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I think you're confusing "health insurance" which has a strong social redistribution component, with pure insurance, which is a business transaction to pay off

I think you're confusing "health insurance" which has a strong social redistribution component, with pure insurance, which is a business transaction to pay off on the chance something happens. Pure insurance is when a consumer buys a Playstation for $300, and then pays $5 for an extended warranty, or when a company insures their office building against a fire. I don't think your arguments apply to that. In such a case, is there unacceptable social harm if a insurance company determines I'm really bad at taking care of my Playstation, and refuses to insure me? Is a company that badly off if they need to write down the cost of a building if it gets burned down? Is all insurance a social right? I feel that health insurance has the strongest claim to this, because it's not a pure business transaction and it's about who we're letting die in society.

jogjayr 9y ago
> Is a company that badly off if they need to write down the cost of a building if it gets burned down? That means a company has to always keep cash in reserve against the off-chance of its building burning down just because insurance can't be trusted. That's money that can't go into expanding the business and creating additional jobs. Imagine the overhead of this parked money across thousands of businesses. Not to mention a lot of startups or young businesses can't have that sort of cash position, which means it becomes another barrier to starting businesses. It would be a major impediment to the economy.
- emilecantin 9y ago
  Even worse, if you have to account for that possibility, why buy insurance in the first place?
losteric 9y ago
I think fair and transparent business contracts are a consumer right. Insurance is statistical in nature, and contracts should be required to explicitly outline the scope of coverage. If I’m paying $5/m for coverage of manufacturing issues with my Playstation, I expect any manufacturing issues to be covered. I would also expect an extremely unlucky customer to receive multiple device replacements without any change of premium - because the contract and price should reflect the expected failure rate of the device (plus overhead + profit). In that example, it should be illegal to boot an honest customer after the first failure… the only reason to do so would be because the insurance company set an artificially low rate that doesn’t reflect the ammortized rate of manufacturing issues. In other words: the business is breaching contract by charging me for a different service than I’m getting. Although, given the clear scope of coverage, proof of malfeasance is justification to both refuse payout and ban the customer. However, if I’m paying $5/m for unlimited coverage, I expect unlimited coverage. That rate is expected to cover idiots that keep their Playstation on a fireplace, and perfect people that never move the device from a cool location away from vibrations and interference. Again - if I get kicked after the first failure, that’s failse advertising. Of course there are people that will microwave their device for fun and demand a replacement - the rate should include those people, or the contract should not offer unlimited coverage. Businesses are free to not offer unprofitable coverage, but consumers have an economic right to demand that businesses honor contracts. I’d argue that consumers also have a right to accurate advertising - if the “unlimited coverage” plan has fine text that says “manufacturing issues only”, well, that’s not really above-board.
- briandear 9y ago
  Totally agree; the problem of insurance is one of contract law. Most people denied claims are denied legitimately based on the contract they signed. However, there is the perception that claims are denied unfairly because there is a disconnect between what you thought you signed with what you actually signed. I saw this every day when I was a catastrophe claims adjuster with Farmers Insurance during Hurricane Ike that demolished a good part of the Texas/Louisiana coast. I actually had a customer threaten to shoot me because I couldn’t write a check for a water damaged wood floor despite writing a big check to replace the roof. The actual source of the water damage wasn’t the roof, it was the floodwater. So while the walls from the roof downward were covered because that damage was from the seepage from the damaged roof, the floor damage was entirely from the flood. (It was a two story house so the water from the roof seeped through the walls from the attic and leached downward into the drywall, while the floor downstairs was covered in a pool of water from the floor. The point is the homeowner thought he was covered despite there being an extremely clear flood exclusion for that particular policy. I could have been really strict and only covered the walls down to the flood line, but since the walls were a total loss either way, I had the flexibility to cover the walls all the way to the floor. I saw this misunderstanding again and again when it came to roofs. A 20 year roof that is 10 years old is only covered at a fraction of replacement cost because it only had 10 years of value remaining. Those were uncomfortable situations for me however, the homeowner, when buying them policy could have bought a replacement cost add-on, but they wanted to save money so they got burned when they needed the coverage. Insurance agents are a HUGE part of the problem – is claims adjusters had to be the “bad guy” and break the news that their policy didn’t cover what they thought it did. I was the one getting harrassee when all I was doing was following the contract. I did my best to lean on the side of the homeowner, but all of my payouts had to be supported by detailed measurements, photographs and Xactimate estimates. A nasty business that was. I barely lasted a year before I burned out.
  - s73ver 9y ago
    I think it is these "pick and choose" exclusions that have no actual sense to them. Of course a homeowner's insurance policy should cover flood damage to a floor. The floor is part of the home, isn't it? But no, the company decides to pick and choose, and they never really call attention to it. This is why the ACA came up with the "Essential Health Benefits" list. There were so many things that, common sense would tell you should be covered, but insurance companies would exclude for no viable reason (making more money or not having to pay out claims are not things I consider "viable reasons" in this context). You'd buy insurance, only to find out it wouldn't actually cover things that people would want to use it for.
digikata 9y ago
All insurance companies have the temptation to disqualify claims to improve profits. The nature of the problem is that when you buy insurance, you are disconnected in time from the point where you might need to make a claim against that policy. And it is only when you make the claim that you find out how nice or terrible that company is at actually delivering the product you've been buying. There is a better way than just purchasing a policy and hoping. E.g. in CA, you can inform yourself about various home insurance companies before you buy. By looking at the data the CA Dept of Insurance publishes, you can see the ratio of claim complaints to policies. In some lines of insurance like healthcare via employee benefits, you aren't the person deciding on the insurance company - and that definitely leads to problems...
golemotron 9y ago
The easiest way to see that health insurance is not pure insurance is to notice that if your auto insurance behaved like health your gas, oil and windshield wiper replacements would be reimbursed also.
heisenbit 9y ago
The biggest reason for the social redistribution component is the pesky issue of age. Old people seem to consume a lot more health services. People when born also do but are taught to consume less. Somehow they forget when they get older... The problem would not exist to this extent if there were lifelong contracts. Even in places where they are common the premiums are not reflecting the cost of the age cohort but have some actuary life insurance component to them. Eventually one has to pay in what one is statistically likely to consume and that is easier when younger. So even in a totally capitalistic system while earning one pays for ones future old age risk. The US system is an outlier as the old age risk is socialized.

jogjayr 9y ago

> Is a company that badly off if they need to write down the cost of a building if it gets burned down? That means a company has to always keep cash in reserve against the off-chance of its building burning down just because insurance can't be trusted. That's money that can't go into expanding the business and creating additional jobs. Imagine the overhead of this parked money across thousands of businesses. Not to mention a lot of startups or young businesses can't have that sort of cash position, which means it becomes another barrier to starting businesses. It would be a major impediment to the economy.

emilecantin 9y ago
Even worse, if you have to account for that possibility, why buy insurance in the first place?

losteric 9y ago

I think fair and transparent business contracts are a consumer right. Insurance is statistical in nature, and contracts should be required to explicitly outline the scope of coverage. If I’m paying $5/m for coverage of manufacturing issues with my Playstation, I expect any manufacturing issues to be covered. I would also expect an extremely unlucky customer to receive multiple device replacements without any change of premium - because the contract and price should reflect the expected failure rate of the device (plus overhead + profit). In that example, it should be illegal to boot an honest customer after the first failure… the only reason to do so would be because the insurance company set an artificially low rate that doesn’t reflect the ammortized rate of manufacturing issues. In other words: the business is breaching contract by charging me for a different service than I’m getting. Although, given the clear scope of coverage, proof of malfeasance is justification to both refuse payout and ban the customer. However, if I’m paying $5/m for unlimited coverage, I expect unlimited coverage. That rate is expected to cover idiots that keep their Playstation on a fireplace, and perfect people that never move the device from a cool location away from vibrations and interference. Again - if I get kicked after the first failure, that’s failse advertising. Of course there are people that will microwave their device for fun and demand a replacement - the rate should include those people, or the contract should not offer unlimited coverage. Businesses are free to not offer unprofitable coverage, but consumers have an economic right to demand that businesses honor contracts. I’d argue that consumers also have a right to accurate advertising - if the “unlimited coverage” plan has fine text that says “manufacturing issues only”, well, that’s not really above-board.

briandear 9y ago
Totally agree; the problem of insurance is one of contract law. Most people denied claims are denied legitimately based on the contract they signed. However, there is the perception that claims are denied unfairly because there is a disconnect between what you thought you signed with what you actually signed. I saw this every day when I was a catastrophe claims adjuster with Farmers Insurance during Hurricane Ike that demolished a good part of the Texas/Louisiana coast. I actually had a customer threaten to shoot me because I couldn’t write a check for a water damaged wood floor despite writing a big check to replace the roof. The actual source of the water damage wasn’t the roof, it was the floodwater. So while the walls from the roof downward were covered because that damage was from the seepage from the damaged roof, the floor damage was entirely from the flood. (It was a two story house so the water from the roof seeped through the walls from the attic and leached downward into the drywall, while the floor downstairs was covered in a pool of water from the floor. The point is the homeowner thought he was covered despite there being an extremely clear flood exclusion for that particular policy. I could have been really strict and only covered the walls down to the flood line, but since the walls were a total loss either way, I had the flexibility to cover the walls all the way to the floor. I saw this misunderstanding again and again when it came to roofs. A 20 year roof that is 10 years old is only covered at a fraction of replacement cost because it only had 10 years of value remaining. Those were uncomfortable situations for me however, the homeowner, when buying them policy could have bought a replacement cost add-on, but they wanted to save money so they got burned when they needed the coverage. Insurance agents are a HUGE part of the problem – is claims adjusters had to be the “bad guy” and break the news that their policy didn’t cover what they thought it did. I was the one getting harrassee when all I was doing was following the contract. I did my best to lean on the side of the homeowner, but all of my payouts had to be supported by detailed measurements, photographs and Xactimate estimates. A nasty business that was. I barely lasted a year before I burned out.
- s73ver 9y ago
  I think it is these "pick and choose" exclusions that have no actual sense to them. Of course a homeowner's insurance policy should cover flood damage to a floor. The floor is part of the home, isn't it? But no, the company decides to pick and choose, and they never really call attention to it. This is why the ACA came up with the "Essential Health Benefits" list. There were so many things that, common sense would tell you should be covered, but insurance companies would exclude for no viable reason (making more money or not having to pay out claims are not things I consider "viable reasons" in this context). You'd buy insurance, only to find out it wouldn't actually cover things that people would want to use it for.

digikata 9y ago

All insurance companies have the temptation to disqualify claims to improve profits. The nature of the problem is that when you buy insurance, you are disconnected in time from the point where you might need to make a claim against that policy. And it is only when you make the claim that you find out how nice or terrible that company is at actually delivering the product you've been buying. There is a better way than just purchasing a policy and hoping. E.g. in CA, you can inform yourself about various home insurance companies before you buy. By looking at the data the CA Dept of Insurance publishes, you can see the ratio of claim complaints to policies. In some lines of insurance like healthcare via employee benefits, you aren't the person deciding on the insurance company - and that definitely leads to problems...

golemotron 9y ago

The easiest way to see that health insurance is not pure insurance is to notice that if your auto insurance behaved like health your gas, oil and windshield wiper replacements would be reimbursed also.

heisenbit 9y ago

The biggest reason for the social redistribution component is the pesky issue of age. Old people seem to consume a lot more health services. People when born also do but are taught to consume less. Somehow they forget when they get older... The problem would not exist to this extent if there were lifelong contracts. Even in places where they are common the premiums are not reflecting the cost of the age cohort but have some actuary life insurance component to them. Eventually one has to pay in what one is statistically likely to consume and that is easier when younger. So even in a totally capitalistic system while earning one pays for ones future old age risk. The US system is an outlier as the old age risk is socialized.