Insurance, How it works.
Mike this is a better forum for a complex subject like this one. Please use it.
- Ando Hiroshige
- Art of the Smoky Mountains
- Artist Rebecca Campbell
- Concept
- Daniel F. Gerhartz
- Dao Hai Phong – Artist painter from Vietnam
- Dragons
- Glass Art Photo Gallery
- Illustrations
- John Pence Gallery – Visuals
- Moira Hahn Fine Art
- Peter Selgin: Artist, Author, Teacher
- Prints and Canvases
- SonnyRadio.com :: The Amazing Art of Jim Warren
- Surrealism Art by surrealist artist charnine
- The Art of Daniel Merriam
- The Tabretts Website – Homepage
- Un discipulo de Dali? (57 fotos) � Curiosidades :: Fotos, videos, cachondeo, humor fresco, todo en Ziza.eS
- FREE DESKTOP WALLPAPERS
- Rogue298\’s web site reviews and blog
- 9800 Free Fonts, fonts for free
- Brainstorming made simple
- BuzzDash – Login
- Free Online Software
- Glow-in-the-Dark UV Paint Etc
- How to Appreciate a Man
- Libertarian Hall Of Fame
- National Geographic
- PhilosophyOfLiberty
- Quotes from the Christian Bible
- Save the Humans Humor
- The Global Broadband Speed Test
- The World\’s Largest Poster and Print Store!
- Truth about Trade
- TWERQ | The evolution of web search.
- Ubuntu: Linux for human beings
- Web 2.0 tutorials for The GIMP
- You Can Build Your Own Home !
- AMERICAN.COM: A Magazine of Ideas, Online
- Americans United: 60 Years of Freedom
- Council on Foreign Relations
- Democracy Is Not Freedom
- Jewish World Review
- Lew Rockwell
- Lobby Your Congress People USA
- Porkbusters
- RealClearPolitics
- Reason Magazine
- Techcentralstation
- The Daily Dose of Reason
- The Great Global Warming Swindle – Documentary Film – Google Video
- The United States Constitution – The U.S. Constitution Online – USConstitution.net
- Welcome to The Constitutional Principle: Separation of Church and State Page
- Blaze Labs Research Pages
- Explorers of the invisible world!
- Human Ancestors Hall: Tree
- IRIS Seismic Monitor
- JOURNEY OF MANKIND
- Longest Running Scientific Experiment
- NOVA | The Elegant Universe
- Spitzer Image Gallery
- The Great Global Warming Swindle – Documentary Film – Google Video
- Up from slavery: Chapter I
- 4096 Color Wheel Version 2.1
- A N F Y F L A S H
- DHTML & JavaScript code library
- GlitterMaker.com – Glitter Graphics – Free Glitter Graphics – MySpace Glitter Graphics
- Google\’s Developer Network
- HTML dictionary
- Internet Resources for Designers and Developers
- Learn CSS
- MySpace20Glitter20Maker20with20Your20Pictures20Glitter20Graphics
- Performancing.com | Helping Bloggers Succeed
- Resources For Web Design
- The PeoplesToolbox, Web Design Tools
- Web Master Resources
Sure. I understand how insurance works. I just think that its effect is primarily a net drain on society. If writing insurance were illegal, people and companies would be less likely to engage in foolishly risky behavior, and we’d all be better off as a result.
As another example: For many years, no hurricanes hit Florida and insurance rates drifted downwards. This encouraged people to overbuild homes on the coast. Then, in 2004-2005, there was hit after hit on Florida which caused billions in damage to these ill-considered homes. Insurers immediately jacked up their rates or stopped doing business in the state. The state is still reeling from the financial consequences. Total losses from the storms would have been much less if easy insurance had not encouraged so many people to foolishly build on the coast.
I think that the moral hazard in the Florida case was created by the knowledge that is the aria was declared a disaster aria federal funds would come to the rescue. Not a insurance problem at all. The banks also knew better than to finance there. They did it anyway. They should have made certain that their money was protected. More moral hazard. They could take risks because the money was cheap and they did not have to work for deposits. They could just lend the ones that they had more times. They were insured too by the government. If they had had to pay for that insurance or not have it at all they would have made the homeowners have insurance or loose their property to the bank.
Yes but my point is, who always loses out the most in the relationship between the insurance company & the consumer? You can sure as heck bet it’s usually not the insurance company. Whether or not they can lean on government for a bailout, the bottom line is that whenever risks increase, insurers just take the money and run. When this happens, except in the case of life insurance annuities, all the premiums the consumer has already paid to the insurer are lost.
Yes, there was a relatively small number of Florida homeowners whose homes were damaged who may have benefited more from their claims than they paid out in premiums. But a much larger number of people throughout Florida saw their rates suddenly increase to unaffordable levels, or had their company leave the state entirely. These people lost billions in premiums with no benefit to themselves. Insurance companies may have occasional bad years, but they rarely go completely bankrupt except for rare cases like AIG (which would have gone bankrupt if the gov’t hadn’t stepped in).
Fact remains, insurance companies essentially nothing but a massive pipeline for draining money out of the pockets of fearful people who don’t have the resources to do an accurate risk assessment & cost-benefit analysis (if they did, they’d always conclude that insurance is an expected net loss for themselves), and funneling this wealth into the pockets of mega-rich fat cats (insurance company executives and major shareholders) who don’t contribute anything useful to society, but just take advantage of people’s fears and rake the money in.
Why do you want to continue voluntarily handing your money over to those greedy, selfish people? You know that if you ever get do in a jam, your insurance company will find any excuse they can not to pay your claim. Like the hurricane victims in Florida whose houses got washed away, but whose claims were denied by their insurance because they were told that their hurricane insurance only covered “wind damage,” not “flood damage.” As if the poor homeowner could have known that they needed to go over the fine print in their policy that carefully. It’s theft, pure and simple. Insurance is little better than a legalized extortion racket. Same basic business model: “You’re possessed by your fears, so give us your money and we’ll ‘protect’ you.”
If you don’t have insurance for floods then you don’t have it. I would not write an insurance policy for a flood for a house that is built under sea level and does not have good protection from storms. If I were to decid to do such a thing the numbers would tell me to set the price high. Not being able to get affordable insurance should tell you that you either have to build your house so that it can’t be destroyed by almost all storms or to not build it there. I understand that some houses are built to withstand a 200 MPH wind. Mine won’t but we don’t have those here any way. I am thinking of buying fire insurance myself. I can’t fix that. I don’t know if I will have to buy a lot of insurance I don’t want though. I am not concerned with water damage and if my tree falls down it will be away from the house. The winds simply don’t blow toward the house as far as I know. The tree is healthy so I am not concerned.
Much of the construction in Florida is silly. Cinder block and masonry construction with reinforced roofs makes a lot more sense there that trailers and 2/4 frame construction does. Give me a break. 2/4s are only 3.5 inches thick.
Walter, I agree with you that people are stupid to build flimsy homes near the coast in Florida, and that the high insurance rates should tell them something about the risk.
But my point remains, that if you insist on having a beach house, unless it is your primary home and you can’t afford to buy another, you shouldn’t even bother to insure it in the first place. Same thing goes for anything else you might insure that you could live without. With all insurance, on average you are paying more to the insurance company than you will get out of it. In other words, you are basically paying some people to just sit around in an office somewhere twiddling numbers.
Maybe you could argue that insurance companies are doing a useful service in calculating the actuarial risks and providing this information to consumers via price signals.
But even then, as an individual, why should I actually buy the insurance? All I really need to do is shop for it, and the market prices will tell me how high my risk is (or at least, how high the market judges it to be – but the market is wrong sometimes, as we see when bubbles pop).
Then, after determining the price, I should take the amount that I would have paid to the insurance company in premiums, and just set it aside in a savings account instead. If the worst happens and I need to rely on this savings, I at least will still get 100% of the money I saved back. And, even if nothing bad ever happens to the house before I sell it, I still get 100% of the money I saved back. No insurance can offer a better deal than that, or else they couldn’t pay their employees & make a profit. Your expected return from insurance is always much, much less than 100%. The profit margins in that industry are huge.
So, in terms of the expected returns, insurance is always a bad investment, unless you have a more accurate idea of the risk than the insurance company has (so that they are under-pricing the insurance), but this is almost never the case.
Again, the only reason to buy insurance for anything is if it’s something that would be totally devastating to lose, that you couldn’t afford to replace, that, if you lost it, would cause you to end up broke, homeless & dead in a gutter.
Insurance is not about getting your money back. It is about protecting what you have and getting more than your money back if something happens. Sometimes self insurance makes sense. North American Van lines is self insured the last I heard. It probably has a policy in case of an extraordinary lawsuit settlement but for ordinary accidents it puts aside money.
You are right for predictable expenses. You should save and pay for them. It is cheaper to do that. It is for the unpredictable events that you buy insurance. They happen to a few people or there would not be insurance against them but are rare.
I think part of your confusion is health insurance. It should not cover regular doctors visits of medications that you know that you are going to take forever. Things that you are certain are going to happen should be paid for directly. Why pay somebody a fee for paying them for you.
Nobody buys death insurance. Also it seems to me that a person can save for his own funeral too. You buy graves and tombstones. Since you don’t know when you will die there is room for a small insurance policy to protect your people from your burial expenses. Of course if you have the money who cares.