I used to be with a mutual insurance, which was still actually a mutual insurance, meaning the customers were also the shareholders. I got a small dividend most years out of whatever surplus existed.
Wish we could have that for fire insurance in California but the company would go belly up by the end of the month.
How insurance should work: Disasters are unpredictable, are bound to happen and can be very expensive to resolve. So instead of each individual risking bankruptcy for participating in a system, everybody pools together money at a much lower individual cost. That money goes toward a statistical guarantee that the cost of any disaster will be covered.
How insurance actually works (under capitalism): For-profit companies use every tool at their disposal, regardless of ethics or legality, in order to take as much of your money as they can possibly get away with while simultaneously paying out as little as they can possibly get away with, and then pocket the difference.
Why people think first part is great for insurance, but when somebody wants to scale that up its suddenly horrible socialism.
America basically has socialised healthcare already. It's just funneled through a 3rd party first, who jack up prices. Where do they think those premiums are going?
everybody pools together money at a much lower individual cost
Another example of this is would be public transport.
The province I'm in has socialized car insurance through a crown corporation. We all pay relatively the same rate, and there are discount tiers applied based on years of experience. If they have a good year of low payouts we get rebate cheques because its not a profit corp.
The idea is when everyone pays into insurance the collective fund is used to pay for the costs any individual wouldn’t.
Thankfully accidents or thefts don’t happen to everyone, but if they do you usually get more out than you put in (personal liability is usually millions of dollars, nobody puts that much in individually).
Where this goes wrong is when fraud happens or insurance companies are incentivized to manipulate rates to increase their profits.
Where this goes wrong is when fraud happens or insurance companies are incentivized to manipulate rates to increase their profits.
I'd say the problem is that insurance companies can take profits above operating expenses at all. These should all be strictly regulated (if not entirely state-run) and predicated on funds going to reimbursements for expenses + minimal admin overhead. If money is leaking out the window to shareholders via dividends and stock buybacks, its effectively being embezzled from policy holders.
There's an argument for maintaining a reserve (think about disaster prone areas for things like floods, hurricanes, etc...), but I agree that it would be better for insurance organizations to be prohibited from being publicly traded (private or public benefit corporation only)
There’s an argument for maintaining a reserve
In a federalized system where you print your own currency, there's really not. Insurance premiums become a deliberate dampener on economic growth that offsets the possibility of future spending (and subsequent inflationary risk) during a large disaster, and an incentive to mitigate risk in order to reduce expenses.
But there's no money in simply holding cash in reserve. That's why private insurance companies typically try to parlay their premiums into investment ROI. The real money in running an insurance company is what you can do with all the cheap cash you've collected while you're sitting on it, with the expectation that you won't need to pay it all out again any time soon.
A public system wouldn't need to hold cash in reserve that it can print/loan itself at ZIRP. And it wouldn't need to seek private ROI ahead of inflation or to pay off private investors in order to mitigate the risk of holding large volumes of cash for a long period of time. But - most importantly - a public insurance program attached to a large state/federal government has a financial incentive to mitigate risk on travel that it can combine with actual public policy to improve the economy overall.
Rather than just insuring a house or a car, state officials can implement public works that reduce the risks of flooding, provide emergency relief during natural disasters to mitigate loss of life, and reduce instances of highway accidents / fatalities. Instead of simply outsourcing and privatizing the risk management aspect to an independent contractor, they can attack the problems of social risk holistically, then set policy prices to reflect the risk-adjusted negative externalities of cleaning up a mess created by risky individual behaviors.
Where's the disincentivization for manipulation?
Not all markets are the US.
Ideally you have an independent regulator who makes sure there’s competition, and if the industry can’t keep up it gets cleaned up into a well regulated government entity.
I have to wait to get hit???
I'm guessing she hasn't figured out the concept of insurance fraud...
And if you don't pay it you can't legally drive a car. And if you can't drive a car, you aren't going to be hired for a job.
I repeat, YOU ARE REQUIRED BY LAW TO GIVE A CORPORATION MONEY IN RETURN FOR NOTHING IF YOU WANT TO PARTICIPATE IN SOCIETY
Car insurance is a fucking scam.
Need a new paint job? Get in an accident. Check engine light? Get in an accident.
I am not a ~~lawyer~~ person whose advice should be listened to on anything, ever.
Liability insurance: legally required.
Also liability insurance: costs hundreds and the price gets jacked up every few months because fuck you.
If it were a socialist systemic thing, and we rephrased it to, we all contribute a little each year and it goes into a pot for anyone who needs their car fixed, who contributes? (but then you gotta erase the evil corporation that rakes in billions and pays ceos unimaginable money)
Protection racket.
Insurance has its place. How much it costs, how much they fight to help you when it comes time, those are the problems.
The fact that for-investor-profit insurance companies exist are the problems.
The fact it's run for profit AND is a mandatory requirement to having a car.
If it wasn't required the cost for those who pay in to cover uninsured accidents would be much higher. But I do agree that like many other things, if we nationalized the cost and eliminated profit we could drop the individual price. It would also help to use federal influence to provide other means than individual cars for transportation, less cars resulting in less risk on the road.
This already exists, and they are called unit linked insurance plans. Basically the insurance company provides you some units in an investment/trust fund, in addition to the policy benefit, for your premiums (obviously higher to compensate).
They are actually much scammier, because the insurance company administers the unit fund as well, and the fees are often much higher than if you just buy the policy and an exchange traded trust/fund separately. They were formulated by insurance companies basically for the sole purpose of bamboozling people who echo this meme. Back in the day, door to door insurance salespeople would say "even if you never claim, you still get a payout!".
Unit-linked insurance plan - Wikipedia - https://en.m.wikipedia.org/wiki/Unit-linked_insurance_plan
Its like gambling, I bet 100 bucks something will happen to my car this month. Damn nothing happened, lost again.
Once you start seeing insurances as casinos where you can bet on something happening to you or not it makes a little more sense
bc “businessmen” in america think they are providing something of value and not utter bullshit
Funny enough, if somebody offers you insurance that builds cash value, even though the sound of it does make sense you should probably run.
I've never heard of this. Why should I run?
The price of insurance only covers the statistically predicted amount of payoffs to all people insured plus a profit. If you're building a cash value, then that's priced in, with more profit priced in for them on the equity youve built. You're better off pocketing the difference.
its a MLM, just like health insurance. theres no guaranteed they will cover your cost in damages some of the time.
Homeowner's insurance is worse, almost as bad as health insurance. Try getting them to pay out, and if they do, watch your rates go up, or your policy get cancelled. If you have a mortgage, you must have homeowner's insurance. State Farm cancelled me out of the blue after 25 years without a single claim.
I suspect they all conspire to cancel policies, knowing that we need to go somewhere, so State Farm cancels a customer, and they go to Allstate at a much higher rate, and Allstate cancels a different customer, and they go to State Farm at a much higher rate. This forces the customer to go through a new approval process, and sign a new contract that is probably worse for them than they had before, in addition to being a higher rate.
Insurance is valid, profit from insurance is where it gets problematic cause the whole point of insurance is to have a similar average outcome, just less extremes in the worse case scenario.
That's basically what whole life insurance is, and it's a complete scam IMO because premiums are high (to allow for investment) and the investment is too conservative. You're much better off buying term life insurance and investing the difference.
You can partly do this DIY with self insurance. Basically, you put a certain amount of capital into a bank account or something and hand that over to the state treasurer in a trust, and it needs to be about $200-400k in my area (range is because the law isn't clear to me). If you can stand to part with that much, you probably prefer to have the insurance take that risk for you so you can retain control over that money and not worry about lawsuits.
Any guesses as to how much money would be in the pool if every person in your country paid into a single pool for automotive insurance? I bet that if such a pool existed, then there would be a lot of motivation to use that money to reduce the risk of paying out. Which makes me wonder if public transit is better in countries with national health insurance as a result of the national health insurance.
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