Elon Musk says this is why insurance is so expensive

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Several factors go into the cost of car insurance.


Key points

  • A Missouri arbitrator recently awarded a woman $5.2 million in damages after she was infected with HPV in her boyfriend’s car.
  • Elon Musk thinks damage claims are driving up the cost of insurance.

Elon Musk reacted strongly to an article published on CNN.com. The article told the story of a Jackson County, Missouri woman who contracted a sexually transmitted disease in her boyfriend’s car. Because the damage occurred while he was in her insured vehicle, she sued GEICO, her insurer.

After reading and reposting the article, Musk wrote, “Crazy damage claims like this are a big part of why car insurance is so expensive.”

Why the dust?

To better understand Musk’s reaction, it might help to quickly review the incident in question.

According to a woman referred to as “MO” in court documents, after fooling around with her partner in his car, the woman learned she had contracted the human papillomavirus (HPV) from him. Worse still, the partner knew he had HPV and did not tell her or use protection to prevent the incident.

Untreated, HPV can lead to more serious problems, including a host of different cancers. In February 2021, MO submitted a claim directly to GEICO, at which point the insurer basically told him to pound sand and denied the claim.

Knowing that she was responsible for the medical bills, MO made a final settlement offer of $1 million. GEICO refused to settle. MO’s case was then sent to arbitration for decision.

The referee’s decision

After hearing the case, the arbitrator determined that “there had been sexual activity in (insured’s) automobile”. The arbitrator also wrote that the activity “directly caused or directly contributed to causing” the woman’s HPV infection. Finally, the arbitrator held that $5.2 million would compensate MO for damages and injuries sustained while in a GEICO customer’s insured automobile.

GEICO never bothered to step into a defense. However, after the arbitrator’s opinion was rendered, he appealed to the Jackson County Circuit Court, saying the company had not had “a meaningful opportunity to defend its interests”.

The Missouri Court of Appeals upheld the award against GEICO, saying the company could have defended its interests by presenting a defense and that the insurer had no right to pursue the case. And so the $5.2 million judgment stands.

At Elon’s Point

While it’s hard to imagine the last time Elon Musk wrote a check for car insurance, his reaction may be an oversimplification of a complex issue. It’s not just judgments against insurance companies that are driving up prices. There are many more factors at play. Here are three more reasons insurance rates aren’t cheap:

  • Auto repairs are expensive. You can’t give a car a dirty look without running into thousands of dollars in repairs. In addition to the driver’s deductible, these repair costs are borne by the insurance company.
  • Insurance companies must remain solvent. When a rating agency like AM Best checks its financial strength, it must have enough money to pay all claims.
  • Insurers are there to make money. Premiums are designed to cover losses and make profit.

The next time someone gets frisky in a car, they might want to consider whether they want their insurance company involved in their ride. There might not be a more embarrassing way to lose car insurance coverage.

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