Is insurance a scam?

[Typhoon]

"This is a rant i've gone on many times in my life and a recent debate with my father brought it back into the forefront of my mind so I thought it might be good to get a dialogue going on this.

Is insurance really just a huge scam? Specifically i'm talking about health, life and auto insurance.

I mean the more I think about it the less it makes sense to me. Essentially you give money to someone on the chance that you may one day need it.

If you don't end up needing it you don't get one red cent back from the insurance company, and if you DO end up needing it they will look for every possible technicality and loop-hole to avoid giving you the money you need.

Then when you do need it, when you're in a car accident or you need surgery or god forbid you die, they try to find some place on an insurance form that you lied or they try to prove that things are your fault or any other way in which they can avoid paying you or at the very least pay you the smallest possible amount.

Then even if they do pay for it often they raise your premiums so in the long run you end up paying more than if you had just taken a loan and fixed the car yourself.

The one I have the biggest gripe with is auto insurance. My biggest problem is this is the only one you are required by law to have, if you want to drive then you HAVE to have insurance.

To me it would make far more sense to require by law that people have bank accounts that can only be withdrawn from if you have an accident or if there was extreme need (like you're family is starving) and require by law that the money you would spend on insurance go there.

That way your insurance would get interest from the bank and when someone lost their license or died their money could go to their kids for that.

Not only that but insurance seems to be the only business where its legal to discriminate based on age, race and gender. If you're a man you'll automatically end up paying more for auto, health and life insurance. Based on nothing other than the fact that you have a penis you owe them more money for the same coverage.

It seems to me that this kind of discrimination in any other kind of business would be grounds for a law suit. If I walked into a walmart and all the prices shot up for me when they saw I was a man I could sue them into oblivion. Aside from that since you're required by law to have auto insurance you're being forced by law to be discriminated against.

The only one that even remotely makes sense to me is health insurance since that is one that you get regular benefits out of since whenever you need to see a doctor or have a prescription filled (if you have insurance) then you get a benefit. But personally I don't believe you should have to pay anything to see a doctor or get medication.

Well that concludes my rant for the moment, thoughts?"
-Tsukiyomi
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I didnt write that but i thought it was a good topic to start. And it makes sense

 

[The Oi]

Re: Is insurance a scam

The question is, "are you prepared to pay for $400,000 out of pocket in damages if you cause a multi-car pile-up that's your fault on the highway?"

If not...you need insurance whether you like the idea of it or not.

Otherwise you can just pray that you're lucky enough to never cause an accident. It's really all about that one major accident that you might cause which you simply can't afford to cover by yourself.

 

[The Oi]

Re: Is insurance a scam

And I don't mean to be grammar police here but I'm doing this one as a favor to you. It doesn't "make since" It "makes sense."

 

[Maximus]

Re: Is insurance a scam

I had a year where my wife had over 1M in medical bills.
I've had an employee cause a pretty serious accident in a company car.

Yeah, it's worth it...

 

[Typhoon]

Re: Is insurance a scam

i know i need it. But that wasnt the question of the thread.

edit: i didnt even notice that was you Maximus i had to do a double take cuz of the new avatar

 

[Maximus]

Re: Is insurance a scam

i know i need it. But that wasnt the question...

Well, I thought I showed examples that it wasn't a scam as far as I'm concerned.

As far as the article goes, some of his points are just terrible. The descrimitation part about Auto Insurance v. Walmart lacks any logic whatsoever.

This part is just asinine -

To me it would make far more sense to require by law that people have bank accounts that can only be withdrawn from if you have an accident or if there was extreme need (like you're family is starving) and require by law that the money you would spend on insurance go there.

Who the hell is going to have enough money in this account to cover an accident with serious injuries? No one.


Look, I hate paying for insurance. It is one of the biggest costs of running my business. That said, the peace of mind it gives me allows me to sleep at night.

 

[Typhoon]

Re: Is insurance a scam

very true

verrrry true
good point

 

[The Voice]

Re: Is insurance a scam

In fact if you believe insurance is a scam, you have something wrong with you.

You cause an accident, you are not only liable for damages you caused to health, the vehicles, and maybe even punitive damages.

How do you pay for all this without insurance?

Even if you have saved what you would have paid... for the sake of arguement, we'll take car insurance and the average cost of an individual in the USA. These are 2005's numbers, sorry it's the closest I could find to the present time.

Average cost: $829
** Average expenditure is not the total of liability, comprehensive and collision coverage. In making the average expenditure calculation, the NAIC assumes all "insured vehicles carry liability coverage but not necessarily collision or comprehensive coverage." -- Insurance Information Institute

And for the sake of arguement, we'll say these are 6 month payments.
That's $1,658 per year.

With $1,658 per year saved are you prepared to pay 40k in damages (your car and theres), plus 50k in medical expenses, and 500k in punitive damages? Not to mention the cost of having a lawyer. What if you're only 16-22? You simply don't have that much saved.

Or worse... guy loses his limb, gets John Edwards as his lawyer (this is the type of cases he made his milllions off of and notouriously got higher ammounts then others). You owe Millions... can you afford to pay it?

You don't get your money back, but Allstate for one rewards you with no accidents by charging less. Your money goes to those who did get in an accident or into their profits.

As far as health insurance... nobody requires you to have it and there are bank accounts now set up for medical expenses. National City has this type of account, I'm not sure what other banks do.

 

[Cavatt]

Re: Is insurance a scam

Health insurance is the scam to me and for this reason. If the doctor tells you you need something and you have insurance, the insurance company can still tell you it is unneccessary. In emergencies they will only treat you at certain hospitals. With car insurance you take it to a shop and they tell you how much it costs to fix. When you are hurt you go to the hospital and the medical insurance tells the doctor how much it will be to fix.

I just think it wastes a lot of time and money to have some disinterested uncaring party go over your medical procedures when you might need them right away. I know not every company works like that, but far too many do.

 

[gourimoko]

Re: Is insurance a scam

Well....

Health insurance IS a scam. Life is a result of health and therefore health is an inherent right; one can argue that it is in the interest of the government and the responsibility of the public to ensure the public health and thereby the health of it's citizens. Many progressives believe universal health-care is therefore a responsibility of the government and a right of the people - it is a part of the public trust, similar to the responsibility of the people to pay income taxes, the "right" of the government to collect interest on currency, the "right" of the government to conscript it's citizens and the responsibility of those citizens to respond. There are many other examples of the public trust but these are just a few. I illustrate them so that more conservative interpretations of the role of government and it's inherent powers do not misconstrue the ability for the people to erect new mechanisms to ensure growth and prosperity.

Auto insurance is a different matter entirely. You do not have a right to drive a car; operating a motor vehicle is not necessary to have freedom of motion/travel. However, to answer your question directly, "Is it a scam?" In my opinion, no it's not a scam per se; yet the costs are so prohibitive that for the middle-class, mandated car insurance (especially full coverage if you finance your car) can seem like a scam. However, while it is necessary to have some means of insuring the potential costs of car accidents and such, the exorbitant cost of car insurance is mostly unnecessary. A better approach would probably be a non-profit approach that would involve some method of government guarantees via issuance of bonds and securities. This would be a much cheaper solution for trivial scenarios that don't involve more than 1 family insuring more than 2 drivers. Other scenarios would likely call for either a more traditional approach or greater government involvement.

Life insurance is not a scam, as it is entirely optional to insure yourself or a spouse against accidental/health related death. I have no problem with life insurance because it is never mandated. What I would say is that if there was a government operated, somewhat privatized, retirement program that would not supplant Social Security but enhance it; with similar features of an IRA - then life insurance would not be necessary for the lower-middle class, only for the upper middle class or the wealthy. Families could survive the loss of a father or mother by way of Social Security and some prospective retirement/insurance package. This would also alleviate businesses from needing to maintain vast pension accounts because pensions themselves would no longer need to compensate for the lack of any other meaningful retirement program.

Some people (you know who you are :chuckles will tell you that these are the ramblings of a liberal who thinks government should solve all their problems; recalling arguments about the "Nanny State." And at one point in my life I would've agreed with those sentiments. But I grew up poor, and lived poor in my earlier adulthood, and it wasn't until maybe a few years ago that my family came into some moderate wealth that I ever knew what it was like to not worry about money. I was raised in a single-parent household (for the most-part) and my mother was a product of the Civil Right's movement. I watched her scrap and scrape to get her and her 3 sons by so that we could just have a roof over our heads and food to eat. No one should ever need to worry about the very essentials of life, no American at least; considering our nation's wealth. We needed food stamps at one point, and there were many times being sick that I never got to see the inside of a doctor's office. Fear of Child Protective Services kept us from ever expressing our destitution to a classmate or a teacher, because we knew what would happen. People shouldn't have to live like that.

With that said, I'm not saying the government should pay your rent, give you a job, and hold your hand on your deathbed; however, I am saying that if my government can wage wars against countries for oil profits, or kill my male relatives off before I was born fighting communism, bankrupt my currency so that my hours at work mean less and less for my family and more and more for savvy corporate thugs, then the least We the People can ask for is health care, and a functional form of Social Security. I think that's only fair.

Sorry for ranting...

 

[Cavatt]

Re: Is insurance a scam

Healthy people are more productive and Universal healthcare would give people more bargaining power against their employers for wages and bad working conditions. A lot of people won't change jobs because they are worried about healthcare. It is dangerous not to have it, and starting your own business or working free lance can be really difficult because it is very expensive to buy on your own.

Other countries do universal care because it prevents small health problems from becoming big ones, and can be used for preventative medicine. When you have copays and these kind of things you are more likely to try to let problems blow over and they cost more in the end. Most people don't want taxes to go up to pay for other people's health care. I understand this, but my answer is always that you are already paying for their emergency room visits. They make up their money elsewhere and that is from increasing prices to exorbitant fees for processing and 20 dollar aspirin. All of these cost would go down if it was universal.

I think there should be a very basic universal system that would take care of preventative and life threatening procedures and could then be supplemented for special procedures like MRI's and non cancerous dermatology etc.

My cousin had health insurance but she got a rare tumor with a one in millions chance. They covered 95% of her costs, but she still owes more money than she can ever hope to pay off especially because she is not cured and may not be able to continue working the rest of her working life. Even when people are "responsible" they can still end up in a weird situation where they can't pay. Then no one will insure you.

 

[Deezus]

The closest thing to a scam, by far, is health insurance. Besides the points Gourimoko already made about health/life being a god-given RIGHT, think about this... For health insurance companies to be profitable, they (obviously) need to take in more money than they give out. That means that no matter how you look at it, on average, we all pay more than we get back. Keep in mind, most of us that don't own our own businesses have 75-80% of our insurance paid by our companies. This is money that WE could be getting in salary and using to invest in the future of our families, retirements, etc.

"In order for the system to work, those who claim in excess of what they pay in must be outnumbered by those who claim less than what they pay in, which means that for the majority of the people, they will pay in more than they get back. In Vegas, this is called a sucker bet, and the house loves gamblers who take it. Additionally, insurance companies set their premiums based on total claims over the past year, adjusting the rates to ensure a slight profit. In Vegas, it’s called the house’s edge, and it is what pays for all those multi million dollar casinos and resorts."

Source

 

[Cavatt]

That has to be true because as we saw with Katrina the insurance companies don't pay out on that rare occasion when the house loses. Just like they throw you out of the casino when you win too much.

 

[The Voice]

The only scam is how much drug companies, hospitals, and ect... charge!

Plus: I can just go to webmd and diagnose myself for free most of the time. The M.D. and Nurse are just the midlde men. Why do I have to pay the middle man that tells me I'm right?

 

[Lee]

Re: Is insurance a scam

very true

verrrry true
good point

Its not a scam, Insurance is shared risk. They poole together X amount of people and use actuary tables to gather how much expense the group will have to pay for the event...ie health costs, auto accidents/thefts etc.... There is a profit level built in, then its is divided by the X amount of people. Now that is a simple example, as different people have a higher risk level ie smokers or drivers with recent tickets, etc... and thus have to pay more than people with lower risk.

In the end, most people will not use the insurance they pay for over their lifetime. What happens is that in extreme situations, like max mentioned, a high percentage of the shared risk expenses is used. But, it protects you against catostrophic loss. Now, if you have no assets you might ask what am I protecting? In simple, future income. As you can be sued and have your wages garnished for years to come if you needed insurance but did not have it. Creditors will come after you, and bankrupcy most likely will not be an option as insurance is required therefore not having any is legally negligent....ie not eligble to be forgiven in bankrupcy court(although most medical expenses are exempt from this)

Basically...no its nto a scam, but rather a neccessary evil. But do yourself a favor, insuranc expense can be a big part of our monthly budget, continuously check to make sure you are not over or under insured and make sure you are not paying to much for your coverage.