Posted by admin on March 6th, 2010
There are so many different versions of the idiom. Try, “Expect the worst. Hope for the best.” or “Expect the worst and you’ll never be disappointed.” or “Prepare for the worst. Plan for the best.” You get the idea, particularly when it comes to dealing with your insurance company. It’s a strange reality but, no matter where you go, insurance companies always seem to have a reputation that, as a policy holder making a claim, you will end up like something the cat dragged in. The problem we all face is the profit motive. Although it would be great if every large corporation was full of the milk of human kindness, the directors and executives are driven by the desire for more wealth. They seize every opportunity to take the extra dollar for giving us less. In the case of insurance, the companies are rather like the big bad wolf that blows your house down rather than paying to repair the leaking roof. So you always have to plan on the basis you will be in for a fight if you make a claim. That means opening and keeping an up-to-date file on everything you say to the insurer about the policy and any claims you might make. The more comprehensive your records the better. If you must speak to a representative of the company, whether in the flesh or on the phone, get a name and always write a letter confirming what was said and what, if anything, was agreed. Yes, it will take up a few minutes of your time. But you should always be able to produce contemporaneous records – a day-by-day record of representations, promises and action.
You are rolling your eyes. All that hassle. Why bother? Let’s take Massachusetts as an example. Five of the largest companies insuring vehicles all managed to make the same data entry mistake. There is this wonderful “place” called the Comprehensive Loss Underwriting Exchange (CLUE). All companies pool information about the drivers they insure. One of the more important pieces of data is whether the driver is “at fault” in a traffic accident. If you are found the “guilty” party, this justifies loading your premium with an increase. What happened in this US state was the five insurers routinely recorded anyone making a claim as being “at fault”. There was no investigation, no court case with a judge deciding one party was at fault. The insurers simply wanted to justify increasing the premiums so assumed fault from the fact of the claim. Fortunately, the people of Massachusetts are well organized. They had a paper trail for every claim and, when they reported the behavior of the insurers to the State Attorney General, this resulted in fines paid by the companies and a recalculation of all the premiums with a full refund to everyone affected. Read the rest of this entry »
Posted by admin on March 6th, 2010
The market for insurance in the US is somewhat unusual. In most every other line of business, companies are allowed to compete with each other across state lines. This helps to keep pricing and the quality of the product to higher levels and protect the consumer. But, the insurance industry is licensed and regulated state-by-state. There’s no such thing as a federal insurance policy. You have to buy a policy written by a company licensed in the state where you live. This is frustrating because, if you live near the border, your friends and colleagues at work probably tell you how little they pay or complain you have the better deals. Either way, it’s not very fair. Worse, the companies often decide not to set up in all fifty states, but pick and choose where they will operate. The result is that many states only have a small number of licensed insurance companies. Because there is no real competition, their premium rates tend to be high. This produces a big political divide. In Republican states, this is the free market at work and no intervention is necessary. If you do not like this, move to another state which has lower rates. In Democratic states, there is more interest in protecting consumer interests. Some states have intervened in their local markets to introduce “managed competition”. Needless to say, this has outraged the insurance industry and the insurance agents who survive on the commission earned from the insurers. There have been heated debates between the lawmakers. Where the local Department or Office of Insurance has produced new rules, they have been referred to the local courts. Who would have thought helping millions of average people to save money on their premium rates would produce so much heat. Read the rest of this entry »
Posted by admin on March 5th, 2010
Let’s leave the politics of healthcare reform to one side and focus on a proposal to change the law to allow free market competition between insurers in different states. A policy consistently mentioned by the Republican party is to break the state monopolies in the insurance market. Since the 1800’s, the individual states have claimed the sole right to regulate the sale of insurance within their own borders. Each state has asserted the right to license insurance companies and to set the terms on which they can conduct business. This has led to a patchwork of different sets of regulations with each state creating unique laws. In turn, this forces an insurance company to set up separate subsidiaries to trade in each state. No licensed company can sell a policy to someone who has a residence in another state. There was a brief moment in 1944 when a decision of the Supreme Court allowed the possibility of federal supervision. But the lawmakers in Washington immediately changed the law to retain state control. Why is this a bad thing? The national insurance companies have divided up the states between them and choose not to compete against each other. This keeps the number of insurance companies in each state artificially low and, because there is no real competition, premium rates are higher than they should be for weak policy terms.
You are reading this article on the internet. When online, you can buy more or less any product or service across state or national boundaries. Although there are some restrictions, e.g. some states limit your right to import drugs from foreign countries, there is an almost free market where you can search for the cheapest price and buy whatever you need. There is no possible economic justification for retaining this historical privilege for insurance companies. All it does is preserve their ability to maximize their profits at your expense. For example, in Minnesota three insurance companies dominate 80% of the market for health plans. There is no doubt that, if more companies entered the market, the premium rates would fall. During his run for President, Senator John McCain was in favor of free markets for health plans. President Obama supports it and the proposal is in both versions of the healthcare reform bills currently stalled in Washington. But because the Republican party’s only policy is to oppose everything the Democrats propose, it seems even this simple change in the law may be lost. What will the result be? The anticompetitive behavior of the insurance industry will continue and you, the consumer, will suffer. Read the rest of this entry »
