All private sector insurance is a scam and should be governmentalized

Feb 2011
15,811
5,448
Boise, ID
#1
It may appall my fellow conservatives that I am saying this, but I encourage them and everyone else to sit back and really contemplate it without jumping to judgment.

I don't know who this guy is but I feel compelled to start a thread on this and link to his argument:

The Big Insurance Scam

Free market mechanisms work perfectly to control price and promote fairness assuming buyers have perfect information. They work less well the less perfect the buyers' information is. And when it comes to insurance, how good and accurate are buyers' information? Put another way, if every buyer of health insurance was a brilliant actuary, would anyone ever buy insurance? And/or would the insurance industry ever make any money? If the answer is no, then we need to ask ourselves why we tolerate for-profit insurance at all.

A few excerpts from this guy's blog entry:

The blanket over many eyes is the false security insurance provides. Being prepared for disaster is important… but there is a line beyond which a levelheaded strategist won’t go because the frequency of disasters is so low that paying to defeat a phantom risk is too costly. There are an infinite number of disasters that could happen at any moment… but most never happen because of intelligence and order. If you want to prepare for them all you will end up spending one hundred percent of your time planning to defeat the infinite list of tragedies that could come your way. And then after all that you can have a heart attack and die.

Again, I’m not arguing that being prepared and having a plan to deal with tragedies is wrong. But the insurance companies want you and me to believe that they will protect you from tragedy—when in reality there is absolutely nothing insurance companies can do to protect you from tragedy because they have no bearing on the actions you take in your life. They know that they can’t do anything about it… but they market their services as a form of protection.
Insurance is inherently the socialization of risk, so the mere ability of a private sector insurer to make a profit requires consumers to have irrational risk aversion and overpay for an illusion of protection out of their exaggerated sense of risk.

I have homeowner's insurance which is essentially just protection from some types of fire. Other statistically likely (still rare but definitely a statistically possible where I live and not at all unheard of) things to destroy my home where I live include flooding, earthquakes, tidal waves, and landslides. Any one of these things could entirely wipe out my house and devalue my property to zero, and none of these things is covered by my homeowners insurance. I called and asked what it would take to buy protection from these things and it turns out each is its own separate policy, and added together they would cost more than my total income (which isn't low by my community's standards). Think about that for a second. These events are still statistically rare but not unheard of, why on Earth wouldn't insurance protect from them and spread the premiums out to everyone? Because they're "lasered" out to protect the insurance company, not homeowners. So I have no real choice but to roll the dice, because actually being protected would be financially idiotic. The things against which I really need protection either aren't covered or, to make them covered, would cost me enough in premiums that it's not worth it to buy the protection.

When you sit and just think about that for a while, it really reveals the success of private sector insurance requries consumer irrationality and idiocy, like the gambling industry. Profit is statistically virtually guaranteed, which necessarily means consumers are making uninformed decisions about risk and the appropriate cost to protect themsevles from it. The house always wins. The people participating know the house always wins, but they surrender their hard earned money anyway in that remotest of remote chance they are one of the supremely lucky (or in this case, unlucky) ones.
 
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Likes: 7 people
Jun 2014
59,572
34,031
Cleveland, Ohio
#3
The difference between home insurance and health insurance is that not every house burns. Life insurance? Everyone dies, but not always at a point where they are insured and the insurance companies can tell, with terrifying precision, who will die when, so they can create profit.

But everyone gets sick. Insurance companies can create profit only if they can deny expensive claims or pay little on routine claims, or both. The reason socialized medicine is so necessary is that a healthy population is essential to the survival and growth of our society, and for-profit insurance is DIAMETIRICALLY opposed to maintaining the health of the insureds.
 
Likes: 4 people
Nov 2013
24,688
20,720
None of your business
#4
The difference between home insurance and health insurance is that not every house burns. Life insurance? Everyone dies, but not always at a point where they are insured and the insurance companies can tell, with terrifying precision, who will die when, so they can create profit.

But everyone gets sick. Insurance companies can create profit only if they can deny expensive claims or pay little on routine claims, or both. The reason socialized medicine is so necessary is that a healthy population is essential to the survival and growth of our society, and for-profit insurance is DIAMETIRICALLY opposed to maintaining the health of the insureds.

That's right, and the idea to promote wellness program is supposed to defray or offset the costs of immediate care and extended care, but it's aimed at the young, who typically run with no insurance, until they end up in the emergency room with a septic infection from a tooth.

That's the fault line in this, the actuaries predict this also and amortize it into everyone's profile of cost.

The issue is that the health services afforded people "are not used to their optimum" if they were, the run rates at hospitals would drop due to the depreciation of value (capital), but that's not the case.

Regards
Pace
 
Apr 2015
11,722
1,982
Banned
#5
It may appall my fellow conservatives that I am saying this, but I encourage them and everyone else to sit back and really contemplate it without jumping to judgment.

I don't know who this guy is but I feel compelled to start a thread on this and link to his argument:

The Big Insurance Scam

Free market mechanisms work perfectly to control price and promote fairness assuming buyers have perfect information. They work less well the less perfect the buyers' information is. And when it comes to insurance, how good and accurate are buyers' information? Put another way, if every buyer of health insurance was a brilliant actuary, would anyone ever buy insurance? And/or would the insurance industry ever make any money? If the answer is no, then we need to ask ourselves why we tolerate for-profit insurance at all.

A few excerpts from this guy's blog entry:



Insurance is inherently the socialization of risk, so the mere ability of a private sector insurer to make a profit requires consumers to have irrational risk aversion and overpay for an illusion of protection out of their exaggerated sense of risk.

I have homeowner's insurance which is essentially just protection from some types of fire. Other statistically likely (still rare but definitely a statistically possible where I live and not at all unheard of) things to destroy my home where I live include flooding, earthquakes, tidal waves, and landslides. Any one of these things could entirely wipe out my house and devalue my property to zero, and none of these things is covered by my homeowners insurance. I called and asked what it would take to buy protection from these things and it turns out each is its own separate policy, and added together they would cost more than my total income (which isn't low by my community's standards). Think about that for a second. These events are still statistically rare but not unheard of, why on Earth wouldn't insurance protect from them and spread the premiums out to everyone? Because they're "lasered" out to protect the insurance company, not homeowners. So I have no real choice but to roll the dice, because actually being protected would be financially idiotic. The things against which I really need protection either aren't covered or, to make them covered, would cost me enough in premiums that it's not worth it to buy the protection.

When you sit and just think about that for a while, it really reveals the success of private sector insurance requries consumer irrationality and idiocy, like the gambling industry. Profit is statistically virtually guaranteed, which necessarily means consumers are making uninformed decisions about risk and the appropriate cost to protect themsevles from it. The house always wins. The people participating know the house always wins, but they surrender their hard earned money anyway in that remotest of remote chance they are one of the supremely lucky (or in this case, unlucky) ones.
When you talk about private for-profit health insurance policies, you are only talking about the health care of less than 10% of the US population.
 

webrockk

Former Staff
Nov 2009
30,338
11,007
on the river
#6
Social Security is "government insurance". By baselining benefit qualification ages on typical life expectancy at the time of its inception, it, too, was designed to benefit the issuing "underwriter", and even with that, the system is still irreversibly circling the insolvency drain.

so don't look to government as the magic bullet for the socialization of risks.

(Medicare, as well.)
 
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webrockk

Former Staff
Nov 2009
30,338
11,007
on the river
#7
That said, I hate the industry...but understand its necessity in a debt based economy.

furthering this thought, if "government" were to assume your home and auto policies, private sector lenders would effectively be socializing their risks onto taxpayers. which, removing all pretense, is corporate fascism......unless "government" were to become the nation's mortgage/auto lender and deed/title holder. And what would we call that?
 
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