Friday, May 11, 2007

Insurance Rants Abound, Oddments at Top and Tail

I refuse to explain how my search for sexy insurance pictures led to this site for mirowaveable food, but it did, so here's HeatEatReview. They treat the foodstuffs to taste tests and in-depth discussion, and the lower the ratings, the funnier they get. Too bad, Gardenburger Margherita Pizza Style Veggie Wrap- one star.

I've not posted here in so long. I've been on the run, but wanted to give you an overdue, infuriated libertarian-ish rant for the nonce, and something much funnier and odd is at the post's bottom, if this political/econ stuff glazes your eyes.

1) Allstate stops writing new homeowners policies in California, like they've done to reduce their financial exposure in other catastrophe-prone states. Is it because they don't want customers? No. It's because state governments pressed by residents who've been undone by natural calamities have meddled inordinately in insurers' abilities to do profitable business there, one egregious example (that I will salt liberally into the mix here) being that insurers after big FL hurricanes were forced to pay flooding damage claims from policies that specifically excluded such. That means that any existing policy is an uncertain and expanding risk, and those companies make money by managing risk. If suddenly your contracts mean nothing, regardless of how clearly stated, and state officials will pressure you to pay for coverage that the homeowners didn't opt to purchase, any insurance policy could result in huge claims, no matter how small the premiums or limited the terms. In this case, Allstate wasn't allowed to raise its rates in order to cover its increased risks in CA. More money paid than collected sounds like an unsustainable business plan, but I guess people working in insurance company offices don't deserve Christmas bonuses, only homeowners are noble here. But soft. What if the over 2.3 million people employed in the insurance industry need access to affordable health, auto, and home coverage, too? Could that many people possibly have families and homes and be mostly well-intending professionals rather than soulless jerkoffs? Nah.

I do NOT argue that insurers are saintly philanthropists, Hell-to-the-No, and plenty of claims and legal actions have been taken against them for wrongly obstructing payment in certain instances. (We spit on their damned delays and evil evasions.) But there are mechanisms to address these things, not least that they are, if you read the links above, sensitive as businesses to the impression of being dishonest, heartless bastards. Furthermore, wronged claimants have a legal leg to stand on because of the integrity of their policies as contracts in the eyes of the court. We continue to need firm, transparent oversight and penalties for misdeeds in this arena. However, when you decide (even for the most humane reasons) to perpetuate unjust dealings by shafting insurers as a group and invalidating their contractual agreements with their customers, the poorest people will eventually suffer most. Corruption always hurts the poor. Because things inevitably change in response, and they don't have the money for work-arounds and extra homesteads on flat lands that the rich do.

Insurance is not a right, it is a business model that operates on companies earning more from investments than they pay in claims. The money needed for investment (the paid premium) and the amount of coverage redeemable for each policy are calculated in numbing detail by pointy-headed types analyzing and putting dollar values on the risk of highly-specific calamities. Purchasing insurance coverage represents a spending priority, a perspective on life and personal assessment of one's own charmed life. I have known plenty of people spending more on their toys (like shiny motorcycles) than even a basic, catastrophic health care policy to cover them if they fell badly (a not uncommon occurrence). If such decisions work out badly, I'd like to see help available through charitable giving and emergency aid, even low-cost long-term loans. But I don't think all the other taxpayers should be paying even more to the bloated G-O-V-T out of their checks to finance Thor and MamaBelle's freedom of choice.

Actually, where private insurers have indeed feared to wade, federally subsidized flood insurance has been widely available, but strangely, mostly the well-heeled seem to be purchasing it. I consider that scheme one super-giant boondoggle against taxpayers because it indemnifies risks that businesses would never stomach to underwrite because they're too Freaking Risky- like building mansions on the slippery mud canyons of Malibu. But okay.

If you don't believe the rain will fall, do without coverage. If and when the rain does fall, some government help will probably arrive (less and worse than you'd likely prefer), and charities and private organizations and even big, bad corporations will mobilize to help out, and many good-hearted individuals will find ways to assist their fellows in need as they always do. But will you be made whole, or come out even better than you went in? Well, you can't expect civil society to value your health and possessions more than you did yourself when you opted not to buy a tarp, or even a cheap umbrella.

What about the poor who must choose between insurance and subsistence? That's why I'm for a government insurance spending allowance for individuals (a redirection of other, much less efficient forms of public aid) to dole out for the most appropriate coverage as they see it, rather than government-provided health care. I believe the market does it better, faster, and cheaper when it's actually allowed to work, and people are always more selective about spending on things they pay for themselves. Instead of the lousy, inefficient government administration, I'd prefer good (or even lousy) private administration that we can at least audit, sue, fine and lambast in the public square to enforce fair dealing.

If the IRS is deeply dishonest, what can you do? It's a relatively impenetrable, unaccountable bureaucracy. And the same people complaining about VA hospital conditions want gov't to handle the whole enchilada of personal health care? Madre de Dios! Even Channel 2 won't handle those kind of dissatisfied consumer scams, but give them a nice public company with an address and letterhead and stockholders, and maybe things can be leveraged for the powers of good.

Anyway, a couple years ago, many buyers in Florida skipped the extra premiums for flood policies, and found happily (as happy as one can be after a devastating hurricane) that the state strong-armed companies like Allstate into paying the water damage claims anyway. Well, that's this week's disaster. What about the next? As a result, insurance businesses-- employing millions of fine people who are by-and-large just as worthy as their neighboring policyholders--took a defensive strategy against ballooning claim costs. Now, new homeowners in certain areas, even if they're willing to pay for a full menu of coverages, may not have the option as the biggest players pull out of these markets. The smaller firms or others that stay will likely be able to jack their prices through the roof if they're willing to keep writing policies in those jurisdictions. Competition diminishes, demand outstrips supply, and prices will go up. Simple. Someday, and very soon, California will have to approve that detestable rise in insurance rates or few new policies will be issued or available in the state. That is, except from Al's Fly-By-Night Friendly Insurance Corp, premiums payable by money order or auto pink slip. Will the consumers and homeowners be happy for the protections of their benevolent state legislature then?

In the case of claims awarded contrary to policy terms, the resulting rate increases due to increased business costs, reduced competition, and downright policy shut downs will be especially painful for those poor people who suffered the initial damages without coverage. What are their long-term prospects? Selling their homes because they can't afford to insure them against the next downturn? What happens to the sale value of homes that simply cannot be insured because states can't be trusted not to inflict unpaid-for "meteor-damage" claims on insurers and also won't let them charge enough to offset the risk created by the legislatures' own whimsies? Will it be easy to get mortgage companies to lend money for property purchases where they can't protect their collateral asset with insurance? Will that cause the mortgage rates in those areas to rocket because of the higher risks incurred by the lenders on property there? Will that create more flight of working people from those states to those with lower housing and insurance costs (and therefore with lower costs of operation making them more attractive to new corporate facilities, and so on- you get the idea)? Will the next disaster, and there will be one, likely find those states with more self-sufficient, prepared, and insured property owners or fewer? Will we face a downward spiral of ever-worsening outcomes for homeowners in ghettos of damaged property that no one can afford to leave and no one else can be persuaded to buy, no matter how cheap? Possible consequences of all this aren't unfathomable, they just suck.

Many, many people warned that this short-sighted state beneficence with someone else's dollars would cause insurers to flee those states where the legislative climate proved as hostile as Mother Nature's. Now, these states with very large populations and tendencies toward dramatic weather have helped make themselves even less safe havens for their residents. Totally predictable and Just great.

2) This is a very funny interview of the recently demoted Pluto by John Scalzi.

1 comment:

April said...

As a person who makes a whole $9 an hour, with a pre-existing medical condition that prices me right out of even the most basic of private health insurance market...I say let them eat cake.

The health insurance industry is still desperately trying to make up the HUGE losses they incurred from their unwise investments in the stock market in the late 1990's. I was there, on Morningstar every day, researching and watching them do it. And they'll take it out of your hide, gladly. And cry poor, poor me when they have to pay out.

The insurance companies are really, really unhappy that for ONCE, they had to possibly pay out more than was put in for that year. Boo hoo.