That's the point. An extreme event will be something that puts you out of work for at least a month, and for many people, they will no longer have a job after not working for a month. Since their insurance is coupled in intricate ways with their job, it ends when they need it most.
Right but that has no bearing on if the concept of insurance is a scam or not. Sure, health insurance in this country is tied to a job due to WW2 wage controls but that doesn't invalidate the entire concept of insurance.
I don't think DanBC is saying that insurance per se is a scam, but that the U.S. health insurance industry is unavoidably scammy.
EDIT: Put another way: you're 100% correct that that's what insurance should do and purports to do, but that's not how it actually plays out with American health insurance.
No! I'm very much saying that most insurance (car insurance, home contents insurance, payer-protection insurance, flood protection insurance, etc etc) is rife with scammy practices and awful awful people - the scum of the earth.
Agreed. On the scale of insurers, there's no risk - it's just cost averaging a.k.a. what the government should be doing. There's no way to lose money at it.
Insurance is a scam because insurance companies sell products with simple, big, headlines but complex fine print. They go to extreme measures to avoid paying out if possible.
If this were actually true then word would get around quickly and insurance companies would lose business as honest rivals emerge. (Hint: This hasn't happened. Because it's not true.)
See, from a cancer patient writing three days ago who had her insurance canceled because of Obamacare:
http://online.wsj.com/news/articles/SB1000142405270230452750...
"The second element essential to my fight is a United Healthcare PPO (preferred provider organization) health-insurance policy. Since March 2007 United Healthcare has paid $1.2 million to help keep me alive, and it has never once questioned any treatment or procedure recommended by my medical team. The company pays a fair price to the doctors and hospitals, on time, and is responsive to the emergency treatment requirements of late-stage cancer. Its caring people in the claims office have been readily available to talk to me and my providers."
People buy life insurance based on price. Whether you're alive or dead isn't generally difficult to establish.
People buy other types of insurance based in part on price and in part on reputation. There are plenty of discussions (I've participated in some) about how insurance company X is too difficult to deal with, and insurance company Y is better when your car is totaled, etc.
That's because the system is setup so that the payouts go from a pool of money that would otherwise be "profit" for the company. If the company's "profit" is independent of the payouts, maybe this would help. Probably have a separate pool of the money from where to settle claims. You could split up the premium into two parts:
1) The money for the payout pool. No profit should be extracted from here.
2) Money that you will invest and thus earn profit from.
You could use actuarial science to make sure that you have enough collections to statistically be able to pay out every claim. And in this model, the company would have no incentive to NOT payout
Isn't that why most insurance companies used to be mutual co-ops and only recently have become corporations? Essentially there are insurance companies that are exactly what you describe, people in a large group pooling their money.
