Insurance.

This may well be the most boring blog post I do. The title is an excellent start in boring the pants off people (a phrase which has significant change in meaning depending on what continent you are). However, this has been a peeve of mine for a bit.

There were a couple of things that amazed me in my process of becoming an adult. One of them was that it is essentially illegal to live for free in the western world. I was shocked to find out that there is a tax on property, just for being property. If you own a place to live not only must you pay to acquire the ownership but you must continue to pay for it from then on. The amounts of this tax vary wildly from place to place (my parents place in Wales would be valued at least five times more than my present house but the tax on it is less than half the amount). If you add this tax of owning a place to live with all the laws about loitering, vagrancy, etc. then essentially in order to obey the law you must pay money. The fact that it is illegal to live without income was a shocking to me, something completely non-intuitive.

The other was finding out about insurance companies. The first portion of insurance companies is that their products are to a very large extent mandatory. If anyone has a mortgage on a house that house must be insured, you are not allowed to take that risk. If you have a business you must get liability insurance. Out of our paychecks come various required insurance costs. To drive a car you must have insurance. So the various powers that be require that if you wish to have an income and a place to live (both legal requirements in themselves) you must purchase insurance.

For a start this seems to be not a necessarily intuitive thing. The powers that be have decided that I cannot decide to take risks with regard to my own well-being. This seems to be a pretty large instance of abridging my freedom. On the other hand the insurance is not really for my own benefit, but to stop other people having to pay more money later in sheltering me, or caring for me if I'm disabled, and so on. So, as long as the benefits overall outweigh the costs, I can go along with it. A necessary evil, like the police, or taxes.

However, almost all insurance is run through for-profit agencies. The point of for-profit agencies is to make money. As an insurance company that tries to make money your motivation is to get as much money from those you cover, and then to cover them to the least extent possible. This means that what insurance is for is paying money to get coverage, and what the insurance provider is trying to do is get money without providing coverage. This means that by definition the insurer and the insured are in direct competition with each other. This means that insurance companies will try everything to not pay claims, whether through the largest amount of bureaucracy they can manage, or by legal fine print, or by delaying until people give up, or by lying. On the other hand, if they determine it will be cheaper for themselves they will pay a claim regardless of its worth and simply charge you more money, no hope for appeal.

Since insurance companies are in competition, and how you succeed is by not paying out insurance claims, insurance companies will also do everything they can to shift the blame to another party. This causes vast amounts of legal fees adding to the cost of insurance. For buyers of insurance it is to the advantage that no legal fees be added to the cost, but for companies any aggregate of legal fees less than the cost of paying out claims is a plus. The reason why no-fault state have equal or higher fees is actually because in those states medical insurers bill auto insurers, and are better at it in medical cases. So no-fault states are not actually no-fault states in the US.

The societal use of insurance is to provide protection against hard times. The company use of insurance is to take in regular income and minimize the payout in hard times. This competition makes the whole system far more expensive than necessary, and reduces the efficiency of the point o f the system.

Why is insurance not a non-profit organization? It is a government mandated program to protect society (and individuals) against unpredictable disaster. It's been shown that health care (with a similar job description) is half the cost when government run. Everyone knows that insurance companies are evil entities with no regard for their customers. Surely a single payer insurance system that has no profit motive, whose point is to serve citizens, and cannot waste legal resources on suing other entities would provide better results at a lower cost?