9 ms·
After working in or for the insurance industry for 15 years, I came to the conclusion that it is not right, and that it is the moral equivalent of gambling. I
by sverige 10y ago
After working in or for the insurance industry for 15 years, I came to the conclusion that it is not right, and that it is the moral equivalent of gambling.
I understand that the vast majority of people rationalize insurance as a good thing because the cost is relatively low when compared to catastrophic loss, and even have a couple of personal anecdotes to add to those of the advocates of insurance that demonstrate the wondrous utility of insurance, but I am convinced that it is wrong.
I quit the insurance business and moved to a completely different career. I only buy the insurance that is required by law (what a ridiculous concept! does the government have to mandate that you also buy food?) and have paid the tax penalty for foregoing Obamacare.
I know this will likely not be well received here, but I thought I'd share my position for any who read this and wonder if they're the only ones who understand it this way.
- truetraveller 10y agoUpvoted for strong morals.
- sverige 10y agoOr at least the willingness to live out what I believe to the best of my ability. Such behavior is often labeled as insanity by those closest to you, incidentally.
- IanCal 10y agoCan you explain why it's morally wrong in the case you bring up, small costs for catastrophic loss?
- H4CK3RM4N 10y agoBecause the viability of the industry is predicated on the vast majority of consumers losing money on their premiums. Insurance isn't a bad idea intrinsically, but it's a bad thing when the industry is turning billions of dollars worth of profits
- abtinf 10y agoInsurance companies generally pay out more in benefits than they collect in premiums.
- jon-wood 10y agoI'm deeply skeptical of that given the huge profits posted by insurance companies.
- derivagral 10y agoThere's 2 parts to this: the actual 'pay out claims' part which is the expense ratio, and then the part where the insurance company makes money off of the giant pile of cash they're holding before re-paying it to claims. I am not well-aware of ratio regulations (some amount per-state do exist) and generally their investments are quite conservative. My source is having done investment in and diligence on a couple insurance companies (which I've since sold.)
- jon-wood 10y agoYou make a very good point, it had completely slipped past me that they can make investments with that big stack of cash they're collecting from customers.
- Nomentatus 10y agoSpecifically, people are being persuaded to outsource risk at a steep premium rather than much more cheaply self-insuring themselves by laying aside less money regularly, or by accepting much higher deductibles. In order to increase sales, unnecessary products proliferate.
- sverige 10y agoAnd the risks are exaggerated to induce as much fear of loss as possible. The entire industry is built on fear of loss.
- michaelhoney 10y agoIf someone freely chooses to gamble/take out insurance, is that morally problematic? I'm guessing you're opposed to the compulsion rather than the actual gambling?
- sverige 10y agoYes, that is correct. A person should not be compelled to participate.
- afterburner 10y ago> and have paid the tax penalty for foregoing Obamacare Gambling with your health...
- sverige 10y agoActually, most of the gambling that goes on is believing you can eat what you like and do what you like without consequence, since if your body gives out, some doctor will fix it. Everyone dies, after all, so the gamble is not whether you will die, but rather what the quality and length of your life will be. But those risks are far more complex than whether you will be able to afford vastly overpriced health care in the event of some health crisis.
- abtinf 10y agoWhat was your role in the industry and how did you come to your current view?
- sverige 10y agoI worked for ten years as a litigation paralegal defending insureds, and sometimes insurance companies. I sold insurance for two years. I was a manager for a year in the service department of a very large insurance company whose name you would immediately recognize. I worked as a financial analyst for that same insurance company for two years. All of these various experiences made me realize that a) American justice is really solely about the transfer of money from one party to the other, and is rarely equitable (sometimes one way, sometimes the other); and b) the entire industry is really a way for a small group to direct the investments of and reap the profits from the small capital excesses of millions of people.
- teekert 10y agoSo you wouldn't have a health insurance if it wasn't required by law? You would just die of cancer? Let your partner or kids die because you don't have the money? I don't understand how not being insured can be legal in some fields. Also, in my country you are obliged to have an insurance that covers costs in case you cause an accident in traffic. Suppose you would hit me, it's your fault but you don't have money? I don't buy anything from you going to jail, you should have insurance. Maybe you would argue that the state should in such cases pay, then I could agree with you. The fact that insurance companies of obligatory insurance have stock holders is a perverted concept with big (political) conflicts of interest.
- baddox 10y agoLiability insurance for automobiles is required by law and is very different from a legal requirement to purchase health insurance (you could probably make some argument for liability insurance for contagious diseases, but that's not really part of the health care policy debate).
- sverige 10y agoI do have liability insurance for my car, since it is required by law. I would be prepared to live without one if it became unaffordable. For most of human history, the vast majority of us got around on foot. (In fact, that may still be true, I don't know.) Buses and trains still work, if that's not palatable for some reason. Whole startup companies have been built around getting people from point A to point B in larger cities. I do not have health insurance. I recently had major surgery that others have helped me to pay for, but I was in fact completely prepared to die, as odd as that may sound to most. Our lives on this earth are finite. Most people don't deal with that reality in any meaningful way, even when they acknowledge that it is true intellectually.
- sumedh 10y agoSo why did you accept help from others?
- vog 10y agoSerious question: What is the alternative to an insurance? The worst case would be that everybody saves huge amounts of money on their own, not touching it, for the case of a catastrophic event. If the catastrophe doesn't happen, or not as bad as feared, you wasted money. If the catastrophe is larger than expected, or happens when you are too young to have saved enough money, you are out of money despite the savings. Either way, this is the exact opposite of solidarity. Also, in that setting, not saving any money would be some kind of gamling, too. Solidarity means that if somebody had really bad luck, their peer will help them, because it could have happened to any of them. But that doesn't work well for large groups. On the other hand, we do want large groups to cover catastrophic events, because only then it is affordable. So we need some entity to coordinate their efforts: An insurance, a state, or something in between like a non-profit organization. Or, am I overlooking something here?
- sverige 10y agoI am a member of a community that takes care of its members. We are not perfect at it, but then neither are the more common social mechanisms like insurance. I recently had major surgery. The tremendous costs incurred are being paid. As fragmented as society is today, I can understand why people believe insurance is an absolute necessity, but I also believe that mechanisms like insurance contribute to and frequently cause that fragmentation. Insurance in particular warps normal market forces. For example, it seems likely to me that the very existence of huge pools of insurance money has contributed greatly to the hyperinflation in health care costs that has continued unabated and really unopposed for the last two generations. My mother told me recently that it cost a total of $80 for her to give birth to my sister in a hospital in 1959. I'm sure the billed cost for hospital birth today is many times that amount. That is an example of the great harm that insurance can do to society, as opposed to any perceived good.
- avar 10y ago> I am a member of a community that takes > care of its members. So you and your friends / family / community / church / cult / whatever are essentially implementing an insurance scheme, and yet you think insurance is a bad thing? > Insurance in particular warps normal > market forces. So would not having insurance and instead having everyone having to set up some ad-hoc insurance scheme as part of their own community.
- MrQuincle 10y agoI'm thinking why it does have a moral component in either case. I think it might have to do with the nature of a financial transaction: it does not the change the world on its own, it is not a solution to any problem. Suppose there is a low frequency event such as a comet heading for earth; the right thing to do is build a shield or way to reflect it. Suppose there is a flood once in 500 years; the right thing to do is to build dikes. Money is a virtual thing, we sometimes forget. Technology and innovation can oftentimes be the alternative for insurance.
- sverige 10y agoI completely agree that taking some reasonable action is one way to reduce the perceived need for insurance. For example, the recent California floods affected populated areas that were never inhabited by the indigenous peoples. Why? They knew from experience that it would flood someday -- maybe not in their lifetime, or even their grandchildrens' lifetimes, but someday. So they didn't build there.
- rahimnathwani 10y agoThanks for sharing. Can you go into more detail as to what made you come to this conclusion? Some guesses: 1) Insurance companies' gross margins are too high, due to asymmetric information, scare-mongering or similar? 2) People buy insurance to cover shocks that they are perfectly able to bear themselves? 3) People buy insurance to cover risks that have effectively zero chance? 4) People buy insurance that doesn't cover them in the way they expect (i.e. the insurance company would deny the types of claims they're expecting to make)? ?
- pjc50 10y agoI do think we need to distinguish between kinds of insurance. Cheap insurance for rare catastrophic loss of high-value capital assets (ie shipping, buildings and contents): fine. The oldest form of insurance (Lloyds). Expensive small-value insurance (phones, PPI): probably a bad deal for the consumer. Mandates to insure other people (motor vehicle, public liability, etc): here the cost of the premiums are a useful incentive to avoid inflicting unnecessary risk on bystanders. Although that can make it prohibitively expensive for young people to drive. Disguised forms of saving (life insurance): it's complicated. Also a surprisingly old product. Maybe best handled by mutual societies rather than for-profit businesses, although the actuarial considerations of estimating death are the same. Insurance-flavoured things that push the risk outward (credit default swaps): sophisticated investors only, and even then someone's getting taken for a ride. Some cities lost a lot of money by investing in these. Health: should be dealt with at national level, not the private sector. Nobody should be refused coverage and people should not be financially ruined by medical conditions. I'm quite happy with the NHS system in which private "topup" insurance is permitted but uncommon.
- grecy 10y ago> probably a bad deal for the consumer Insurance companies make billions in profit each year. By definition, insurance is a bad deal for the consumer. Sure, it spreads out the "payments" into a manageable sum in the case of house fire or some other major incident, though by definition, on average, you will pay a lot more for insurance than it will ever pay you.
- greenshackle2 10y agoYes that's true the average payout rate is 60% IIRC. But due to the diminishing marginal utility of money, it may make economic sense to buy insurance against risks that would ruin you. But buying insurance for small stuff, you're just donating money to insurance companies. The biggest scam is 'insurance' for eyeglasses. It's a fixed, predictable cost for most people. Eyeglass frames are ridiculously overpriced, the market is practically a monopoly ran by Luxottica. Insurance companies and Luxottica manage to get people to pay $600-700 for a pair of glasses (300$ for frame, $150 for lenses, x1.5 because low insurance payout rates) by hiding the cost in monthly premiums. No one would pay that much upfront.
- wu-ikkyu 10y agoInsurance as defined by The Devils Dictionary: http://dd.pangyre.org/i/insurance.html http://dd.pangyre.org/i/insurance.html
- 6stringmerc 10y agoUpon close examination it's quite apparent that Mutual Insurance Companies are the best method to address risk without moral issues, I think, whereas most of the for-profit industry is so ridiculously in bed with regulators it's awash in essentially government-approved profit margins with any decent level of underwriting discipline. Quite fascinating. I support having coverage for things like Health and Property but what a bizarre setup we have in the US.
- giardini 10y agosverige says "... I came to the conclusion that it is not right, and that it is the moral equivalent of gambling." Your 15 years' experience provides you with some authority; people will listen because of that. But you failed to tell _why_ you believe so.
- sverige 10y agoYou are right, I did not specify that, so I will try to now. First, I don't believe in chance. That puts me pretty much out of the mainstream right there, even among christians, but so be it. I don't really want to get into a lengthy philosophical / theological debate about it, since I have found such debates to be utterly fruitless, but basically I believe that God orders our lives for our good and his glory. Anyway, if something happens to me or if I do something that has negative consequences, that is between me and God with regard to personal consequences. Do I have faith that he will provide? Do I have faith that, even if he doesn't, it is still for my ultimate benefit? It's easy to say I do when everything is going well. It's quite another to demonstrate that I do in adverse circumstances. So, second, to me, buying insurance is an act of unbelief. It's fine with me if the rest of the world wants to do it, but I cannot, since it would be a clear demonstration of my lack of faith that God will provide, even if that provision is what the world calls catastrophic. (Perhaps a little catastrophe is just what I need to make me pay attention to something I've been neglecting! This is not a popular view, obviously.) Here's an article that explains it better than I have here, but I will say ahead of time that it will be unlikely to make sense if you do not believe in God. "[It should be a serious question with a child of God, ere he avails himself of an assurance company, whether in the matter of fire or life, "Am I, hereby, distrusting God? or, am I seeking by human agency to counteract divine visitations? There is something sadly anomalous in a Christian's insuring his life. He professes to be dead, and that Christ is his life: why then talk of insuring his life? But many will say, "We cannot bring Christianity into such things." I ask, Where are we to leave it? Is Christianity a convenient sort of garment, which we put on on Lord's day, and at the close of that day take it off, fold it carefully up, and lay it on the shelf till the following Lord's day? It is too often thus. People have two characters; and what is this but the leaven of the Pharisees, which is hypocrisy? Insurance offices are all very well for the men of this world, who should certainly avail themselves of them, inasmuch as everything around and within is so uncertain, but to the child of God, all is sure. God has insured his life for ever; and, hence, he should regard insurance offices as so many depots of unbelief.] These things do very well for men who are only governed by now; but the disciple of Christ is to be governed by then. This makes all the difference; and truly it is a serious difference." (From http://www.stempublishing.com/authors/mackintosh/Bk2/TIMETERN.html http://www.stempublishing.com/authors/mackintosh/Bk2/TIMETER... ) A comment from the same author on practice: http://www.stempublishing.com/authors/mackintosh/Shrt/SHORTP09.html#a9 http://www.stempublishing.com/authors/mackintosh/Shrt/SHORTP...
- GFischer 10y agoWhat kind of insurance? I've worked in property and casualty insurance for 10 years, and although I wasn't entirely sold on some of their practices, on the whole I do think they provided an important and needed service - with way too many intermediaries and government meddling and some questionable cases where coverage is denied or accepted, but on the whole a decent service which helped make whole people that suffer catastrophic losses (cars or houses). OTOH, the kind of insurance I think is extremely shady is the U.S. health insurance industry.