Is the insurance system a scam?

To clarify, I was speaking specifically of auto insurance. If you want to require people to insure against liability of damage to others, that is fine; what I object to is private companies profiting by a government mandate that forces consumers to buy any commercial product. Government mandated products should be administered by non-profit or government entities, free of the profit motive. I can think of no other commercial product that is compulsory by law. It is wrong, and antithetical to the free market. Thje only way to mitigate this is to remove the product from the free market all together.

Health insurance is TOTALLY mandatory, for all intents and purposes. Economic coercion is just as coercive as legislated coercion.

Your point, while true, is actually very stupid.

Insurance companies provide a service, the elimination or reduction of risk. Competition keeps their premiums relatively low…but of course they make money, or else they’d go bankrupt. That doesn’t mean insurance is bad or “corrupt” though. It provides a service.

If insurance on your house costs $200 but the “fair” expected value is $180, does that mean it’s a ripoff? Suppose your house burns down? Do you honestly expect a business to provide something without a profit? If you do, then you’re just ignorant.

It’s like saying that it’s stupid to buy cars because “everyone knows the cars only cost $10,000 to make but they charge $12,000. It’s totally corrupt!”. Duh, OK, walk then.


Is the insurance system a scam?

Of course. So is the lottery. So is the stock market. So is the futures market. So is the banking system.
All involve a transfer of money from the ignorant and the trusting to the rich.

But these scams are fairly benign until the government gets involved, then the con game becomes vile. In example…

In Alabama our upright citizens and petty state politicians and some of our more interested insurance companies got together and decided that all owners of automobiles would be fined $ 500.00 if they were caught riding around without papers proving that they had liability insurance. How nice. Now those slackers riding around without insurance would have to pay up to the insurance companies or else pay the state heafty fines and court costs. Win win win, right? Well here is what happened…

In short order a hundred thousand people who couldn’t afford car insurance got car insurance. Ten thousand people more who were driving about but couldn’t afford car insurance were fined five million dollars for not being able to afford car insurance. Many of the people who bought insurance and then couldn’t keep up the payments were fined by the courts because they were dropped for non-payment and got caught by the fuzz. Getting to work became a problem if you happened to be in jail for non-payment of a fine and the other brothers that you know can’t drive because they don’t have insurance.

A compulsory payment, enforsed in effect by jailtime for non-payment, in the amount of one hundred dollars or so a month for liability insurance is maybe 1% of the income of the rich while it is more than 10% of the more basic income of the poor.

All high fines and court costs are discriminatory. And all men of this republic are not being treated equally.

Today it was announced by the State of Alabama that they will not issue new license tags for cars to the uninsured.


Milum, your point is just plain wrong IMHO. Why should law abinding drivers be a risk from the uninsured writing their property off, or killing or injurying their loved ones in an auto-wreck without the prospect of monitary compensation from the rich?

The valid point is surely that popular US opposition to enough taxes to run, for example, even a decent public transport system is what really decriminates against the poor and polarises US society. If that was fixed those who cannot afford to legally own and run a car to get to work can still get there cheaply and efficiently.

To go the other way around as you suggest is to fix the symptoms not the route cause and would put other citizens at risk unjustifiably.

Other benefits for example would be to be able to increase fuel taxes to encourage better fuel economy in the US without hitting the poor. Basically from what you say millions of US people cannot afford to run a car now but the transport system you have mandates that they need one to live. Doh!

Don’t be absurd. It is not “economic coercion” for a company to offer to cover you for only certain risks in exchange for periodic premium payments. It is a service, a hedge against risk, that you can take or not take at your discretion. That it is generally wiser to take the hedge rather than pass it by does not in any way make the offering of insurance “coercive.”

But that was exactly my point. Any honest gambling game favors the house. Anyone who whines about the fact that insurance companies make a profit is ignorant of this basic truth.

OK, sorry then. Your point is good. I can’t understand why people can’t understand your point!

bri1600bv, I work for a non-profit health insurance company. The way it works is that the state mandates certain things about how we run, who we have to insure, and so forth.

Being non-profit does not mean that we can’t operate in the black.
And, my two cents of auto insurance at any rate is this: yes, it is a scam. Actually, I’ve probably gotten back about 60% of everything I’ve put into it (I had a small accident which required about 1,500 of repair, with a 500 deductible, and I’ve only had my car for about two years). But, I want to know why it cost me 1,500 to replace the hood on a car that only cost me 6,000 to begin with. In that sense, I think it is a scam. Insurance has enabled basic auto repair costs to rise to the point where one needs insurance in order to afford them.

Well, I think the point about repair costs is an issue with replacement parts, not insurance. I don’t think insurance distorts the replacement market. It’s not like they’re making a profit off of it.

As for getting out what you put in, I’ve paid insurance for 10 years or so and have taken out about 10% of what I put in. And that 10% was through uninsured insurance, where the person who hit me had no insurance.

But that doesn’t make it a bad bargain.

If every year you have a 1 in a 1000 chance of costing the insurance company 100,000 and they charge you what, $300 a year, then even if you don’t claim, it’s not a ripoff. You have to pay your money and not claim cause there are a few people out there that will incur huge charges and take out much more than they ever put in.

If you buy life insurance and don’t die…does that mean it was a rip-off?

Yes, I realize not for profits are not all that different from traditional insurers. I think people mistakenly assume “insurance is a ripoff” b/c insurers make a profit. They don’t make much of one, first off, and competition insures that prices are reasonable.

If you cannot afford car insurance, then you * cannot afford to drive*. If you own a car, then you have a personal responsibility to every other citizen on the road that you will not unduly endanger their lives. If I were involved in a car accident through no fault of my own, then I would be damn sure that your going to be the one to pony up. If you don;t have insurance, you better be able to prove you have an extra million or so lying around to pay for hospital bills and the like.

Who is allowed to drive is fortunately determined by social contract, not by you. If you think we uninsured should not be allowed to drive, then fine, we won’t let you drive either, insured or not! In the USSA, you do not have to be insured to drive in any of the states, as long as you are a resident of NH, WI, TN, CA or any of the other states that do not require insurance. (Of course the intelligent person will be a resident of either NH or TN, the only two states without state income tax.) This is guaranteed by the full faith and credit clause of the Constitution as well as the interstate commerce decisions. If a particular state or one of its residents doesn’t like that, tough.

In any case, the compulsory insurance of most states specifies a minimum liability coverage of around $55,000. This is around half the cost of a college education. So why should a person borrow to pay for a college education and carry car insurance when he could borrow in the case of $55,000 in liability from an accident? You are entitled to your irrational behavior, but include me out.

jimbino—if you ever get caught driving in Louisiana without insurance you can bet you will be walking very shortly. The authorities don’t play around at all. I got pulled over for an expired inspection sticker right in front of my office. I’m in the insurance business (life, health, disability etc. NOT property or casualty) but I could not produce my certificate of insurance for the officer. I had every certificate which was issued to me but the last and current one. I asked the officer if I could go into my office and call my agent to have him fax the document to me to show proof of insurance.

No deal! I was asked for the keys and they had my vehicle towed in about 10 minutes. So not only must you have insurance you better be able to provide proof on demand. I sincerely hope you don’t have any accidents while unisured. If you do you could be paying for it for the rest of your life. In my insurance career I have seen million dollar settlements bankrupt a few people because they either did not have insurance or did not have adequate insurance. If you want to run that risk then you are a selfish person indeed.


Alabama is one of our more fascist states and it’s good to know they only tow away your car nowadays instead of just shooting you for DWB. I have the advantage of being an attorney, and it gives me great joy to force the cops to respect the law and to sue them personally under USC 1983 for violating my civil rights and the civil rights of others. I am only single person, but I feel it is my Darwin-given duty to use my talents and the skills gained at such great gummint expense to frustrate the gummint at every turn. History has shown that it sometimes works, as it did for Luther, and sometimes doesn’t, as in the case of Jon Hus.

Yes, I have been stopped by cops in TX who asked for insurance documents. I showed them my TN driver’s license and read them the law. They phoned in to check on it and had to let me go, of course.

If they don’t cooperate, you can sue them. Cops, like prosecutors and judges, have full or partial immunity, and they usually win (unless their behavior is caught on video tape!), but in winning, they often lose, to the extent that they still have to pay several thousands of dollars in legal fees to their lawyers. Of course, you can gain great tactical advantage by suing the city that employs them for failure to instruct them in the law, and the city has no such immunity from civil rights violations.

The last cop I sued, the head marshal in the town, claimed immunity and won. After paying his legal bills, he was fired from his job and his wife divorced him. Amerikans have to stop being such wimps and take on the gummint! Iraqis know what I mean!

Of course, you’ll be suing the city for not letting you go. The city has insurance to protect themselves against this type of incident. So, in essence, you’ve probably helped to raise that city’s premiums and thusly made the need to raise taxes. It’s attorneys like this that make additional insurance needed as well as tort reform.
And, by the way, how did you take on the “gummint” by destroying one person’s life? Real nice. :rolleyes:

Whether you get beat on the head in LA or have a broomstick rammed up your ass in NYC, you need to sue big time. It is the city’s problem that it wastes money on insurance. In any case, taxes need to be bumped up so that the citizens in a democratic society will feel the pain personally and get rid of the abuses.

As far as taking on gummint by taking out a cop is concerned, a cop is usually my only contact with gummint in the course of a year and is definitely the only contact a young black man has with the gummint, unless he’s in prison. Until I can make GWB feel the pain of his civil rights abuses, I will see that individual cops pay the price for the misguided policies of the gummint.

The Iraqis understand this in spades, for which I congratulate them. The will make the citizen-oppressors of the USSA pay, starting from the ground up, as in “ground zero.” This is proper, since in a so-called democratic society, the people are responsible for the sins of their government.

Thus Amerikans should pay for any sins of GWB, whereas I hold Iraqis generally blameless for the sins of their dictator.

I’m sorry I’m mistaken jimbino.

I mistakenly thought you lived in the USA but you must be from the bizzaro universe of the USSA instead. I’m an american so when I see you refer to yourself as an amerikan you must be from the bizzaro universe.

Insurance is not a scam. Insurance companies are selling a product: risk mitigation. They recognize that the Utility of insurance premiums is, to the average person, less than the utility of not having to plan for disasters. For this valuable service, the insurance company charges a fair premium.

They are the opposite of casinos. Both run a ‘house’, but in the casino’s case what it is selling is risk itself. Wager a small amount of your worth for a small chance of hitting it big. In exchange for this valuable recreational activity, the house charges a fee.