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.
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.
In my Canadian province car insurance is government run and if you’re a good driver your premiums and license fees are reduced
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.
No it's not, mandatory insurance of cars is there in case you do something, is it better if you get into accident and go bankrupt instead?
Agree about having to own a car but that's a North America problem, even then there are some cities where you don't need to own a car
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.
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
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
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.
You say "try getting them to pay out" and follow up saying you never filed a claim? I've gotten my home insurance to pay out twice, once for a beer that fried a laptop (my fault, but I had coverage for it) and again when a lightning strike took out part of my solar array and some indoor electronics. They've also promptly paid in situations where I wasn't a customer but the beneficiary of a claim and bent over backwards to make sure I was taken care of.
Maybe the problem is using an insurance company that farts out millions of dollars a quarter marketing Gecko, Jan, Jake, Mayhem, or Emu instead of investing that in claims. Though, I'll give a shout-out to my homegirl Jan back when I was in a different situation and a snowplow took a chunk out of my car. Progressive took care of me then while the city took their sweet time making good on the claim against them.
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.
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