- Hayden Kopser
Racial Justice MGA Proposal
Over the past year, carriers and brokerages across America and the broader world have made public comments condemning racism, coupling those comments with promises to donate money to racial justice initiatives, and assuring the public of their intent to (re)evaluate the diversity of their workforce. While these are certainly steps in the right direction, the direct impact and effectiveness of these initiatives on improving the lives of African Americans remains to be seen. Further, while hiring someone is likely a company's greatest tool to aide the individual's socioeconomic advancement, it is only one piece of an extremely complex puzzle.
What I have found missing from all of these initiatives - all of which I assume are going to play out as promised - is that none of the plans I have heard of will serve to have any direct impact on the African American consumer.
To those who are following where I am heading let's get one point out of the way. Racial discrimination in offering or declining insurance is generally and thankfully illegal in every US state (if you know of a state where this is not the case or there are loopholes please let me know). What I am prepared to propose is not a product offering that is intended to violate any state regulation, but rather a product that is structured to aide individuals and families who have perhaps been wrongly treated by the justice system.
What I propose to willing carriers and brokerages who at present offer personal automobile insurance nationally is that they team up to create a pool of available capacity in the standard market, which would be intended to afford advantageous rates for drivers who have a small or even high number of certain types of driving infractions, coupled with minimal or non-existent claims exposure. Offering the product through an MGA seems to be the most logical option in my mind (more on this below). This is not a proposal for a nationwide guaranty fund, and I am not suggesting a new non-standard offering. The goal of this product would be to aide drivers who have perhaps been wrongly ticketed and are receiving higher auto insurance rates, perhaps through poorly rated carriers, due to their driving records.
This is most certainly not intended to be an anti-police measure, and it is not intended to suggest that all driving infractions are due to injustice. People of all races, genders and ages can drive poorly, violate laws, and receive tickets or wind up in accidents. However, some evidence suggests that African American drivers are either ticketed more frequently than other races and/or are more likely than their white counterparts to have their tickets dismissed when they fight in court. The latter suggests that either there is a preference in America's traffic court system for African American defendants - I can find no evidence of this - or more likely, I believe more likely that the tickets African American drivers do receive are more likely to be either excessive or borderline unjustified.
Working off of this assumption, carriers can utilize their actuarial teams to come up with justification to rate less for or even disregard certain infractions. While this could not be a product that only one race of people can buy due to state laws, it is certainly a product that can be designed with African Americans in mind, and one that can be marketed to areas with a predominantly or at least sizable African American population. Sure, people of other races would be able to obtain coverage, but what's the matter with other people who have perhaps been wrongfully ticketed catching a break on their insurance? Imagine the life changing value to a good driver with driving infractions of dubious justification who is suddenly able to acquire less expensive quality auto insurance from a carrier with an excellent credit rating. If a driver is at or near the poverty line, but needs to own a car for work or family reasons, expensive auto insurance, much like pricey health insurance, can be financially crippling and limits their ability to save an move up the socioeconomic ladder. Even for someone making middle income, paying perhaps thousands for 6 month or annual policies is a large financial burden.
Perhaps some carriers would not be able to or interested in considering and pursuing this concept. While understandable, I would suggest to those interested or on the fence and who have already considered or agreed to give millions to social justice causes, this would not only offer an opportunity to create real change in the lives of African Americans, but would also offer the company tremendous visibility as a leader in American business culture. Clients, employees and the broader public would almost certainly applaud the attempt, regardless of its ultimate success or lack thereof.
In order to add value to the proposition, it would be best to offer this product through an MGA that is developed with the help of at least some brokers who are presently serving the African American community. On the carrier side involving talented African American employees in developing and managing the product would be essential. I know a number of talented men and women I would gladly recommend for involvement, assuming they would be interested. With modern mobile technology, this product would be very easy to offer via an app or an easy to use website that the carriers and/or brokerages involved would aide in funding.
Lastly, I think it important to address those who feel that this proposal would be either futile or is based on bad information. I once again note that I am not suggesting that data on traffic stops among various races is completely conclusive, and I am also not suggesting that the traffic court system is either unfair or favorable to African American drivers. I am basing my proposal on data, anecdotal experience in discussing issues like 'Driving While Black' with African American friends, and from hearing stories in the news such as stories from Senator, and former insurance agency owner, Tim Scott of South Carolina. To those who dismiss my proposal or even the idea of disproportionate treatment of African American drivers, this proposal will be the perfect way to definitively prove their rightness. If the plan shows that future long term loss ratios for these drivers are closely tied to certain infractions that are questionable at present, they can rest assured knowing they were right. If, however, this does not prove to be the case, they will have firmer data to work with and will be justified in changing their opinions.
The intent of carriers and major brokerages to aide in the quest for American social justice is great, and it's now time to use that energy and available capital to aim at initiatives that would have real world impact on the lives of real people using products that these firms develop and manage better than any firms. North Improvement simply does not have the capacity to create and manage this product at present, but I would gladly consult on and aide in its development to make sure it is created and managed as intended.