Why do people get insurance for ANYTHING?

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geckojohn

Diamond Member
Nov 28, 2000
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Insurance is really important to have. You never know if something major will happen that can financially wipe you out.
 

Uppsala9496

Diamond Member
Nov 2, 2001
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Originally posted by: dullard
Originally posted by: Uppsala9496
The lines I underwrite....Big money maker there for me.
And the truth comes out as to why you attacked me for saying to get insurance, but not to over-insure. You profit from it.
I don't profit from it. I make a yearly salary. I make nothing off the people I insure. No commissions for me (that would make underwriting a conflict of interest and the sec would not allow that).
I underwrite Directors' and Officers Liability, Employment Practices Liability, and Fiduciary Liability (some crime as well).
D&O insurance is the kind that covered Enron. It's a spoecialty market. I deal on the private company side. Venture Capital companies require the companies they are going to invest with to carry D&O coverage (covers things such as unfair business practices, fraud, misrepresentation.

It is not an "over-insure" type of insurance.
My wife for example underwrites Lawyers Professional Liability. LPL is required for all private practicing lawyers (it's basically lawyers' malpractice).

I "attacked" you because you obviously have no clue what you are talking about.
 

dullard

Elite Member
May 21, 2001
25,476
3,976
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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 the small 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 insurance to cover the big things, and have high enough deductables so you aren't insuring every little thing.

I await reasons for why all 4 of those are wrong.
 

Vic

Elite Member
Jun 12, 2001
50,422
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If 100 people instead pooled their own money without insurance, they'd get 100% back on average.
I'd argue against this. Someone would still have to manage the pooled funds, with accounting to the satisfaction of everyone involved, and that costs time and money. And because the bigger the pool, the better the risk, at a large enough scale it makes sense to pay specialists to do that for you. And if those specialists do it better and at a lower cost than you can, then whatever they profit beyond that has no meaning.

The above part BTW can be applied to almost anything in a marketplace, and is why the P&N'ers with their constant whining cries about the evils of profits are such dipsh!ts. For example, if you don't like the idea of your mechanic making a profit from fixing your car, you could fix it yourself. But then you'd have to buy the tools, parts, and equipment, and educate yourself on the technique, at which point (if you're the average person and depending on the job, I'm NOT talking about something super easy like oil changes) you've probably spent considerably more in time and money than if you'd just let the specialist make a living from his specialization in the first place.
 

dullard

Elite Member
May 21, 2001
25,476
3,976
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Originally posted by: Vic
I'd argue against this.
I personally wouldn't do it either. It is just an example. You can find other ways to cover the small things. Heck, a pool of 4 (typical family size) is pretty darn good to cover the ultra small expenses. We don't have $0 deductables for most insurance for a reason. We can and should find other ways to cover the small things.

 

KarmaPolice

Diamond Member
Jun 24, 2004
3,066
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1. You have to have car insurance

The thing with insurance is that we pay montly so we don't have to foot the bill when something else happens. Most people are willing to take the risk that if something happens they are going to pay a whole medical bill. Whats better. Pay monthly with peace of mind that if you get hit by a truck and you get really ****** up that you wont have to 100,000 dollars in medical bills? Or not pay monthly, spend it on whatever or invest it...knowing that if you got hurt badly and made it out alive you would be in financial ruin for a majority of your life? If you have 100,000 dollars in medical bills and your solution is to take out a 100,000 dollar loan to pay for it....well really thats not really a solution.

Same thing with a house....most people cant afford to lose their house...so they pay insurance so that IF they do they can handle it ok.
 

Uppsala9496

Diamond Member
Nov 2, 2001
5,272
19
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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.
 

Vic

Elite Member
Jun 12, 2001
50,422
14,333
136
Originally posted by: dullard
Originally posted by: Vic
I'd argue against this.
I personally wouldn't do it either. It is just an example. You can find other ways to cover the small things. Heck, a pool of 4 (typical family size) is pretty darn good to cover the ultra small expenses. We don't have $0 deductables for most insurance for a reason. We can and should find other ways to cover the small things.
On this I agree. I keep my car and home deductibles at $500. I've found that seems to be the right price point for my circumstances. So yeah, this past winter I had to shell out $400 of my own money to get a broken windshield fixed, but it still saves me money in the long run.
 

Uppsala9496

Diamond Member
Nov 2, 2001
5,272
19
81
Ooops, forgot to type out another example. Here is an employment practices one for you:

A male security officer sued a local security company claiming sexual harassment.
The claimant alleged that a male manager would regularly and repeatedly sexually harass him by touching him on the chest and stomach while stating different sexual phrases to him. He further alleged that his employer failed to investigate or take any corrective action concerning his allegations. The employer did in fact investigate the claim, and the manager was eventually terminated.
In some states, strict liability can apply to certain situations such as this, meaning the employer is liable for the actions of its managers, even if no one was aware that improper behavior was taking place. This matter cost the security company $400,000 to resolve.
This company didn't have EPL insurance at the time (eventually they went with my coverage and don't need to worry about shelling out $400,000 for something like that again).

 

Zenmervolt

Elite member
Oct 22, 2000
24,512
21
81
Originally posted by: alkemyst
Originally posted by: Uppsala9496
Zenmervolt - Your statement about what is covered in relation to what is paid is false. That only applies to certain self-insured or stop-gap plans. Some companies find it to be more cost effective to have a self-insured plan (usually 500+ employee companies with a younger work force). Basically they use the health insurance company has a third party administrator while reaping the insurance companies negotiated lower rates with doctors and hospitals (the PPO, POS, HMO, etc plans).
Under 50 employee plans for example are on a pooled basis. All the premiums going into a common pool for example and then claims are paid from there. Some companies have minimal claims while others have numerous/expensive ones. The rates per company are on an individual company basis however.
We do self insurance here, we are a fortune 300 company with about 6-8000 associaties.

I don't know how ZV can get all that for $10/mth, I am not saying it's impossible...but it would be very very rare.

We are pretty well subsidized and I pay $65/month for health (company gives me the $2k for my deductable as a health fund each year that can roll over). $16 for dental and $3 or so for vision. I automatically get life at 1.5x my salary and disability up to 3 months full pay and another 3 at 80% (this is based on time of service, I am at 3 years now).
I checked and was off. $20/month, $10/pay period.

Company has exceptional benefits. ~30,000 employees too.

ZV
 

Uppsala9496

Diamond Member
Nov 2, 2001
5,272
19
81
$20 a month is cheap.
I pay around $90 a month for my wife and I.

When I worked at a health insurance company, underwriting health insurance I was paying about $20 a month. My benefits were on the weak side though. I underwrote better plans than I had.
 

Zenmervolt

Elite member
Oct 22, 2000
24,512
21
81
Originally posted by: Uppsala9496
Zenmervolt - Your statement about what is covered in relation to what is paid is false. That only applies to certain self-insured or stop-gap plans. Some companies find it to be more cost effective to have a self-insured plan (usually 500+ employee companies with a younger work force). Basically they use the health insurance company has a third party administrator while reaping the insurance companies negotiated lower rates with doctors and hospitals (the PPO, POS, HMO, etc plans).
Under 50 employee plans for example are on a pooled basis. All the premiums going into a common pool for example and then claims are paid from there. Some companies have minimal claims while others have numerous/expensive ones. The rates per company are on an individual company basis however.
Not quite what I meant.

You pay for a specific level of coverage and even if you "need" more coverage, you don't get it without being enrolled in a higher-coverage plan just because you need it.

How the rates that are paid for your plan are negotiated with the insurance company are irrelevant really, and in any case, the type of bargaining for rates that you describe is itself a uniquely capitalistic system.

ZV
 

Zenmervolt

Elite member
Oct 22, 2000
24,512
21
81
Originally posted by: Uppsala9496
$20 a month is cheap.
I pay around $90 a month for my wife and I.

When I worked at a health insurance company, underwriting health insurance I was paying about $20 a month. My benefits were on the weak side though. I underwrote better plans than I had.
Mind you, I'm single and on basic coverage. The higher-coverage plan is about $80/month.

ZV
 

Uppsala9496

Diamond Member
Nov 2, 2001
5,272
19
81
Zenmer, I understood what you meant after I posted. At that point it was too late to go back and change anything.
EDIT: Sorry about that.
 

Zenmervolt

Elite member
Oct 22, 2000
24,512
21
81
Originally posted by: Uppsala9496
Zenmer, I understood what you meant after I posted. At that point it was too late to go back and change anything.
EDIT: Sorry about that.
No worries, I just wanted to re-clarify. :)

ZV
 

GasX

Lifer
Feb 8, 2001
29,033
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Insurance is society's way of sharing the wealth to help each other through hardships of all sorts of kinds. Insurance companies provide the mechanism for this and take a profit for providing the service. It is simply capitalism at work.

Why should you get (and forever keep) health insurance? two words: "pre-existing condition"

Why should you get life insurance? 3 words: "wife and kids"

Why should you get car insurance? 3 words: "swoop and squat" or "it's the law"

Why should you get home owner's insurance? 3 words: "act of god"

What the OP seems to fail to realize is that the main purpose of insurance is to cover circumstances that one would face a huge hardship paying for. You don't pay for health insurance so a doctor's visit only costs $10 (although that is part of the product offering most people end up with). You get health insurance in case you end up with a extraordinarily expensive medical condition you could not possibly pay for.

To the OP: Adapt your current point of view to temper your insurance outlays and self insure where possible. Do not make the mistake of thinking insurance is an entirely bad thing.
 

RagingBITCH

Lifer
Sep 27, 2003
17,618
2
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Originally posted by: Fritzo
Looks like the op stopped posted. Guess he was getting pwned too badly :)

pwned is an understatement. Some of his other posts (as already pointed out) aren't, well, too well thought about.
 

KK

Lifer
Jan 2, 2001
15,903
4
81
wasn't there something like if you had so much money, you didn't need car insurance.
 

Zenmervolt

Elite member
Oct 22, 2000
24,512
21
81
Originally posted by: KK
wasn't there something like if you had so much money, you didn't need car insurance.
Some states will allow you to waive automotive insurance provided you can provide proof of a specified amount of liquid finances. In other words, you have to have $X in the bank and available immediately at any given time to be legally allowed to waive insurance.

ZV
 
Dec 28, 2001
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Originally posted by: dullard
Insurance as a whole is a money losing proposition. It is basically the same as playing the lottery. You put in small amounts, in the chance that it might pay off big down the road. And we all know the lottery is a tax on the stupid. Insurance should be treated similarly. Big entities know this and don't have insurance for many things and this may shock people. For example, you can bet your state doesn't have insurance on its buildings - government buildings, universities, schools, etc. Why? Even if one building burned to the ground, the state can afford to rebuild it. There is no reason to pay enough in insurance premiums to rebuild it AND cover an insurance agent's salary.

But, there are some differences between insurance and the lottery. (1) In most locations you can't legally do many things without insurance - car insurance to drive, house insurance to get a mortgage, medical insurance for doctors, etc. (2) The payout is FAR more likely with insurance than with the lottery. You probably will get sick and need health insurance, you probably will get in an car accident, you probably will have damage to your house, etc. Thus, you shouldn't try to avoid insurance.

The key is to insure against things that you CANNOT overcome. Can you pay for a $1,000,000 heart transplant by saving $100/month? No. Can you get a loan for that? No. Instead, you just die. That is why you need catastrophic insurance to cover that possibility. Do you need low deductables or copays with expensive monthly fees in case you sprain your ankle? No, that is just a massive waste of your own money. Get the highest deductable you possibly can and insure against those major cases that you can't afford to not have coverage for. Then put the monthly premium savings into an interest earning account and you'll be able to cover those high deductables PLUS have a lot left over.

That's called being self-insured. For the auto-side of things, most trucking firms are self-insured. You just have o prove that you have enough money to carry the financial burden in case something were to happen, and you can be self-insured as well.

I'm sure everyone else posted this, but the bottom line is; most people cannot save up enough money to cover all contingencies, and on a more logical point of view, who can plan on an "accidental" loss?

I know I make some inane posts, but . . . geez, OP.
:roll:
 

jackace

Golden Member
Oct 6, 2004
1,307
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Insurance is needed today because of the extreme cost of certain things. If you go back 100+ years insurance was in no way as common.

You can argue however that insurance is the reason those extremely expensive things are so extremely expensive.
 

ultimatebob

Lifer
Jul 1, 2001
25,134
2,446
126
In my opinion, most insurance is only required to cover the bank's ass at your expense. That's why you need collision insurance if you have a car loan, and home insurance if you have a mortgage. They just want to make sure that their collateral is still covered if the product that they're financing is destroyed.

The benefit for myself is much more questionable. With the insane price of car insurance, for example, I would probably be better off putting that money in the bank and paying for all expenses out of pocket.
 

MotionMan

Lifer
Jan 11, 2006
17,123
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Originally posted by: ultimatebob
The benefit for for myself is much more questionable. With the insane price of car insurance, for example, I would probably be better off putting that money in the bank and paying for all expenses out of pocket.

Why do people keep saying this? How long would it take you to put aside say, $100,000 or more, to cover the medical bills of the other driver your injured, your car's damage, the other car's damage and your legal bills?

What if the accident happens one month after you cancel your insurance rather than years later when you have built up your war chest?

MotionMan
 

SSSnail

Lifer
Nov 29, 2006
17,458
82
86
[Homer] Extended warranty, how can I ever lose? [/Homer]

Seriously, it's like the "Oh sh*t" bars. Damn if you do, but you'll be royally fvck if you don't when the time comes.