Jacko3 wrote:Nice write up! However, so long as the economic incentive to pay out is naturally less than the economic incentive to take in more cash, as you have stated, the propensity of insurance companies to legitimately shaft consumers, will remain a reality. Some state insurance commissioners are elected rather than appointed, and so, insurance lobbies can influence the outcome of state insurance elections. In addition, non-federally regulated organizations tend to be more profitable as a result of non-uniform policies across several states. So, for example, it is possible for insurance companies to rob Pter in Washington State to pay Paul in Kansas.
Surely every business out there exists to make money. But by your argument, you might as well believe that every business and every person who earns an income is out to shaft everyone else by that standard. Lets keep the discussion realistic and reasonable. If you do want to make that argument, you really need to back it up with how it is different than other industries.
As for insurance lobbyists, sure. But don't think there aren't other interest groups out there that work against insurance companies. Personal injury attorneys don't want to give up any ground that could be used in litigation and they would most certainly want to have some more help in their cases. There are plenty of checks and balances here.
You might want to explain the relevance of reinsurance to this discussion. As I really don't think it does. Reinsurance, very simply, is a way for insurers to spead out risk or take on more risk than it's financial size would otherwise allow. Insurance companies pay premiums for reinsurance like any other policyholder so its not like they get to let someone else pay for some of a claim without giving up some of the premium...Jacko3 wrote:I am also aware of their re-insurance policies, but then, why do they not return unused portions of your funds at the end of the year, if you have had no fatalities or collisions or any claim? They do this in some parts of europe. Why not here in the US? For example, I have had no fatalities with any of my cars, and yet i pay premiums that would suggest that I am subsidizing someone else's claims. Isn't this some type of socialized insurance system (auto and home insurance).
As for returning portions of premiums, I'd imagine that the business models for companies that might do this would likely be much different than US insurers. I have this nagging feeling that there may be a US company with a program like this, but I'm not too sure. My thought would be that policyholders may have to pay more up front to offset the refunds. Perhaps the monetary incentives alone might be enough to reduce the claim payouts enough to make this possible, but my experience with immigrants involved in accidents tells me that the mentality of people from country to country are different enough that certain business models may not work everywhere (perhaps not as effectively).
An insurance premium is for all practical purposes, a pool of people throwing money into a pot to subsidize each others' losses should a loss occur. This is how insurance works. Early forms of insurance throughout history also relied on the collective efforst of a group or community to spread out the losses of a few.
http://en.wikipedia.org/wiki/History_of_insurance
