So Easy a Caveman Could Do It

On the way home, I heard an ad on the radio for All State, warning me that I may live in one of the most dangerous neighborhoods in the country. Of course, I feel quite safe in my neighborhood or I would move. But according to statistics, which never lie, I am more likely to have an accident the closer I am to home. I guess I'd better start looking for a safer address.

I can forgive this little piece of propaganda. I understand that it's all about marketing, and that when it comes to insurance ads, making you afraid is the number one goal. It did get me thinking about all of the other insurance related issues that bug me. The first of which is that lately people don't seem to understand the very nature of what insurance is and is not. It is a mathematical gamble, no different from a trip to the casino. It is not a guarantee of anything. The next time you hear a politician talk about universal health care and affordable insurance for all, ask yourself this. What possible incentive would anyone have for operating an insurance company other than to make money? Let's go back to my casino analogy and expound. The owner of a casino knows that people are greedy by nature and that if they can be cajoled into playing long enough, the house will always win. Gamblers play against the odds and hope to hit that big pay-off early and take the house for all they can. Insurance agencies operate under similar principles. They have complicated actuarial tables that predict the probabilities surrounding your policy. If it is a health insurance policy, they look at your age, gender, occupation, family history, and any mitigating factors such as smoking or obesity. They make money by charging you at rates that they know are likely to have you paying in far more than you will ever take out. You are keenly aware that an accident could be waiting around the next corner and are therefore insuring yourself against the chance that it happens sooner rather than later. If not for the possibility of impending danger, you might be inclined to simply forgo insurance altogether and pay your money directly into a savings account or other interest bearing fund. For most people, this would end up being the better deal, if and only if they were disciplined enough to regularly deposit and only withdrawal for medical emergencies.

So when you start talking about insuring everyone, you are missing the point. Humans are fragile. We will get sick and we will die. The question is not if, but when. That is the question that the entire insurance industry hinges upon. If you try to force the insurance companies to enter into a gamble that they have a poor chance of winning, you have removed all incentive for them to offer their service in the first place. In the future, medical science may advance to the point when we can consider this. There are many who feel that conditional immortality is around the bend. If we no longer die of old age, then we only have to insure ourselves against accidental death and foul play. Until that time, we need insurance companies, and I can assure you they are not motivated out of the goodness of their capitalist hearts. Case in point- the act of God clause.

I just saw a great movie called the Man Who Sued God, which stars Billy Connelly as a lawyer turned fisherman. In the opening sequence, his fishing boat is destroyed by a bolt of lightening, and as you may have inferred the insurance company refuses to pay out, deeming it an act of God. Connelly decides to sue God and hauls the local heads of the major religions into court to act on the Almighty's behalf. Very amusing film; I highly recommend it. All insurance policies have this clause in their contract, and though they never specifically define what it means, essentially it is their way if insuring themselves. There are some events whose very nature depends on chaotic systems that can not be predicted using current technology. Insurance companies don't want to be held accountable for what they can't predict, so they put in this sweeping escape clause.

Now this pisses me off for several reasons. One, and these are i no particular order, they provide no evidence that God in fact exists. Two, if he does exist, aren't all events acts of God? How do they distinguish the ones they're going to pay out from those they won't? Third, isn't they entire point of a contract to strictly define the letter of the agreement so that both parties know exactly what they are getting? This practice seems more than a little archaic to me, and I really can't believe it is allowed to continue.

I feel I've reached the end of my rant about insurance. The conclusion has snuck up on me, and I find I don't have anything profound with which to close. I will just say this. Insurance is a necessary evil, just like death and taxes, and intimately related to both. Unfortunately, it is an institution which has not yet outlived its usefulness. In trying to revamp the system, we need to keep in mind the realities that it has been based upon. Some changes we have the power to make, but others will bring the whole building crumbling down around us.