If I was to come up to you and tell you that I would give you one million dollars, for only two hundred dollars, you
would jump at the deal. If I told you I had a sure bet, all you had to do was allow me to handle a significant portion
of your retirement savings, say $200,000, for a piece of paper mailed to you each month, saying your money was
worth well over one million dollars, and growing, a lot of people would dance gleefully when that piece of paper
would arrive in the mail.
What I have just proposed is not fantasy. The last proposal is called a ponzi scheme, a.k.a. a pyramid scheme,
where those people investing last are assured of losing most, if not all, of their investments. They are illegal,
although that only means someone can go to jail when caught bilking thousands of people out of their life savings.
There is no F.D.I.C. that will return investors their stolen money, for one reason, because the government would
go broke. However, the other proposal is another example of how a promise of wonderful things in the future is
not all it is made up to be; and it is not only legal, it is recommended.
That ponzi scheme is called insurance. It comes in all sizes, shapes, and colors: life, home, auto, health, you n
Look at automobile-vehicle insurance coverage. A person buys a new car for $20,000 (relatively cheap these
days). Say it is an adult over 25 years of age, so the premiums for an adult are only $350 a year, which means
this is a mature driver (over 50), with few automobile insurance claims on record. A younger driver might pay
$175 a month, or $2,100 a year. Both amounts would be for the same $20,000 car. If the car has a loan with the
bank for five years, the mature driver will pay $1,750 for that automobile, usually without filing a claim. The
youngster will pay $10,500 over the same period of time, and if accident-claim free, will have paid more than half
the price of that car (new), for nothing in return. Further, once the owner no longer owes the bank, with the value
of the car reduced to around $8,000 (depends on the make and model for a 5-year old car), the insurance must
be maintained, by order of the State government. A mature driver gets those $350 a year payments because of
having paid in excess of $100,000 over a lifetime of driving (30 years), with no claims. This mature person is
never awarded a point in time where 30 years of zero claims allows them to drive insurance free for the rest of
their life, or until they use up $100,000 worth of claims. No, if they let their insurance lapse, then need to buy a
new car, where the bank requires insurance, the insurance company will treat them worse than a teen driver,
even denying them coverage, causing this mature, claim-free driver the embarrassment of going to one of the
"fly-by-night" insurance companies, who probably have never paid a claim. The government is backing this ponzi
scheme, because of lobbyists from the wealthy insurance industry.
ame it. There are almost as many types of insurance as there are betting odds in Las Vegas. The difference
there is in Vegas when you lose you knew you had that chance, because in Vegas betting the odds is called
gambling. Gambling means you will probably lose more times than win, but you take a chance because you "feel
lucky." When someone calls something "insurance," by definition one feels all warm and snug, because one
thinks "a means of guaranteeing protection or safety" is guaranteed - a security, or assurance. Ponzi schemes
always seem to make one feel secure, until calls to cash in keep getting excuses and reasons why something is
about to break big, to stay a little longer, until the calls stop being answered. Then a little worry creeps in.
Imagine you have insurance on your house, and you pay $500 a year for a $250,000 home. At that rate, you
would have to pay for 500 years to have paid in the amount of the insurance. Of course, no one lives that long,
and neither does a house (usually). But, say after 20 years in that same home, the home increases to a value of
$500,000, due to the lack of space in that area to build new homes, and other reasons, like home improvements.
With that increased value, the cost to insure it would go up, say to $1,000 a year (maybe one $500 payment twice
a year). If that increase set in the year after one bought the $250,000 home, the same 500 years would be the
time when it would mean the homeowner (Methuselah, presumably) would be losing money by still making
insurance payments of $1,000. What this means is the insurance company is promising more than they can
possibly pay back, unless they keep building a pyramid base, with more money coming in that goes back out.
Suppose that person who lived in a $250,000, who had owned the house for five years, having paid the insurance
company $2,500, or one one-hundredth of the original value. Say the market had been strong in that owner's
area, such that the actual replacement cost for the house was more like $275,000. Suppose that house was one
of 200 similar houses in that neighborhood, with all using the same insurance carrier, meaning the insurance
carrier had collected $500,000 for that five year period, for homes totaling $55-million, at the replacement value.
Suppose a hurricane came and destroyed all 200 homes, by wind damage, and all 200 homes had hurricane
coverage for wind damage. The insurance company would have to declare bankruptcy, meaning only a few of the
200 home owners would get something in return for their $2,500 in payments, while the rest would get
little-to-nothing, while all would have lost a home they still had mortgages they were responsible for paying. If
Bernie Madoff had been in that business, instead of ponzi scheme investing, he would still be a rich and free man.
There is nothing illegal about an insurance company defaulting on its obligations of assurance, security, and
guaranty, when it simply has too much owed, with too little to pay.
Let's look at that mortgage issue a little bit now. A buyer like the $250,000 home and goes to the bank to buy
one. Of course, the buyer does not have the money to pay cash for a house. The bank checks the potential
buyer's credit and job history and sees he or she as a good risk, meaning he or she has typically made their
payments for other credit lines regularly, and on-time. Still, they require the buyer pay fees for the bank to make
a profit up front, and a down payment of $5,000. With a mortgage approved, the bank buys the house for the
new homeowner, then gives that $250,000 house to the buyer, for the promise of making $1,500 monthly
payments for 15 years (interest making the payoff $270,000). With that arrangement, it is up to the homeowner
to make sure the house stays around until it is paid off, because if a hurricane was to blow it away, the
homeowner is still responsible for making $1,500 payments every month, until the loan is paid off. That is why
banks require the homeowner to purchase mortgage insurance, if the homeowner is not wealthy enough to
self-insure the house through other assets.
Well, let's take that banking model and apply it to the insurance industry. If a man wants to insure his $250,000
home, the insurance company must make sure the homeowner can afford another $1,500 payments per month -
not per year. If the homeowner can make those payments, then the insurance company would write the
homeowner a check for $250,000, which would be placed into an interest bearing account, with two signatures
required for withdrawal - the homeowner's and the insurance company's, which would be done through the
issuance of a certificate of repayment, much like the title one receives for the payment of a car loan, or the deed
one receives when a mortgage is paid off. That is real insurance, but as you can imagine, few people would be
able to afford those payments, and there would be no need for insurance companies, as banks would be the ideal
representative for loaning such large amounts of cash. Banks would have reason for loaning money, because
they deal in money. Insurance companies only deal in the money that should be somehow making money, hand
over fist, should someone actually have need to file a claim for their promised money.
Imagine a life insurance salesman talking someone into buying a one million dollar life insurance policy. A bank
would have nothing to do with loaning money for something as instable as a human life. How could they hold a life
as collateral? They couldn't. So, only an insurance salesman would even talk of such nonsense, because they
have no intention of actually paying off for someone dying, unless the person lives so long the policy is paid in full
over many years, with the insurance company making interest on that money received, having given nothing at all
away. However, if that salesman convinced a person to insure their life for one million dollars, for only $200 per
month (it would take someone 416.67 years to pay off one million dollars), the insurance company should be
forced, by law, to write a check to the person on the spot. The person would have to write the insurance company
a check for $200. The agreement sealed would then be: if the person lives for 900 years (Methuselah again),
they still have to pay the insurance company $200 every month, without fail ($2, 160,000, if lived the full 900
years), but if the person died the next week, the one million dollars would be kept by the person's family, while the
insurance company wept. Guess what? There would be no insurance on life, if that was the way it worked. When
it works the way it does now, it is a ponzi scheme, where the insurance company will not be able to pay off, should
many people die at the same time.
The only recourse an insurance company has is to deny claims, or add fine print that means the insured amount
is only valid if certain criteria is met, at all times. When it gets down to fine print, there is a loss of good faith
business practices. Rather than have the legal system brought in to settle disputes of this nature, where
insurance companies are more than willing to pay high priced lawyers to make sure the insured loses in court, or
settles for far less than their coverage stated, than the insured is able to afford to get what was assured, secured,
and guaranteed (fine print unread). Such activity should be made banned, simply by the outlawing of insurance,
just as gambling is outlawed in most states (although I am guessing there now, since some form of lottery or
organized government sponsored gambling is beginning to spread through many states). There should be
warning issued on every insurance policy, precisely where all fine print is, explaining to the potential buyer, "Sign
here and risk not being paid one cent!" They do this on cigarette packages, it makes just as much sense to do it
on insurance coverage.
Well, let's take that banking model and apply it to the insurance industry. If a man wants to insure his $250,000
home, the insurance company must make sure the homeowner can afford another $1,500 payments per month -
not per year. If the homeowner can make those payments, then the insurance company would write the
homeowner a check for $250,000, which would be placed into an interest bearing account, with two signatures
required for withdrawal - the homeowner's and the insurance company's, which would be done through the
issuance of a certificate of repayment, much like the title one receives for the payment of a car loan, or the deed
one receives when a mortgage is paid off. That is real insurance, but as you can imagine, few people would be
able to afford those payments, and there would be no need for insurance companies, as banks would be the ideal
representative for loaning such large amounts of cash. Banks would have reason for loaning money, because
they deal in money. Insurance companies only deal in the money that should be somehow making money, hand
over fist, should someone actually have need to file a claim for their promised money.
Imagine a life insurance salesman talking someone into buying a one million dollar life insurance policy. A bank
would have nothing to do with loaning money for something as instable as a human life. How could they hold a life
as collateral? They couldn't. So, only an insurance salesman would even talk of such nonsense, because they
have no intention of actually paying off for someone dying, unless the person lives so long the policy is paid in full
over many years, with the insurance company making interest on that money received, having given nothing at all
away. However, if that salesman convinced a person to insure their life for one million dollars, for only $200 per
month (it would take someone 416.67 years to pay off one million dollars), the insurance company should be
forced, by law, to write a check to the person on the spot. The person would have to write the insurance company
a check for $200. The agreement sealed would then be: if the person lives for 900 years (Methuselah again),
they still have to pay the insurance company $200 every month, without fail ($2, 160,000, if lived the full 900
years), but if the person died the next week, the one million dollars would be kept by the person's family, while the
insurance company wept. Guess what? There would be no insurance on life, if that was the way it worked. When
it works the way it does now, it is a ponzi scheme, where the insurance company will not be able to pay off, should
many people die at the same time.
The only recourse an insurance company has is to deny claims, or add fine print that means the insured amount
is only valid if certain criteria is met, at all times. When it gets down to fine print, there is a loss of good faith
business practices. Rather than have the legal system brought in to settle disputes of this nature, where
insurance companies are more than willing to pay high priced lawyers to make sure the insured loses in court, or
settles for far less than their coverage stated, than the insured is able to afford to get what was assured, secured,
and guaranteed (fine print unread). Such activity should be made banned, simply by the outlawing of insurance,
just as gambling is outlawed in most states (although I am guessing there now, since some form of lottery or
organized government sponsored gambling is beginning to spread through many states). There should be
warning issued on every insurance policy, precisely where all fine print is, explaining to the potential buyer, "Sign
here and risk not being paid one cent!" They do this on cigarette packages, it makes just as much sense to do it
on insurance coverage.
Look at automobile-vehicle insurance coverage. A person buys a new car for $20,000 (relatively cheap these
days). Say it is an adult over 25 years of age, so the premiums for an adult are only $350 a year, which means
this is a mature driver (over 50), with few automobile insurance claims on record. A younger driver might pay
$175 a month, or $2,100 a year. Both amounts would be for the same $20,000 car. If the car has a loan with the
bank for five years, the mature driver will pay $1,750 for that automobile, usually without filing a claim. The
youngster will pay $10,500 over the same period of time, and if accident-claim free, will have paid more than half
the price of that car (new), for nothing in return. Further, once the owner no longer owes the bank, with the value
of the car reduced to around $8,000 (depends on the make and model for a 5-year old car), the insurance must
be maintained, by order of the State government. A mature driver gets those $350 a year payments because of
having paid in excess of $100,000 over a lifetime of driving (30 years), with no claims. This mature person is
never awarded a point in time where 30 years of zero claims allows them to drive insurance free for the rest of
their life, or until they use up $100,000 worth of claims. No, if they let their insurance lapse, then need to buy a
new car, where the bank requires insurance, the insurance company will treat them worse than a teen driver,
even denying them coverage, causing this mature, claim-free driver the embarrassment of going to one of the
"fly-by-night" insurance companies, who probably have never paid a claim. The government is backing this ponzi
scheme, because of lobbyists from the wealthy insurance industry.
Today, there is an issue over the need to revamp the health care industry. The media is split between using
brainwashing techniques (propaganda) that say either everyone wants to keep their present insurance coverage,
because they do not want a government run insurance program that will limit what coverage a person can have,
or cause long waits for some procedures, while the other side promotes a need to insure everyone, no matter
what the cost. All of this is smoke paid for by the insurance industry, because either way they win, as long as they
remain in business.
Here is how health insurance works now, for one of the better health insurance programs in the country. The
individual who works at a good company purchases health insurance. The company charges that individual
around $400 a month ($4,800 a year) for medical, dental, and vision coverage, with this money deducted from the
individual's paycheck each pay period, so the total per month is collected. The company is supposed to also be
paying a portion of the overall premium costs, for group insurance. This means one of the hidden costs of
employee benefits programs is this portion the company pays, on top of what the employee pays. Say this figure
is $200 a month ($2,400 a year). This set-up is more likely to be a company that has multiple work locations in
one state, or multiple states, such that the employer gets that rate for its employees because it employs, say
10,000 employees. That means employees pay to an insurance company $4-million a month, with the company
paying another $2-million. That means the insurance company is insuring that company's employees for $6
million a month ($72,000,000 a year).
These employees will generally receive better benefits for their money, than will someone who is self-insured, or
works for a place that does not pay anything for group insurance, for their employees, other than a basic
association fee paid to the insurance company, which is one of those less than standard companies, who deny
big-dollar claims more often than not. The company I listed above is called a self-insurer, meaning they pool
$72,000,000 into a special account for doing nothing but paying health insurance claims. The underwrite all
claims, using a group insurance company to serve in nothing more than a clerical capacity, processing claims and
writing checks, while reporting to the workplace company how much has been paid, how much is owed them, and
how much is left. These companies can keep health care insurance costs relatively fixed for a number of years,
IF they consistently pay less out than they take in, AND the insurance company does not start getting greedy,
demanding more and more for their clerical expertise. When a company of 10,000 has more than a handful of
major claims in one year, the company, as the underwriter, has no choice but pay the claims (or deny them),
drawing from the company's cash reserves. The years after such bad years are always tales of how insurance
costs are going up, to address those lost reserves, more than to pay the insurance companies more.
For a typical worker, the majority of one's health care costs (over 90%) come in the last five years of life.
Typically, this is after one retires from work, and is living on fixed income (retirement & social security). This is
when Medicare kicks in, assisting the elderly in these prohibitive costs. This means that the typical worker, who
works and pays into a group insurance plan for 40 years, at an average of $275 a month, pays $132,000 dollars
into health care, over a lifetime of work. If that person has had relatively few claims for hospital stays, only two
regular doctor visits a year, and only 20 years of three prescriptions a month, with the co-pays that worker will
have paid an additional $15-$20,000. For a family of four, this could run a 40-year amount of co-pays to well
over $40,000, or $1,000 a year in copays. The reality is one thousand dollars a year should get health care, with
no need for insurance, so no need to pay another $4,800 into a group plan. Those $4,800 could be better
served paid into a forced savings plan, set up by the company, as a self-insurance plan for the worker, with no
need for paying for clerical services.
When a bottle of aspirin can cost $1.99 a bottle, as long as it is a generic brand name (unadvertised through the
media), the only reason another bottle of aspirin would cost more than that is higher cost to the manufacturer,
through advertising and promotion (marketing costs). If a bottle of aspirin required a doctor's prescription, one
would have to pay a $20 co-pay to the doctor for that prescription, then pay a $10 co-pay to the pharmacist for
the aspirin, for a $30 bottle of aspirin. In between the patient and the medicine is a line of hands wanting to be
paid, with the largest hand being the insurance and pharmaceutical companies. If it was against the law to profit
more than minimally from health care (government cost controls, based on reduction of medical care need,
through better health care procedures), medicine would be sold barely above cost, doctors would be paid more
by seeing patients less, such that a prescription for aspirin could be handles for no charge over a phone call, and
insurance companies would want nothing to do with health care.
This means the solution to America's health care woes is not to maintain the insurance industry, it is to eliminate
it.
would jump at the deal. If I told you I had a sure bet, all you had to do was allow me to handle a significant portion
of your retirement savings, say $200,000, for a piece of paper mailed to you each month, saying your money was
worth well over one million dollars, and growing, a lot of people would dance gleefully when that piece of paper
would arrive in the mail.
What I have just proposed is not fantasy. The last proposal is called a ponzi scheme, a.k.a. a pyramid scheme,
where those people investing last are assured of losing most, if not all, of their investments. They are illegal,
although that only means someone can go to jail when caught bilking thousands of people out of their life savings.
There is no F.D.I.C. that will return investors their stolen money, for one reason, because the government would
go broke. However, the other proposal is another example of how a promise of wonderful things in the future is
not all it is made up to be; and it is not only legal, it is recommended.
That ponzi scheme is called insurance. It comes in all sizes, shapes, and colors: life, home, auto, health, you n
Look at automobile-vehicle insurance coverage. A person buys a new car for $20,000 (relatively cheap these
days). Say it is an adult over 25 years of age, so the premiums for an adult are only $350 a year, which means
this is a mature driver (over 50), with few automobile insurance claims on record. A younger driver might pay
$175 a month, or $2,100 a year. Both amounts would be for the same $20,000 car. If the car has a loan with the
bank for five years, the mature driver will pay $1,750 for that automobile, usually without filing a claim. The
youngster will pay $10,500 over the same period of time, and if accident-claim free, will have paid more than half
the price of that car (new), for nothing in return. Further, once the owner no longer owes the bank, with the value
of the car reduced to around $8,000 (depends on the make and model for a 5-year old car), the insurance must
be maintained, by order of the State government. A mature driver gets those $350 a year payments because of
having paid in excess of $100,000 over a lifetime of driving (30 years), with no claims. This mature person is
never awarded a point in time where 30 years of zero claims allows them to drive insurance free for the rest of
their life, or until they use up $100,000 worth of claims. No, if they let their insurance lapse, then need to buy a
new car, where the bank requires insurance, the insurance company will treat them worse than a teen driver,
even denying them coverage, causing this mature, claim-free driver the embarrassment of going to one of the
"fly-by-night" insurance companies, who probably have never paid a claim. The government is backing this ponzi
scheme, because of lobbyists from the wealthy insurance industry.
ame it. There are almost as many types of insurance as there are betting odds in Las Vegas. The difference
there is in Vegas when you lose you knew you had that chance, because in Vegas betting the odds is called
gambling. Gambling means you will probably lose more times than win, but you take a chance because you "feel
lucky." When someone calls something "insurance," by definition one feels all warm and snug, because one
thinks "a means of guaranteeing protection or safety" is guaranteed - a security, or assurance. Ponzi schemes
always seem to make one feel secure, until calls to cash in keep getting excuses and reasons why something is
about to break big, to stay a little longer, until the calls stop being answered. Then a little worry creeps in.
Imagine you have insurance on your house, and you pay $500 a year for a $250,000 home. At that rate, you
would have to pay for 500 years to have paid in the amount of the insurance. Of course, no one lives that long,
and neither does a house (usually). But, say after 20 years in that same home, the home increases to a value of
$500,000, due to the lack of space in that area to build new homes, and other reasons, like home improvements.
With that increased value, the cost to insure it would go up, say to $1,000 a year (maybe one $500 payment twice
a year). If that increase set in the year after one bought the $250,000 home, the same 500 years would be the
time when it would mean the homeowner (Methuselah, presumably) would be losing money by still making
insurance payments of $1,000. What this means is the insurance company is promising more than they can
possibly pay back, unless they keep building a pyramid base, with more money coming in that goes back out.
Suppose that person who lived in a $250,000, who had owned the house for five years, having paid the insurance
company $2,500, or one one-hundredth of the original value. Say the market had been strong in that owner's
area, such that the actual replacement cost for the house was more like $275,000. Suppose that house was one
of 200 similar houses in that neighborhood, with all using the same insurance carrier, meaning the insurance
carrier had collected $500,000 for that five year period, for homes totaling $55-million, at the replacement value.
Suppose a hurricane came and destroyed all 200 homes, by wind damage, and all 200 homes had hurricane
coverage for wind damage. The insurance company would have to declare bankruptcy, meaning only a few of the
200 home owners would get something in return for their $2,500 in payments, while the rest would get
little-to-nothing, while all would have lost a home they still had mortgages they were responsible for paying. If
Bernie Madoff had been in that business, instead of ponzi scheme investing, he would still be a rich and free man.
There is nothing illegal about an insurance company defaulting on its obligations of assurance, security, and
guaranty, when it simply has too much owed, with too little to pay.
Let's look at that mortgage issue a little bit now. A buyer like the $250,000 home and goes to the bank to buy
one. Of course, the buyer does not have the money to pay cash for a house. The bank checks the potential
buyer's credit and job history and sees he or she as a good risk, meaning he or she has typically made their
payments for other credit lines regularly, and on-time. Still, they require the buyer pay fees for the bank to make
a profit up front, and a down payment of $5,000. With a mortgage approved, the bank buys the house for the
new homeowner, then gives that $250,000 house to the buyer, for the promise of making $1,500 monthly
payments for 15 years (interest making the payoff $270,000). With that arrangement, it is up to the homeowner
to make sure the house stays around until it is paid off, because if a hurricane was to blow it away, the
homeowner is still responsible for making $1,500 payments every month, until the loan is paid off. That is why
banks require the homeowner to purchase mortgage insurance, if the homeowner is not wealthy enough to
self-insure the house through other assets.
Well, let's take that banking model and apply it to the insurance industry. If a man wants to insure his $250,000
home, the insurance company must make sure the homeowner can afford another $1,500 payments per month -
not per year. If the homeowner can make those payments, then the insurance company would write the
homeowner a check for $250,000, which would be placed into an interest bearing account, with two signatures
required for withdrawal - the homeowner's and the insurance company's, which would be done through the
issuance of a certificate of repayment, much like the title one receives for the payment of a car loan, or the deed
one receives when a mortgage is paid off. That is real insurance, but as you can imagine, few people would be
able to afford those payments, and there would be no need for insurance companies, as banks would be the ideal
representative for loaning such large amounts of cash. Banks would have reason for loaning money, because
they deal in money. Insurance companies only deal in the money that should be somehow making money, hand
over fist, should someone actually have need to file a claim for their promised money.
Imagine a life insurance salesman talking someone into buying a one million dollar life insurance policy. A bank
would have nothing to do with loaning money for something as instable as a human life. How could they hold a life
as collateral? They couldn't. So, only an insurance salesman would even talk of such nonsense, because they
have no intention of actually paying off for someone dying, unless the person lives so long the policy is paid in full
over many years, with the insurance company making interest on that money received, having given nothing at all
away. However, if that salesman convinced a person to insure their life for one million dollars, for only $200 per
month (it would take someone 416.67 years to pay off one million dollars), the insurance company should be
forced, by law, to write a check to the person on the spot. The person would have to write the insurance company
a check for $200. The agreement sealed would then be: if the person lives for 900 years (Methuselah again),
they still have to pay the insurance company $200 every month, without fail ($2, 160,000, if lived the full 900
years), but if the person died the next week, the one million dollars would be kept by the person's family, while the
insurance company wept. Guess what? There would be no insurance on life, if that was the way it worked. When
it works the way it does now, it is a ponzi scheme, where the insurance company will not be able to pay off, should
many people die at the same time.
The only recourse an insurance company has is to deny claims, or add fine print that means the insured amount
is only valid if certain criteria is met, at all times. When it gets down to fine print, there is a loss of good faith
business practices. Rather than have the legal system brought in to settle disputes of this nature, where
insurance companies are more than willing to pay high priced lawyers to make sure the insured loses in court, or
settles for far less than their coverage stated, than the insured is able to afford to get what was assured, secured,
and guaranteed (fine print unread). Such activity should be made banned, simply by the outlawing of insurance,
just as gambling is outlawed in most states (although I am guessing there now, since some form of lottery or
organized government sponsored gambling is beginning to spread through many states). There should be
warning issued on every insurance policy, precisely where all fine print is, explaining to the potential buyer, "Sign
here and risk not being paid one cent!" They do this on cigarette packages, it makes just as much sense to do it
on insurance coverage.
Well, let's take that banking model and apply it to the insurance industry. If a man wants to insure his $250,000
home, the insurance company must make sure the homeowner can afford another $1,500 payments per month -
not per year. If the homeowner can make those payments, then the insurance company would write the
homeowner a check for $250,000, which would be placed into an interest bearing account, with two signatures
required for withdrawal - the homeowner's and the insurance company's, which would be done through the
issuance of a certificate of repayment, much like the title one receives for the payment of a car loan, or the deed
one receives when a mortgage is paid off. That is real insurance, but as you can imagine, few people would be
able to afford those payments, and there would be no need for insurance companies, as banks would be the ideal
representative for loaning such large amounts of cash. Banks would have reason for loaning money, because
they deal in money. Insurance companies only deal in the money that should be somehow making money, hand
over fist, should someone actually have need to file a claim for their promised money.
Imagine a life insurance salesman talking someone into buying a one million dollar life insurance policy. A bank
would have nothing to do with loaning money for something as instable as a human life. How could they hold a life
as collateral? They couldn't. So, only an insurance salesman would even talk of such nonsense, because they
have no intention of actually paying off for someone dying, unless the person lives so long the policy is paid in full
over many years, with the insurance company making interest on that money received, having given nothing at all
away. However, if that salesman convinced a person to insure their life for one million dollars, for only $200 per
month (it would take someone 416.67 years to pay off one million dollars), the insurance company should be
forced, by law, to write a check to the person on the spot. The person would have to write the insurance company
a check for $200. The agreement sealed would then be: if the person lives for 900 years (Methuselah again),
they still have to pay the insurance company $200 every month, without fail ($2, 160,000, if lived the full 900
years), but if the person died the next week, the one million dollars would be kept by the person's family, while the
insurance company wept. Guess what? There would be no insurance on life, if that was the way it worked. When
it works the way it does now, it is a ponzi scheme, where the insurance company will not be able to pay off, should
many people die at the same time.
The only recourse an insurance company has is to deny claims, or add fine print that means the insured amount
is only valid if certain criteria is met, at all times. When it gets down to fine print, there is a loss of good faith
business practices. Rather than have the legal system brought in to settle disputes of this nature, where
insurance companies are more than willing to pay high priced lawyers to make sure the insured loses in court, or
settles for far less than their coverage stated, than the insured is able to afford to get what was assured, secured,
and guaranteed (fine print unread). Such activity should be made banned, simply by the outlawing of insurance,
just as gambling is outlawed in most states (although I am guessing there now, since some form of lottery or
organized government sponsored gambling is beginning to spread through many states). There should be
warning issued on every insurance policy, precisely where all fine print is, explaining to the potential buyer, "Sign
here and risk not being paid one cent!" They do this on cigarette packages, it makes just as much sense to do it
on insurance coverage.
Look at automobile-vehicle insurance coverage. A person buys a new car for $20,000 (relatively cheap these
days). Say it is an adult over 25 years of age, so the premiums for an adult are only $350 a year, which means
this is a mature driver (over 50), with few automobile insurance claims on record. A younger driver might pay
$175 a month, or $2,100 a year. Both amounts would be for the same $20,000 car. If the car has a loan with the
bank for five years, the mature driver will pay $1,750 for that automobile, usually without filing a claim. The
youngster will pay $10,500 over the same period of time, and if accident-claim free, will have paid more than half
the price of that car (new), for nothing in return. Further, once the owner no longer owes the bank, with the value
of the car reduced to around $8,000 (depends on the make and model for a 5-year old car), the insurance must
be maintained, by order of the State government. A mature driver gets those $350 a year payments because of
having paid in excess of $100,000 over a lifetime of driving (30 years), with no claims. This mature person is
never awarded a point in time where 30 years of zero claims allows them to drive insurance free for the rest of
their life, or until they use up $100,000 worth of claims. No, if they let their insurance lapse, then need to buy a
new car, where the bank requires insurance, the insurance company will treat them worse than a teen driver,
even denying them coverage, causing this mature, claim-free driver the embarrassment of going to one of the
"fly-by-night" insurance companies, who probably have never paid a claim. The government is backing this ponzi
scheme, because of lobbyists from the wealthy insurance industry.
Today, there is an issue over the need to revamp the health care industry. The media is split between using
brainwashing techniques (propaganda) that say either everyone wants to keep their present insurance coverage,
because they do not want a government run insurance program that will limit what coverage a person can have,
or cause long waits for some procedures, while the other side promotes a need to insure everyone, no matter
what the cost. All of this is smoke paid for by the insurance industry, because either way they win, as long as they
remain in business.
Here is how health insurance works now, for one of the better health insurance programs in the country. The
individual who works at a good company purchases health insurance. The company charges that individual
around $400 a month ($4,800 a year) for medical, dental, and vision coverage, with this money deducted from the
individual's paycheck each pay period, so the total per month is collected. The company is supposed to also be
paying a portion of the overall premium costs, for group insurance. This means one of the hidden costs of
employee benefits programs is this portion the company pays, on top of what the employee pays. Say this figure
is $200 a month ($2,400 a year). This set-up is more likely to be a company that has multiple work locations in
one state, or multiple states, such that the employer gets that rate for its employees because it employs, say
10,000 employees. That means employees pay to an insurance company $4-million a month, with the company
paying another $2-million. That means the insurance company is insuring that company's employees for $6
million a month ($72,000,000 a year).
These employees will generally receive better benefits for their money, than will someone who is self-insured, or
works for a place that does not pay anything for group insurance, for their employees, other than a basic
association fee paid to the insurance company, which is one of those less than standard companies, who deny
big-dollar claims more often than not. The company I listed above is called a self-insurer, meaning they pool
$72,000,000 into a special account for doing nothing but paying health insurance claims. The underwrite all
claims, using a group insurance company to serve in nothing more than a clerical capacity, processing claims and
writing checks, while reporting to the workplace company how much has been paid, how much is owed them, and
how much is left. These companies can keep health care insurance costs relatively fixed for a number of years,
IF they consistently pay less out than they take in, AND the insurance company does not start getting greedy,
demanding more and more for their clerical expertise. When a company of 10,000 has more than a handful of
major claims in one year, the company, as the underwriter, has no choice but pay the claims (or deny them),
drawing from the company's cash reserves. The years after such bad years are always tales of how insurance
costs are going up, to address those lost reserves, more than to pay the insurance companies more.
For a typical worker, the majority of one's health care costs (over 90%) come in the last five years of life.
Typically, this is after one retires from work, and is living on fixed income (retirement & social security). This is
when Medicare kicks in, assisting the elderly in these prohibitive costs. This means that the typical worker, who
works and pays into a group insurance plan for 40 years, at an average of $275 a month, pays $132,000 dollars
into health care, over a lifetime of work. If that person has had relatively few claims for hospital stays, only two
regular doctor visits a year, and only 20 years of three prescriptions a month, with the co-pays that worker will
have paid an additional $15-$20,000. For a family of four, this could run a 40-year amount of co-pays to well
over $40,000, or $1,000 a year in copays. The reality is one thousand dollars a year should get health care, with
no need for insurance, so no need to pay another $4,800 into a group plan. Those $4,800 could be better
served paid into a forced savings plan, set up by the company, as a self-insurance plan for the worker, with no
need for paying for clerical services.
When a bottle of aspirin can cost $1.99 a bottle, as long as it is a generic brand name (unadvertised through the
media), the only reason another bottle of aspirin would cost more than that is higher cost to the manufacturer,
through advertising and promotion (marketing costs). If a bottle of aspirin required a doctor's prescription, one
would have to pay a $20 co-pay to the doctor for that prescription, then pay a $10 co-pay to the pharmacist for
the aspirin, for a $30 bottle of aspirin. In between the patient and the medicine is a line of hands wanting to be
paid, with the largest hand being the insurance and pharmaceutical companies. If it was against the law to profit
more than minimally from health care (government cost controls, based on reduction of medical care need,
through better health care procedures), medicine would be sold barely above cost, doctors would be paid more
by seeing patients less, such that a prescription for aspirin could be handles for no charge over a phone call, and
insurance companies would want nothing to do with health care.
This means the solution to America's health care woes is not to maintain the insurance industry, it is to eliminate
it.
| Some Views on Insurance |
| All Material Copyright of Robert Tippett with the exception of the obviously stolen stuff Reproduction by Permission Only |
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