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Insurance guarantees you never know how much a commodity costs. If you had to write a personal check, an MRI, a 40-year old technology, would not cost $5000. You see "insurance" pays, so who cares. If real people had to write a check, that same MRI would magically drop to $500.
Will see how if insurance is there in the aftermath of Harvey...
I've only had one claim and it was when the area was declared a disaster area... insurance was slow but many had much more serious things than I did... but they did settle and no complaints.
California is prone to devastating wild fires... as one was raging the insurance company called offering assistance... said it had movers for valuables, contracted with private fire fighters and had equipment for creating fire breaks... kind of amazing when I thought about it...
Lucky for us the winds shifted driving the fire back on itself...
Insurance guarantees you never know how much a commodity costs. If you had to write a personal check, an MRI, a 40-year old technology, would not cost $5000. You see "insurance" pays, so who cares. If real people had to write a check, that same MRI would magically drop to $500.
No one pays $5000. That may be the price, but not the reimbursement or settlement cost. Look around and most likely $500 is closer to what you pay. Or what your insurance pays.
Around 2006 our medical group offered MRI's and our overhead was in the region of $4-600 per scan.
Considering that an MRI scanner can cost half a million, having one in every hospital is costly. Then there's the cost of the room, and maintenance. If it only gets used a few times a month, it could run $5000 a scan. The companies that are discounting it use lower prices to draw business and can do it more efficiently.
I have been project manager for image center builds... there is a lot to it and nothing is standard construction... even the rebar is different in the concrete.
Plus the cooling/power/enviornmental requirements are very exact which translates into overhead...
aig the parent company of the insurance arm made some very risky bets in the credit default swap market and lost 30 billion dollars on the wrong side of a bet . they wrote credit default swaps on 500 billion worth of assets .
they also got caught up and burned doing security lending . all this was done in their financial divisions , not insurance .
There's no way you can charge someone x amount per month (we'll say $500) and cover them for $50k+ in insurance claims.
Prove it. Show us the math based on frequency of claims, number of customers, and insurance company overhead. Just saying "no way" based on assumptions doesn't really help.
Quote:
Originally Posted by jimmy12345678
Can someone please explain to me how insurance is not a glorified ponzi scheme?
Ponzi schemes are deceptive in that they promise certain returns from investments, but they aren't actually investing they are instead using incoming money to pay off the fake returns to other investors. They always need more exponentially more investors to keep paying the promised returns, so they always collapse.
Insurance companies give a payout if conditions are met for a claim, they make no promise of investment returns and (with a nod to some annuity products) give none. They don't require exponentially more customers to stay afloat and will not always collapse, some (like Travelers) have been offering coverage for well over a century.
Reality check here. When I was born in a hospital, the total bill for my parents was $200. Those were in the days when most people did not have insurance and the costs were very much a fixed price with cash customers paying the same as what insurance companies paid. Ask what it costs for a hospital birth today and the first question out of the billing department is "Who is your insurer?"
Reality check - when I had a high deductible stop-loss policy, it was cheaper for me to ask what a "cash up front" price would be. In one hospital, three X-rays that were billed at $800 suddenly dropped to $200.
Reality check - take a look at the nice big buildings owned by insurance companies, look at what they spend on advertising. Ask yourself - where does that money come from? Now grasp the concept that a FOR-PROFIT company interceding itself between provider and consumer is, by definition, going to increase the money paid out by the consumer.
Insurance companies do act in unethical ways. If an insurance company can help suppress the cash cost paid by people without insurance, and substitute grossly inflated figures for public consumption, it can frighten people and charge more. Those insurance figures are neither fixed nor accurate as to what is actually paid out.
In the overall insurance businesses, some of them have gone out of business in the past. National Life almost was forced into bankruptcy soon after it was formed in the early 1900s. An investment had construction problems at the same time some of the first payouts were being made. In Florida, after the series of hurricanes, many of the homeowner insurance policies were taken over by "Citizen's" which was a government run insurer. The individual companies were unable to respond to all the claims.
Insurance is not a Ponzi scheme, but that does not mean there aren't schemers. Read through your policies with an eye for exclusions. If you spend a little time, you'll find that many of them have as many holes as swiss cheese. In the 1970s, insurance was a great boon that saved many people. These days it makes many people poor.
Also one needs to keep in mind the reinsurance industry. Company X that is collecting your premium often goes out and buys insurance from Company Y to cover a portion of it's potential claims. It spreads the risk around.
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