Where car insurance costs least ... and why
"It's a balancing act," he says. "Insurance is all about pricing risk fairly so that those with higher risk are paying what they should."
--- A quote from way down at the end of the article.
When we are talking about insurance – car, health, life, travel, business, unemployment, bank – we should make sure that statement is kept most prominent in our minds. Unfortunately, we don’t … at least in the U.S. of A.
Take health insurance, a favorite whipping boy these days, where health insurers are compelled to accept people who not only are a high risk, but a sure thing, that they will accrue costs to the insurer. How can they balance that absolute certainty with what they insure so that those with higher risks pay more than those who have risks of a lower order? They really can’t but isn’t that the point? If we burden these private entities that attempt to make a profit (ooo … bad word) off trying to price the risk of paying out by balancing it against the risk that they won’t have to and can invest the money elsewhere then we make it impossible to make that profit (ooo … bad word) and stay in business. Then I suppose we can all depend on “government” to provide that all the risks that we take will be paid for by “society” at large and at no increased penalty or consequence to the individual. Better yet, we can make it progressive: The more you have, therefore the more you are able to pay, then the more you have to pay. That is fair, isn’t it?
In the shipping industry, it is a simple transaction. You are moving cargo through a dangerous area, the rates go up. IF the danger is high enough, you may have to pay as much as the entire value of the cargo in order to have underwriters touch it, or in some cases, underwriters – the people who assess the risk and set the price of insurance – may refuse to insure your cargo at all. Is that not unfair? It seems to be with health insurance. I guess government should ensure all cargoes against all damages at 100 percent.
That means everybody in the country should have to pay into the fund to pay off whenever there are damages, even if they never have anything to do with the cargo. Of course they have a tangential involvement in that they are affected by the prices those cargoes bring on the market, which has effects on other commodities that are remotely tangential to the affected, insured cargo. So, since “society” is paying the price, does it not make sense that everyone … well, at least those who can afford it … has to pay into the pot so people can be compensated.
Take life insurance: Should we not all get the same amount of coverage from the government so that our families and children … or just heirs … can be assured to benefit from our deaths? Is that not a responsibility of society to ensure that we are all taken care of? We don’t have to make our own arrangements; somebody in the government will take care of it for us.
Of course, it matters not that a) we are the government. It is not some separate entity out there hovering over us to make sure that we are taken care of, but it is us, or people like us, making decisions for us. The individual doesn’t have to worry about taking care of themselves. They can just focus on what makes them feel good; what makes them feel fulfilled. They just can focus on themselves in the moment in time. Nothing else really matters anyway.
And b) somebody has to pay for it. Of course, those who have “wealth” can always cover for those who don’t have wealth. That is the answer. So those who have more just have to pay more and those who don’t have enough, don’t have to pay anything.
Oh joy! How simple this all is.
Only problem is that this “solution” already has been tried, repeatedly and it works on the small scale, but when it is “scaled up” to large numbers of people, it doesn’t. In fact, it fails rather abysmally.
Why has it failed? For two reasons:
The first is that when you remove reward or incentive for being good at something, or successful, or just doing more (which removes the equality, oftentimes referred to as fairness, of the reward), then you tend to stifle the willingness for people to do good, be successful or do more. People, I contend, when given the option, usually will chose the option that involves less work, less effort on their part. Not all people, but the vast majority, will take this option. I am not saying it is bad. It has given people around the world a standard of living that was unthinkable a century or two ago. People have been so busy inventing things to save labor and effort that today life is much easier than say in most of our own grandfathers’ time.
Second, the only way, unfortunately, if people try to take the easy way out, is to force them to work. Yes, you have to have some people with means of coercion (guns, food, water, bats, knives) go around and tell people that either they do what the government says, the ruler says (as this usually has devolved into some form of dictatorship) or you will suffer.
Of course, the alternative is to let individuals take responsibility for their own actions and let them be allowed to make their own choices. Radical idea, I know, and fraught with risks. What if they fail? What if they don’t do enough? Won’t they get hurt? Won’t they miss out feeling fulfilled? Aren’t we rich enough to protect them from these ills?
Well, in answer to the last question, it is simple: No, and we never will be.
It is not that such people won’t be assisted, but that choice will be left up to other individuals. It won’t be compelled. Others can and will assist (because it is in their own interest to do so, but that is another treatise).
Still, when you follow the debate in the U.S. this fall on health care insurance, you will see stories of all these people who either will be saved or their lives have been destroyed by the presence or lack thereof of the Affordable Care Act, also known as Obamacare. And at the bottom of this debate will reside the question: Who am I responsible for? Who are YOU responsible for? Only we, as individuals can provide that answer.
Must you be your neighbor’s keeper and can government compel you to be?
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