Friday, April 07, 2006
Insurance as Odds-based Extortion
Insurance is a way of hedging bets against disaster. The earliest forms of insurance were considered a kind of investment. Not for the people or companies seeking it; for those extending the insurance coverage. This is where all that stuff about actuarial tables and statistics comes in. Essentially, all of those figures are designed to give the insurance company an edge, a profit from the money paid to them in premiums when balanced against the money they will pay out in claims.
I've never had insurance because I could never afford it. I've worked in jobs that did not provide medical benefits. I don't have children so I never prioritized life insurance in my budget. Perhaps because I've always lived on the edge of financial disaster and never had a serious (expensive) medical problem, I've always viewed insurance as a form of gambling rather than as a necessary protection or precaution.
2005 saw record high profits for insurance companies, despite serious hurricane damage and claims. This is apparently because of the gradual shift from group and job policies to individual policies. Like retail versus wholesale, there is a greater profit margin selling individual policies. Not having insurance becomes an increasingly hazardous option, an invitation to family financial disaster for even minor health problems.
This is where I think the use of the term "extortion" becomes a proper description of insurance. If you have no future financial security for your family without it, you don't really have a choice about purchasing it. "Itud be a bad fing 'f yer leg got broke, yeah? Wha'd yer famly do then? I's jus' sayin' itud be a shame, a cryin' shame." (Muscle-boy actuaries, hmm...)
I'm trying to suggest there is a different way of viewing insurance than as the "responsible" thing to do, the only thing to do. Everyone makes their decisions about this based on their circumstances and needs. If society as a whole thinks the majority of its workers are faceless, interchangable and disposable, then fair enough: Leave insurance to the individual and damn those who can't afford it. This is capitalism, dammit, not some free lunch.