Definitions: Insurance (n): contract that guarantees compensation for theft, damages, etc., for a fee
Ensure (v): to protect
Assure (v): 1. a guarantee; 2.to confirm confidently; 3. (Brit.) insure
Risk(n): hazard: a source of danger; a possibility of incurring loss or misfortune; 2 a venture undertaken with regard to possible loss or injury; 3. expose to a chance of loss or damage; 4. Gamble
Source
This is a re-visiting of an old column wrapped in new, different issues and terms. This addresses the battle in Congress concerning the Affordable Care Act of 2009 aka “ObamaCare”.
I direct attention to the definitions at the masthead of this commentary. It’s been added to in this case by addressing one of the key component elements of the Insurance Industry – the gradation, quantification and acceptance or denial of RISK.
The Insurance Industry was originally developed under the understanding there was a business entity taking a risk on the happenstance or non-happenstance of certain devastating circumstances in life. You remember, don’t you?
LIFE INSURANCE – insurance taken out to protect your family in the event of untimely death. AUTO INSURANCE – insurance taken out to protect your interests in the event of an unpredicted traffic incident resulting in damages.
All insurance is issued with the knowledge there’s a risk something could happen. Actuaries study and analyze statistics, trends and the safety advances of other industries. They develop the odds of any particular event occurring to cause a pay-off to an insured when the event happens. They decide either for or against the issuance of coverage. At least that’s the way it once was. Doing this does NOT involve taking on risks known to have a pay-out before the fact.
Insurance (believe it or not) is a necessary and vital element in the financial health of the United States and the world. The Insurance Industry is responsible for BILLIONS of dollars of investments causing safety improvements in industries few people would believe. For example the Auto Industry’s been subsidized and prodded by insurance companies to improve crash survival statistics and the physical construction of vehicle to make them safer.
Health insurers have forced improvements in hospital, hospice and care for the elderly and children resulting in numerous advances cutting mortality and morbidity during the treatment of injuries and disease. We need insurance companies. Arguably the failure of the Insurance Industry in America could have devastating, destabilizing economic consequences. We’re talking hundreds of billions of dollars controlled by these companies worldwide. This would have an effect if it was all paid out at one time. This is bad enough as a hypothetical question and far from real as the horizon is viewed today. But the entire picture has to be inspected concerning the industry’s stance in this matter and the manner government influences or interferes with it.
We can see there’d be a devastating impact to the industry if all claims were honored at once. But the industry wouldn’t go bankrupt (in my understanding). It would sure as heck lose its dividends for a period of time. And, I fear this is the case more than most people are admitting. Curtailed profits lead to diminished investment. Diminished investment leads to economic downturn and recession, if not depression.
It’s not about the reparations due people holding the policies as many of them see it. It’s about the Benjamins; the profit the industry’s investors have enjoyed for years and now expect each quarter.
And, the Obama Administration demanding the insurance industry extend coverage to an already recognizable detriment i.e. “pre-existing conditions” is a problem. The Obama Administration’s stance this will not cause deviation in the National Deficit is more a matter of asking whether they’re kidding themselves or us. But, the insurance industry is NOT a government protocol to be enforced. It’s capitalist and therefore profit oriented.
Back to the Benjamins.
(Next week we’ll look a little closer at the problem)
