Affordability

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?

Severity?  How?

      *  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.  

By Dennis