insurance


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I had a life insurance salesman visit me yesterday selling life insurance. He made his case with the purpose of life insurance, viz. the risk of my dying and the missus left penniless. Fine, no problem, I appreciate the management of risk far more than possibly your average chap in the street.

When he asked “do you have any questions”? is when things turned a bit curly. The question that I put to him was this: how do I know that if my missus lodges a claim that she will be paid out? Normal question, one that any reasonable potential customer would ask.

The answer that came back was pretty much what I expected. If you are dead, you are dead, and apparently after 10 months this includes suicide. Talk about a non-insurable risk. Anyhow, I let him finish before rephrasing my question.

I am not referring to “exclusions”, rather, to the ability of the insurance company to actually “pay-out” on any claim lodged. The Christchurch earthquakes bankrupted a huge number of NZ based insurance companies, they had mis-priced the risk of a tail-risk. So the answer I was looking for related to this.

After looking a little confused, and requiring some further prompting, I elicited that this particular insurance company, apparently it is now NZ law, had laid off risk via re-insurance. I mentioned Lloyds of London and asbestos – never heard of it. Ok, no problem, what is the name of the re-insurance company?

The answer came back, “SCOR”. Excellent, what is their capitalization and financial position like? The answer, “excellent” some ratings agency just raised them from B- to AA. Well hell son, that is some jump…WTF did they do to deserve that upgrade? Who was the ratings agency, I was thinking “Best” as they specialise in the insurance space.

Anyway, I said that I would look at SCOR and if I liked them, I would top-up my life insurance. Give me a few days to do some research and I’ll come back to you.

Well indeed I did have a quick look. I haven’t run the numbers yet, but once I have, I’ll post them up. Essentially however, superficially, the numbers look fucking atrocious. This obviously does not bode well for a long term investment which is essentially what a life insurance policy is for my missus. So once I have the numbers crunched, we’ll take a closer look.

I am not on my own computer here, so this post will lack any images.

The object, or end, of Obama’s healthcare Bill was to provide universal healthcare. Morally, this is an admirable end to aim for. Unfortunately, he has approached it in the manner of legislating the desired end, which, economic reality being what it is, cannot but fail.

There is already universal access to goods and services supplied, and it is called exchange. The exchange mechanism operates now through indirect exchange, via money. Thus should any individual demand healthcare, they can receive it through the exchange of money.

Health insurance came about as a method by which the risk of possibly permanent, or long term illness/disability to a wage-earner, could be offset`; a premium would be paid for a lump-sum, or stream of payments to offset both the capital outlay and the loss of ability to earn.

The real issue then is not about “availability” it is about “affordability.” Affordability is an entirely different argument entirely. Here we return to my earlier post in regards to the restriction, via government granted monopoly status to the allopathic medical model, in raising the cost of healthcare. If you limit [artificially] supply, the price must rise in the face of a growing demand.

Some will raise the issue of medication and the high costs associated with drug therapy. Once again however, the government has granted a monopoly restricting the supply, through the patent system, and preventing generic drug manufacture lowering the costs. Also prevented are phytotherapies, homeopathic remedies, etc. The result: higher costs. Of course you could look closely at the major pharmaceutical companies and their budgets allocated to lobbying Congress.

Providing universal access, to goods and services, to those who cannot afford to pay, due to earnings that are below the required levels, requires a subsidy. Where does that subsidy come from? Clearly from those that can afford it. There are two choices here [i] philanthropy or [ii] coercion. If it is coercive, then government impels contribution to provide for the subsidy. This is called a “Tax.” Indeed the SCOTUS decision labelled it as exactly that, a tax.

This, unfortunately, is where the issue goes beyond the normal government error of adding taxes. This tax falls on the very socioeconomic class that cannot afford a tax. They cannot afford the healthcare, but neither can they afford the tax that will be levied should they choose not to purchase the subsidised insurance, which they can’t afford either.

What is required, is not a gun-to-the-head tax, but a lowering of the costs of healthcare: this can only be accomplished via a removal of the allopathic monopoly, and an opening of the market to increased competition from healthcare providers.

What could possibly cause this? The answer is that American football is in very, very serious trouble.

2,450 players have now filed 89 concussion related law suits against the NFL and Riddle Athletics (helmet manufacturer) . All of the State cases are being referred to Federal Court.

I’m no expert on this topic. I follow (among others) ESPN and NFL Concussion Litigation. I have recently talked with four attorneys (none directly involved – all sue for a living). The cut to the chase question for the lawyers was:
“Will there be financial awards?”

Four out of four were quick to answer:
“Yes.”

This will make for an interesting legal case.

I suppose the starting point would be a contract [certainly at the Pro level, & probably at the College level too] The contract would obviously have to address the physicality of the sport and the potential for serious injuries/death from participation.

Without a doubt, the protective clothing/padding, contributes to the speed/strength of collisions/tackles. In rugby, where there is minimal/none of protective padding, the collisions are at lower speeds and impact power. There are still injuries/concussions, but they are I would guess less common frequent. That must therefore open another door as to prescribed/proscribed uses of the equipment.

Then there is the whole area of injury during the game, diagnosis, and management of the player. I read the book “Don’t worry it’s just a bruise” written by an NFL team doctor, and the level of drug useage etc employed to keep key players on the field, and the entire culture around that playing injured. Motorcycle racers ride injured all the time, break a few bones in an off during a practice round, back on for the race: this is not simply an NFL problem, you are dealing with tunnel vision athletes, and as such, very often they may require protecting from themselves, particularly in the case of a concussion where cognitive function will be impaired, and responsible, informed decisions cannot be made.

Ultimately, assuming that the draconian measure of an outright ban, or withdrawal of various participants does not end the game, insurance coverage would seem to be one avenue that could be explored. Of course the issue immediately that comes to mind would be “pre-existing conditions.” Where current players have been playing since grade school, all the way through to pro-level, the insurance risk becomes far higher, and of course, ultimately the insurance would have to commence at the start of the football playing career, in the PeeWee leagues, and be maintained continuously through the playing career.

Tail risk would be a major issue for the insurance companies, someone who played through say College, and developed problems say ten years later, attributable to football injuries. This would be a major stumbling block.

Of course, the game could retrogress as far as protective clothing is concerned. Make the padding far less protective, thus reducing the speed of collisions: remove helmets, return to the leather protective headgear, this will remove the current trend of tackling with the head as a weapon. All you lose are the slo-mo replays of hits that lift people into the air and popping off helmets etc.

Either way, it will be interesting to follow this case and see how it all plays out.

Pretty miserable industry currently with all the natural disasters around the world. Time to raise rates. I’ll be watching this one while I have a look at the financials.

Congress apparently asked the same question:

Multiple factors, including falling investment income and rising reinsurance costs, have contributed to recent increases in premium rates in our sample states. However, GAO found that losses on medical malpractice claims— which make up the largest part of insurers’ costs—appear to be the primarydriver of rate increases in the long run.

And independent of Congress:

Under the fee-for-service model that most health insurance plans use, physicians make more money with every office visit and procedure they do. That gives them a built-in financial incentive to push for more, though not necessarily better, health care, says award-winning journalist Shannon Brownlee, author of “Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer.”

Covering preventive care is low on most insurance companies’ priority lists, even though doing so could help patients avoid serious illnesses and their complications — as well as their pricey treatments. “We pay for costly interventions like bypass surgery or chemotherapy to treat diseases at the back end instead of focusing on lifestyle changes to keep patients healthy on the front end,” says Aaron Carroll, M.D., director of the Indiana University Center for Health Policy and Professionalism Research. Placing a priority on preventive care would also save billions: One recent report showed that investing just $10 per person per year in programs on exercise, nutrition, and smoking cessation could save $16 billion per year in another five years.

Experts call it defensive medicine. “Doctors often order unnecessary diagnostic tests, procedures, and therapies to cover their butts in case of a legal dispute,” Caplan says. The more stuff your insurance company has to cover, the more it will pass those costs to you.

From The Economist

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