Making Insurance Affordable?
Government proposes to serve citizens by making insurance “affordable.”
How are they going to do that?
Insurance premiums are determined by math – frequency (number of claims per thousand), times severity (average cost per claim), plus expenses (cost of insurer doing business), plus profit (about 5%). Now which of these factors is government going to manipulate?
Frequency? Maybe improve public safety?
* Tell doctors or hospitals or repair shops to not charge so much?
Government could influence severity by limiting the amount attorneys can charge – but that’s unlikely because attorneys contribute to legislators re-election efforts.
How about reducing taxation on insurers?
How about making insurance premiums tax deductible for the consumer? .
Slash insurer profit? From 5% to…? Attack this number too aggressively and insurers may be driven out of the business.
Are you thinking along with me here? I wonder if you’ve come up with one crazy idea, a solution that some in government like but we observers of government in action (like the government-run VA hospitals) find hilarious or frightening.
Let government take over all insurance! (eeek!)
The first problem with this is it eliminates competition. Competition is the best affordability-vehicle because it gets the people who know most about the business concentrating on how to be more efficient, to cut costs, to achieve a lower rate and gain more insureds.
The second problem is government inefficiency. Government wasn’t designed by our founders (bless them) to run things.