Originally posted by: dullard
Originally posted by: Uppsala9496
I don't profit from it. I make a yearly salary.
You make money from insurance it what I meant. And it appears to be true.
I "attacked" you because you obviously have no clue what you are talking about.
Again you say that, but you haven't said ANYTHING that I typed was wrong. Many, many experts in the subject say the same thing as what I typed. Here are my points, now you tell me what is wrong and why. Lets have a productive conversation instead of a personal attack.
1) Insurance is necessary because you can't cover everything. Such as my example where you won't be able to pay for a heart transplant on your own or through loans. If I'm wrong that insurance is necessary, why do you post otherwise?
2) Insurance is necessary because of laws or other requirements. My examples were insurance requirements for drivers licenses, medical or other professions, etc. Your wife selling to lawyers is a perfect example. If I'm wrong in saying it is important to get insurance for people like lawyers, why do you let your wife sell it?
3) Insurance pays people salary, and thus is an extra burden. You posted examples were 30% of the money is not returned. Thanks for backing me up. If 100 people instead pooled their own money without insurance, they'd get 100% back on average. Thus, avoiding insurance for things you could cover in other ways will help you save that lost ~30%.
4) Because insurance is necessary, but because it is not 100% returned, don't go to either extreme. Don't skip insurance, and don't get far more than you need. A good medium is to get enough to cover the big things, and have high enough deductables so you aren't insuring every little thing.
Let's not confuse underwriting with selling.
Here is how it works:
Company XYZ realizes they need ABC coverage (property, specialty, etc).
XYZ then contacts an insurance broker (the person that sells the insurance).
The broker then contacts numerous insurance companies.
I as the underwriter evaluate the risk. For my line of business (D&O/EPL) I look at the company's financial statements. I also look at location, number of employee's policies and procedures, etc.
My job is to look at the past and predict the future. Will the company go bankrupt? Are there certain red flags that indicate a potential claim in the future?
After evaluating all of this, I price the account out. There are actuarial tables. I deviate when I think I should. As a senior underwriter I am given a lot of leeway to price things as I feel they should be priced. It's an educated guessing game. I can't predict if some employee is going to decide to sexually harass a co-worker. I can however evaluate based on a handbook how the company would respond. If they are weak in policies and procedures, I may charge them more premium knowing that if something happens it is going to cost me (the insurance company) more money.
I then provide my quote to the broker. The broker then looks at the quotes (usually at least 5) and evaluates coverages, deductibles, limits, etc.
The broker then presents these quotes, along with his/her recommendation, to Company XYZ. The commission to the broker is clearly stated (thank Spitzer/AIG/Marsh for that).
I pay the broker a commission. It all depends if they are a wholesale or retail broker and how much profitable business they place with me (the more you give, the higher your commission - and yes, there is a cut off).
My duty as an underwriter is to asses the risk and price it accordingly. I am out to make my company money. I am not a free million dollar (my coverages are usually at $2M in coverage) lottery service.
Originally posted by: dullard
3) Insurance pays people salary, and thus is an extra burden. You posted examples were 30% of the money is not returned. Thanks for backing me up. If 100 people instead pooled their own money without insurance, they'd get 100% back on average. Thus, avoiding insurance for things you could cover in other ways will help you save that lost ~30%.
Insurance is a contract. It has terms and conditions, and when a claim happens, those terms and conditions are reviewed. If the claim is covered, then we start paying (usually a deductible applies). That is what we do. We enter a contract and uphold our obligation. Sure we make money. No one would do this for free and no company exists that just gives money away. Insurance is no different from any other business in this regard.
Risks are involved. The unforseen happens. Not everything in life is predicable. No one can predict the future. That is where insurance comes into play. Look at the past and predict the future. What
might happen?
If your magic 8-ball knows what 30% won't happen, please let me know. I will open my own company for the betterment of mankind then and turn it into a non-profit insurance company (or get really greedy and take over the world because I now know how to make a killing in profits).
My whole point here is basically that insurance is necessary and serves a very real and important purpose. Here are some real world examples of claims on accounts I have written:
Shareholders for a company that markets fitness, health and beauty products filed suit alleging that the company and its directors and officers made misrepresentations in a proxy filed with the SEC, upon which shareholders relied in determining to vote in favor of a merger. Shareholders were unwilling to settle for less than $5 million. My company defended the case through trial, and the insureds were found not guilty. We paid approximately $2.5 million in defense costs.
Their premium was under $50,000.