liability to other parties to $100,000, even if the actual damages were much higher.
Every state's minimum insurance requirements are dreadfully too low. In this case the motorist had $100,000 liability (not insignificant) but his own insurance company valued the damages to the cyclist to be $375,000 - $475,000.
And this from simply pulling in front of a cyclist.
What I get from this is:
1) Minimum liability insurance needs to be raised several orders of magnitude.
2) Perhaps we should have a new liability insurance component that specifically covers damages to person(s) who are NOT motorists (and by virtue of not having several tons of steel protection suffer greater injury).
I would set a liability requirement for damages to non-motorists to be several multiples of the existing liability minimum limit.
Keeping in mind that a car - car collision at 25 MPH likely will not injure any of the occupants while a car - pedestrian collision certainly will). Actuaries could work out the correct multiple.
Crickey7 makes the key point:
... It's truly risk-shifting to the victims and an example of moral hazard in that the irresponsible pay less in insurance premiums and get away with it.