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Post by FunkySwerve on Sept 16, 2011 0:22:04 GMT
To be less glib, insurance serves an economic purpose, and increases net efficiency. There is nothing devious or suspect about it - only the companies that try to squeeze every last cent of profit they can out of it, absent some regulation. The above-mentioned antitrust exemption IS a huge part of the problem - it is the ONLY industry to have one other than baseball.
If you want to understand why insurance is a positive value on its own, you need to understand something about humans - we are classically conservative - we do NOT like radical change. It was on that principle that Burke predicted the outcome of the French revolution before it happened, in his Reflections on the Revolution in France - a seminal work illustrating classical conservatism.
Insurance helps to guard against radical change, by spreading costs out over time. Net expenditure is about the same, but does not come in huge spikes in response to emergency. This leveling effect is in itself a net gain, and that is the reason we've had insurance as long as we've had currency - longer, even.
More technically, insurance is integral to any system of exchange, and is conceptually similar to every single financial transaction we make, in which risks are assumed by one party or another. The concept of assumption of the risk is a core building block of our contract law. Insurance is simply another kind of risk allocation, which we see in every single human endeavor - risk is part and parcel of the costs we weigh when making cost-benefit decisions in our daily lives.
The notion that insurance is somehow suspect is profoundly incorrect.
Funky
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Post by uncanny on Oct 4, 2011 8:54:38 GMT
The notion that insurance is somehow suspect is profoundly incorrect. Funky You've never taken insurance in Ireland I take it? Here in Ireland, for example, motor insurance is the bane of any drivers life. It's legally required (not an issue necessarily), but because the insurance firms know this, they actually use that fact aggressively when you try negotiate better terms. To give you an example, someone with 5 years clean driving record but under 25 will pay around €5000 per year insurance at a minimum on a low value, low performance car. This means that most students will take the cheapest junk they can find - which in turn increases the mess caused in accidents (seatbelts that barely work, no airbags, etc). They also refuse to go to court when there is a disagreement on the accident. There is no inspection on cars - ever - so for example, if I one day reversed into a pole and got a huge dent in my boot, then you one day bumped my bumper I would claim the damage was all your fault - and insurance companies will pay out rather than argue a point, this is on record as costing drivers tens of thousands because more payouts means more costs. Companies have actually cited insurance cost as a reason they have left Ireland in the last 5 years - instead they go to Germany where taxes are ludicrously high. Taxes are preferred to insurance? Mad. You might say, ok so more payouts more costs sounds fair. Realise then, that the insurance industry in 2009 made around €9bn on motor insurance in Ireland, for total payouts of under €600 million. That's a return of more than 9 times (ok, before the economy experts jump in, I know that's not quite accurate; the point is they are making more than they claim to be). Right now I pay about €500 per year on a 6 year old diesel saloon. That's not too bad, though if I renewed with last years insurance company it would be over €1400. Argh.. sorry I'm rambling. My point is, it's not all altruism and nothing to suspect about insurance; it may be different in the US (I don't live there thus don't know), what I can say is that making it a legal requirement here in Ireland has made it all about gouging the consumer and paying out instead of questioning claims.
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Post by gandoron on Oct 4, 2011 12:34:30 GMT
Uncanny,
Car insurance is required in the US, but what you describe in Ireland has not happened here. It sounds like the basic problem in ireland is not enough competition in the insurance business. Seems like a great business opportunity. I am surprised that there isn't more lower priced alternatives. Without any knowledge of the industry, insurance seem like a relatively low barrier of entry industry, requiring mainly government approval and $ backing...compared to power or telecom for instance.
Are the number of insurance companies somehow limited by the government or is there collusion between the companies to keep prices high? As silly as it sounds, it might be a situation where more (or correct) government over site is needed.
-Graham
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Post by uncanny on Oct 4, 2011 15:44:44 GMT
Uncanny, Car insurance is required in the US, but what you describe in Ireland has not happened here. It sounds like the basic problem in ireland is not enough competition in the insurance business. Seems like a great business opportunity. I am surprised that there isn't more lower priced alternatives. Without any knowledge of the industry, insurance seem like a relatively low barrier of entry industry, requiring mainly government approval and $ backing...compared to power or telecom for instance. Are the number of insurance companies somehow limited by the government or is there collusion between the companies to keep prices high? As silly as it sounds, it might be a situation where more (or correct) government over site is needed. -Graham Well, that's where it gets interesting. The Tanaiste (um... deputy prime minister I guess in political terms) at the time this was signed in as law was married to the head of the insurance board. The government oversight, as it were, is mainly concentrated on health and home insurance (these are reasonably priced I might add). There is a fair amount of competition; so there is no real economical reason. Part of the problem stems though from the old Irish way of business: "I don't care because I don't own the company". I'm not kidding: you can be in a shop buying €6'000 worth of stereo equipment, ask for a 1% discount for cash with the offer to go elsewhere and generally speaking your offer to go elsewhere will be heartily accepted by most high street companies. There are some companies that are now taking advantage of this: Quinn healthcare for example. They're required to pay a stippend to the other health insurer because they're taking all their customers (!!). BMW just entered the market here for insurance as well; so I'm hoping that helps in general (their practice in some countries is to buy a contract from an insurer and resell it, typically ending up to 50% cheaper than the insurer themselves). I kid you not, the following is a discussion I had when I first came here about 11 years ago: me: "Hi, I'd like insurance please on a 1990 Ford Sierra. Car value £1100". I proceeded to hand over details like my id number, bank name, underwear size, how many times I went to the toilet in a given day, etc. Bear in mind, clean license, 5 years traceable driving history, etc. them: "Sure, that'll be £5600 so. Would you like to give me your credit card details or will you post a cheque?" me: "Sorry?!? No thanks, I'll wait till I get something cheaper" them: "Ah, sure no problem. But remember if you're caught more than twice without insurance your license gets taken away. And all insurance companies charge a 25% surplus for those sort of drivers when they get their license back. I can also guarantee you you won't find a cheaper price until you're over 25". I ended up taking the bus until I turned 25. First insurance quote? Around £3000 for the year. That was back before the Euro came in, so remember the Irish pound was 1.27 times the Euro... Ah well. It's a funny world.
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Post by FunkySwerve on Oct 4, 2011 16:38:36 GMT
Argh.. sorry I'm rambling. My point is, it's not all altruism and nothing to suspect about insurance; it may be different in the US (I don't live there thus don't know), what I can say is that making it a legal requirement here in Ireland has made it all about gouging the consumer and paying out instead of questioning claims. You missed my point. I was describing and defending the concept of insurance. What you are complaining of is the bad behavior of companies (who happen to sell insurance) lacking either proper competition or proper regulation. In the US, with regard to health insurance, they're lacking both, since they are exempt from antitrust laws. Nothing you said indicates we should be at all suspect of the concept of insurance - and in fact, we should not, as it's integral to any financial system. What we SHOULD be suspect of is companies, who primary motivation is profit (by law as well as by market forces, for public companies in the US). So, to address your example, what regulations are there that pertain to insurance in Ireland? I'd also be curious to know what makes you think it's the cost of insurance that's causing them to leave - what specific facts? Generally, in that situation, a lower-cost provider would typically enter the market. It's a suspect claim more generally as well, since there are other powerful forces driving the flight of companies from countries with high labor costs as a part of the process of globalization. Funky
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Post by FunkySwerve on Oct 4, 2011 16:44:28 GMT
Uncanny, Car insurance is required in the US, but what you describe in Ireland has not happened here. It sounds like the basic problem in ireland is not enough competition in the insurance business. Seems like a great business opportunity. I am surprised that there isn't more lower priced alternatives. Without any knowledge of the industry, insurance seem like a relatively low barrier of entry industry, requiring mainly government approval and $ backing...compared to power or telecom for instance. Are the number of insurance companies somehow limited by the government or is there collusion between the companies to keep prices high? As silly as it sounds, it might be a situation where more (or correct) government over site is needed. -Graham Well, that's where it gets interesting. The Tanaiste (um... deputy prime minister I guess in political terms) at the time this was signed in as law was married to the head of the insurance board. The government oversight, as it were, is mainly concentrated on health and home insurance (these are reasonably priced I might add). There is a fair amount of competition; so there is no real economical reason. Part of the problem stems though from the old Irish way of business: "I don't care because I don't own the company". I'm not kidding: you can be in a shop buying €6'000 worth of stereo equipment, ask for a 1% discount for cash with the offer to go elsewhere and generally speaking your offer to go elsewhere will be heartily accepted by most high street companies. There are some companies that are now taking advantage of this: Quinn healthcare for example. They're required to pay a stippend to the other health insurer because they're taking all their customers (!!). BMW just entered the market here for insurance as well; so I'm hoping that helps in general (their practice in some countries is to buy a contract from an insurer and resell it, typically ending up to 50% cheaper than the insurer themselves). You're contradicting yourself here - either there is sufficient competition in the market, and the entry of BMW will have no effect, of the market is sufficiently competitive, and it will help. You can't have it both ways. From what you say, it sounds likely that there are some extremely anticompetitive laws in place - both the connections of the Tanaiste and the stipend requirement scream that. That problem isn't with insurance; it is rather a much broader, more general problem called regulatory capture - when an industry attains undue influence over those who craft laws regarding it. Inevitably, those profit-seeking entities will craft regulations to maximize their own short-term profits at the expense of everyone else (their competitors, their customers - the public at large). Funky
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Post by wollstonecraft on Oct 4, 2011 17:23:35 GMT
I dont know how health insurance works in the US, and I have no real information to add to this discussion, except an anecdote:
When my daughter was born, we went to a brand new hospital where my wife was induced, had an epidural and C-section, spent 3 days in a private room (we ordered satellite TV and radio) and went home early against the doctors' advice. In the first 3 weeks after the birth, we had home visitations from the provincial nurses who coached us on breastfeeding and nutrition, regularly examined my wife's incision and finally removed the stitches. Overall, it was the best health service we had ever recieved.
Now I dont know what that would cost in the US, but here in Canada, our bill was $24. I love my health insurance. Seems like a no-brainer to me.
/pointless comment
-WSCraft
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Post by tomaan on Oct 4, 2011 19:18:53 GMT
I dont know how health insurance works in the US, and I have no real information to add to this discussion, except an anecdote: When my daughter was born, we went to a brand new hospital where my wife was induced, had an epidural and C-section, spent 3 days in a private room (we ordered satellite TV and radio) and went home early against the doctors' advice. In the first 3 weeks after the birth, we had home visitations from the provincial nurses who coached us on breastfeeding and nutrition, regularly examined my wife's incision and finally removed the stitches. Overall, it was the best health service we had ever recieved. Now I dont know what that would cost in the US, but here in Canada, our bill was $24. I love my health insurance. Seems like a no-brainer to me. /pointless comment -WSCraft Not sure about pregnancies, but my son broke his leg a few years back when he was 2. Ambulance ride + surgery to set the bone + 3 nights in the hospital = $18,000 (USD) billed to my insurance company. I paid close to $4,000 (USD) out of pocket. People try to justify it by saying "quality of care", but I find it hard to believe you can effectively set a broken bone for under $10,000 (USD)...much less $18,000 (USD). I mentioned this before but I'll say it again: the problem isn't the availability of insurance, it's the cost of health-care delivery.
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Post by eternal on Oct 5, 2011 19:03:19 GMT
My twin daughters were two months premature, and were delivered by emergency c-section, one of my daughters had to be resuscitated immediately after birth, $600 charge not covered by insurance.
They then had to spend almost two months in intensive care, each individual total charges were over $600000 each, so over $1.2 million. We had to pay our full deductible and co-pay, which I believe was around $6000, plus all other non covered charges which were around $3000. I was one year away from graduating college at the time and was working at a job that payed $10.60 an hour.
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Post by gandoron on Oct 5, 2011 20:48:10 GMT
For everyone that thinks insurance is high. Eternal just gave a perfect example of where a lot of that money goes. I think pre-natel and end-of-life costs are basically the highest payout-vs-incoming for health insurance companies.
Uncanny, you seem to compare your insurance to the cost of the car. I think this is incorrect. In the US, the only car insurance that you must have is liability...basically to cover you hurting someone else medically and their car. This has nothing to do with your vehicle (or value) directly, the vehicle (and your age, record) is just a proxy to how much of a risk you present to hurting someone else. I'm not sure what type of insurance is offered in Ireland or what type you were trying to get, but I'm pretty sure that the liability portion was pretty high.
While it doesn't always make sense in a micro-evaluation, on a macro level age 25 is a pretty decent cutoff where the risks start to go down significantly.
-G
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Post by FunkySwerve on Oct 5, 2011 22:17:42 GMT
That's fair, but 5k euros is a fairly outrageous sum for insurance - that's over 6k US dollars by my last recollection of the exchange rate. In the US, unless you have accidents in your history, insurance runs around 2000 for that age category, or less, depending on the coverage, education, credit rating, accident history, and so on.
Funky
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Post by uncanny on Oct 6, 2011 13:09:55 GMT
That's fair, but 5k euros is a fairly outrageous sum for insurance - that's over 6k US dollars by my last recollection of the exchange rate. In the US, unless you have accidents in your history, insurance runs around 2000 for that age category, or less, depending on the coverage, education, credit rating, accident history, and so on. Funky But that's the point (I might even have the quote still somewhere in the attic - if I do I'll scan and post). By the way, that's not 5k EURO that's 5K in Irish POUNDS, which is more converted to dollar rate. With BMW entering the market, this means that outside underwriters - eg, from Germany and the UK - will be introduced to the spectrum but under the terms of the BMW agreement. BMW did this back home in South Africa as well, when insurance companies ratcheted up fees because of "fears" that the BMW's were more prone to hijacking (around the 90's). They weren't, even old conkers are as prone, but that's beside the point. In terms of regulatory compliance, there's nothing that governs cost. People have been lobbying the government for years to get involved - this lead to the dreaded points system which charges you 2 points for DUI and up to EIGHT (though usually FOUR which is still a lot) for driving without valid insurance for the driver in question - bear in mind that even if the car is insured, if you are not listed it's not valid. Get 12 points and you can't drive for 3 years. Oh, and no discount if you have no points - just more costs if you do (I believe you have the points concept in the US as well though?) As to the statement that Funky makes about insurance necessity: I agree. Many a business would be in deep trouble without insurance to help shoulder the heavy hits; but this does not mean we should not be suspicious of an industry that makes money hand over fist despite economical downturns. Insurance is a needed factor of both life and business, especially in the US where people WILL sue you for anything. But to write it into law that insurance is required without adding the safeguards that prevent gauging the consumer.. should be criminal.
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Post by shardelay on Oct 6, 2011 14:38:21 GMT
That's fair, but 5k euros is a fairly outrageous sum for insurance - that's over 6k US dollars by my last recollection of the exchange rate. In the US, unless you have accidents in your history, insurance runs around 2000 for that age category, or less, depending on the coverage, education, credit rating, accident history, and so on. Funky This also completely varies from state to state. I moved from MN to NJ about 7 years ago when I was 27 with no previous accidents on any record. I was leasing a new 3 series and my insurance went form about 70$ a month to 350$ a month purely based on the state.
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Post by Lythe Featherblade on Oct 8, 2011 17:59:12 GMT
straight car insurance where I live (BC, Canada) is mandatory, and there is a provincial provider that you must get your primary insurance from, with optional stuff available through alternate providers. Recently they introduced a change that increased what was mandatory (possibly to squeeze out the alternate private insurers?).
Insurance rates are based on where you live, and if you are accident free (accidents deemed not your fault, like when someone ran a red light and hit my car didn't count against me) then you get a 5% discount for each year of driving (capping at 43%). If you are in an accident, you go back down a number of steps (depending on where on the discount chart you are), capping at 205% for really bad drivers.
Between the two my insurance started around $2000 a year (first car 7 years after getting my licence, 35% discount, new driver would have been ~$3000), living in a densely populated area (higher rates). Right now (rural, cheaper base rate area, 43% discount) I just bought a 2-year old car and insurance was under $1200. My old car is closer to $800, and when I waived collision on a really old junker, it was even cheaper than that (I'd have payed more in collision over 2 years driving than the vehicle was worth)
The only trick to the system was that it pays to get your license as soon as you can, age is irrelevant to calculations and the system assumes that if you have your license, you are driving.
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Post by eternal on Oct 10, 2011 17:22:17 GMT
On the auto insurance side, I drive a motorcycle, $120 a year for insurance ..... win.
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