I am wondering if their are any “hidden” subsidies that the insurance industry receives from the government, particularly in Canada, but anywhere is fine. By hidden subsidies I don’t necessarily mean direct cash, they could be tax breaks for example. I know they received some money to keep them afloat at the beginning of the “Great Recession”, but I don’t really know what sort, and in what form. Nor do I know if they continue to receive such government support. I am hoping to find something that is specific to the Insurance industry itself.
“Insurance industry” is amazingly broad. Health? Life? Personal Auto?
I work for a property and casualty insurance company in the US. There are no government subsidies for us, unless you use some definition of “subsidy” that is beyond my comprehension.
Property is what I was mainly thinking about. I don’t want an overly broad definition, but I was thinking of such things as ethanol produced from Corn, and the subsidies that are given to the agricultural industry (guaranteed prices etc)
One could argue that the requirement that every car be at least minimally insured is a subsidy to the industry; not that I think that’s the motive behind the requirment. In effect it not only gives a baseline level of business to the industry but it also gives an annual/biannual opportunity to upsell every car owner in the province.
Probably the biggest advantage is the regulatory regime and complexity. Insurance gets a lot of scrutiny, moreso at the state than federal level. As a result, it’s not a market people are eager to break into.
In Canada, a Private Health Services Plan covers certain medical and dental expenses that government health insurance does not cover. If a business pays for its employees to be covered by such a plan, the payments made by the business are 100% deductible by the business, and the benefits thereby conveyed to the employees are not considered to be taxable benefits for the employees. (Take note, Canucks, as of 2012, employee group plan medical benefits paid for by the employer are no longer non-taxable benefits – they are now taxable benefits, so get your employer to switch over to a private health services plan.) The purpose of such tax breaks is to make health insurance more affordable. An indirect consequence is that private insurance companies sell more health insurance, so in a very round-about way, one might say that in Canada insurance companies are unintentionally and indirectly subsidized, but that’s quite different from direct subsidization created primarily for the purpose of assisting insurance companies.
In Ontario, Canada, the government would rather that widows/widowers and orphans not end up on the dole while the deceased’s estate goes to his/her creditors, so life insurance for which an immediate family member has been designated is usually (subject to claw-back under certain conditions) exempt from creditors. This means that people who want to preserve a nest egg against creditors sometimes invest through a life insurance company’s product rather through some other sort of financial institution. This gives a competitive advantage to life insurance companies, so one might say that in Ontario (and in other provinces that may have similar legislation), insurance companies are intentionally and indirectly subsidized, but again, that’s quite different from direct subsidization created primarily for the purpose of assisting insurance companies.
In Ontario, Canada, estates of any significant size usually will have to go through a process that used to be called probate before the land titles office or a bank will do what estate trustee/executor says. The court filing fee for this process is a small percentage of the value of the estate. Life insurance is paid out directly to the designated beneficiary, and only goes into the deceased’s estate if the estate was named as the beneficiary or if there was no beneficiary named at all. That means that upon the death of an investor, less of the investment will make it into the government’s hands if the investment was made as life insurance (with a named beneficiary other than the estate) through a life insurance company rather than some other financial institution. This gives a competitive advantage to life insurance companies, so one might say that in Ontario (and in other provinces that may have similar legislation), insurance companies are intentionally and indirectly subsidized, but again, that’s quite different from direct subsidization created primarily for the purpose of assisting insurance companies.
(Before pulling savings out of Canadian banks and handing it over to life insurance companies, take note that the federal crown corporation Canadian Deposit Insurance Corporation (CDIC) insurers most (but not all) types of deposit accounts at Canadian Banks for up to $100,000 per bank, whereas there is no such protection for funds placed with insurance companies.)
Not sure, but the US Government does assist insurers in flood insurance, and certain aspects of crop insurance. The idea being that if something is uninsurable (by private firms) the government must step in-which explains why people are able to get insurance for homes built on barrier islands.
I wouldn’t call FEMA Flood Insurance a benefit to the insurance industry; they would choose not to insure at all if FEMA didn’t cover it. The government gets it’s money for the insurance by making people pay out the ass; none of it goes back to the insurance companies. My insurance agent doesn’t even want to talk to me about my FEMA policy. Banks are the beneficiary of flood insurance, you can’t get a loan on a property in a flood plain without one.
For employment provided health or disability benefits, insurers get a huge break by state regulations being preempted by ERISA. They get to have their way with you without threat of any real sanctions.
Since you mentioned property, and flood insurance has been discussed, about the only other “special” thing I can think of in the US is TRIA (terrorism) reinsurance:
In the US, not only are insurers not directly subsidised by any level of government, they pay into a state-level “Insurance Guaranty Association” which is designed to pay claims in the event an insurance company becomes insolvent. So, they buy insurance for the insurance they’ve sold to you. Apart from that, it is up to the insurer to see to its own business and find the balance between remaining competetively-priced, reasonably profitable, and in compliance with state and federal regulatory thingies.
Whether or not compulsory auto, and now health, insurance is an indirect subsidy just because it creates a product demand is certainly a good debate. One could argue just as easily that governmental regulations and restrictions save the insurance companies from themselves and each other, and in so doing generally ensure everyone’s profitability (another indirect benefit ‘imposed’ by government). That system is imperfect, of course.
If by, “Their way” you mean, “Right to subrogate their payments irrespective of ‘made-whole’ legislation” then yeah, being a federally-regulated outfit means state-level legislation doesn’t apply to you. In my experience, most health insurance is not ERISA though. Maybe you meant something else?
Except in those provinces (eg Sask and BC) where the basic car insurance can only be purchased from the government insurance company. Far from being a subsidy, it drove the private insurers out of the lucrative auto insurance market.
ICBC does give out the equivalent of taxi-medallions to agents who want to sell the government insurance though. Which sounds like a sweet deal to me. I have to wonder why they allow a secondary market in the right to sell goverment insurance rather than issue new ones to qualified/interested parties.
That’s what I meant, also the right to a jury trial, the right to extra contractual benefits, and some other things. If you get your insurance through your employer, and you don’t work for a church organization or the government, chances are you have an ERISA plan.
Again, I don’t see evidence of many ERISA plans, but I make the claimant attorneys deal with selling the ‘made-whole’ thing to the insurers and I just wait for revised subro demands, so maybe I don’t see it because it’s not usually my problem. As for jury trials, a claimant always has a right to the jury trial. The risk to the ERISA insurer is that the jury might call BS on a bunch of the treatment and award only $4,500 of the claimed $80,000 in bills plus a couple grand in pain & suffering. Not sure what the aftermath of that looks like for the plaintiff–I suppose the insurer has to take the $4,500 and leave the P&S award alone. I have mixed feeling about the whole “made whole” thing anyway. On the one hand, it screws the non-ERISA insurer out of getting reimbursed for a loss caused by a tort, on the other hand, I hate seeing a badly smashed up claimant have to take my $100,000 check and sign it over to the healthcare provider–leaving the victim with dookie for their trouble. I’ve had amputee claimants walk away from generous settlement offers because they had no incentive to settle. Sad stuff.
If there isn’t enough insurance to pay both the injured person and the health insurance company, it seems only humane for the health insurer to take the hit. They provided health insurance for a fee, and if they don’t get their money back, well, that’s not quite as sad as someone injured in an accident not getting compensation. And, no, in an ERISA dispute, the plaintiff does not get a jury trial.
Humane? That depends on whose ox is getting gored. Theoretically, that humane thing penalizes the rest of the policyholders who ultimately absorb the company’s loss. But I do see your point, and generally agree it’s better for a lot of people to pay a little more if it means one person isn’t completely crushed.
Since we seem to be the only ones playing in this little sandbox…
We might be talking about different things. I’m talking about a plaintiff suing a tortfeasor (think car accident, because that’s where I’m coming from), and the jury in the case saying, “These are your damages, this is your award.” That number often falls short of what the subrogating insurer wants to recover, because not all of the treatment they paid for is found to be related to the accident. Now as I said, I don’t know what happens betweenthe plaintiff and the insurer after the trial–that’s beyond the scope of my experience. I assume the plaintiff turns around and says, “You don’t get to claim this and that treatment in your subro demand because it wasn’t related to the accident cuz that’s what the jury said!” But that’s a guess.