New York Times
August 24, 2010
A couple weeks ago, I became briefly fascinated and somewhat appalled by the appearance of a new Internet business that offered a sort of insurance against speeding tickets. In return for an annual fee of $169, ticketfree.org promised to reimburse you for the costs of up to $500 in moving violations. Its webpage enthused:
- We don’t promise that you won’t get a ticket; we just promise that you won’t have to pay for it.
- Never pay another ticket again. Period!
- Never pay late fees on tickets.
- Never worry about speed traps or radar while driving.
- Never need an expensive ticket lawyer.
- Never have a take a day off work to fight a ticket.
The first reaction of any economist would be that ticketfree.org faces an enormous moral hazard problem. People who are insured against the cost of speeding tickets are more likely to speed. To be a viable business, the insurer has to hope that the hassle of being stopped, incurring “points” toward the suspension of your license or “demerits” on your auto insurance, and the cap of $500 will stop the average person from receiving more than $169 (the premium) in annual tickets. (Ticketfree.org was smart not to cover parking tickets. Because parking tickets don’t result in the hassle of a police stop or the accumulation of “points” like speeding tickets do, people like me would react to parking insurance by massively increasing the number of our parking violations.)