Maybe you haven't thought of it quite like that before.The way insurance works - whether it is casualty insurance or life insurance - is that a group of people, a qualified "pool," put up a poker ante at the beginning of a "hand" (specified period) and only the "winners" get to divide up the money during that particular risk episode. In this case, the "winners" are the ones who have had injuries or losses during the game. The only other entity who gets to take money out of the pot are the insurance companies themselves, in return for running the scam in the first place.
I used to be in the insurance game for several years quite some time ago. Many of my customers were American Indians, and more than a few didn't grasp the concept of insurance, or pretended not to. Most got liability insurance on their vehicles because the state said they had to in order to drive on the state's roads, and got vehicle damage insurance only because the bank they borrowed the money from said they had to do that. Left to their own desires, many simply drove without insurance. I have had a few come in and ask for a refund at the end of the year because they didn't "use" the insurance. That was an interesting concept to explain to them. I used to tell them it was like hiring a bodyguard; just because you didn't get beat up didn't mean you didn't have to pay him.
Most people do understand how insurance works, don't like it at all, but participate anyway because they are afraid of being beat up financially. If you look at it cynically, though, insurance is pure socialism. Assets are pooled and the money is doled out to those who need it. And the ones who are careful and keep their nose clean (the rich) get their money taken away from them and given to the less successful.
Here I am not judging; it is simply a fact of life.
I think the point to be understood with insurance is that it doesn't matter if a private insurance company is running the game or if it is a government who is running the racket, there is still a huge ante to be paid in order to compensate the "winners." If it is a private insurance company, they will take part of the pot for their trouble, and if it is a government, they will take a good part of the pot for "administration" bureaucracy, simply through their inefficiency.
One way or the other, YOU are not going to be a winner.
That's a way to look at it, but not the way I see it.
ReplyDeleteInsurance, particularly private insurance, is like gambling to me. Are you willing to pay for a little piece of mind, an assurance from us that we'll take care of you if the worst would happen? We'll take your money and you can get it back, plus some, if the worst would happen.
The pooling of resources is for the benefit of the insurance company. I can offer a bigger payoff because, if someone gets a "win" (gets to collect "winnings") before they've put in enough to carry it. But the winner, like with most gambling establishments, is always the house, i.e. the insurance companies.
Insurance is mandated for some situations, including the ones you mention, because people with nothing have no means of compensating others if they, say, total the others' cars. Requiring insurance helps prevent innocent drivers from having to pay for accidents they did not cause because the one causing the accident had nothing to pay. And, those requirements are intended to prevent those without insurance from being on the road.
Implementation, unfortunately, is imperfect, but it is very difficult to work around that difficulty in my state and, as a driver who has been on the receiving end of accidents (rather than the other side) 4/5 times, I appreciate those efforts.
Amortization helps the insurance companies improve their odds of coming out ahead, getting far more money from "high risk" individuals to compensate for the unexpected payouts for those who looked like a good risk. While always making a profit, often an obscene one.
Because there IS a difference between public and private insurance. With private insurance, the goal is for the house, the company, to make money. Only the perception of use is necessary and payouts are discouraged, even when justified because, hey, that's not what they're about. Government mandates for insurance just mean that people have no choice but to gamble and, in fact, pay in whatever the company wants.
Public insurance, which need only break even to be a wild success (and can be successful even at a loss if the effects are good), has no such incentive, because there, the goal is exactly as you've described it - pooling resources so everyone's covered.
Now many think the latter situation, everyone pitching in so everyone's covered, is far more sinister than the one where companies make obscene amounts out of the good intention of keeping citizens from suffering from the irresponsibility of others.
As you may have guessed. I don't see it that way.
One last point. The underlying assertion in your post ("And the ones who are careful and keep their nose clean (the rich) get their money taken away from them and given to the less successful.") is a judgement and depends on the notion that those only ones who need a payoff from insurance are the irresponsible. That's a great way to villify and I just don't think it's true.
Whatever works so I don't have to pay $400 a month for weak coverage... I just hope someone will fix this mess, and get it right.
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