Installing Spy Boxes May Lower Premiums

By Author: Marcus Stalder
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Paying extra for out-of-town crashes

Should you pay extra when you get into an accident outside your home city? A proposed bill by the Sacramento City Council could have out-of-towners footing extra bills in the event of an auto accident. The proposal, called a "fire cost recovery charge" by supporters, though opponents hurl the name "crash tax", would require non-resident motorists to pay an extra fee when Sacramento responds to your emergency - $400 to over $2,000.

And it's not just Sacramento

Sacramento, California's capitol city, would be the most populous municipality in California to try this strategy, but not the only one. At least 50 cities in California and as many nationwide have adopted similar policies to combat fiscal shortfalls. They have also been outlawed in 10 states, including Florida, Alabama, and Georgia. Last December, New York City Mayor Michael Bloomberg defended an implementation of such a policy, regardless of who is at fault. He admitted it was a back door tax but contested it is a better alternative than closing firehouses.

The Reason for the Measure

The fine would ...
... repay the city for various expensive municipal services, including damage and dangerous fluid cleanup, responding to gas explosions, and extinguishing vehicle fires. Fire recovery charges could net the city up to half a million dollars annually, a spokesperson for Sacramento Linda claimed.

A spokesperson for New York City Fire Department explained that the idea is to remove the burden of payment from resident taxpayers and onto those who cause the accidents.

Everyone seems to agree that new ways to procure funding are necessary during the economic downturn, but many do not see this strategy as effective.

Critical Response

First proposed back in July, the measure has more than its share of critics. The Sacramento Bee editorial board argued that the bill would upset drivers who would not find out about the extra charge until they received the bill. Ultimately, they said, the plan would backfire from lost revenue when angry motorists stop visiting the capitol city. Insurers are not happy either, claiming they will have to raise rates and ultimately push the price to customers.

Peter Vallone, a Queens Democrat and chairman of the public safety committee, saw it differently:
"What's next? Your store gets hit by too many shoplifters and the police charge you to respond?"

The Impact on Auto Insurance

How these accident fees will affect auto insurance customers is yet to be seen, but according to Ohio's National Association of Mutual Insurance, motorists are merely getting hit twice.

Joe Thesing, an association representative, said that it is a kind of "double taxation", where citizens who follow the law and carry insurance are penalized. Third parties to handle the transactions are marketing the idea to municipalities, he said, because they will get a cut for acting as an intermediary.

If insurance winds up covering the costs of the city fines, there is a good chance that premiums will increase, especially if you do have a collision in one of these cities.

It remains to be seen if auto insurance will be more expensive as a result. Insurance providers are certain that the widespread use of such a policy will have an impact on auto insurance rates.