Insurance companies

[A Karenina]

No.



How on earth would an insurance company "incite mayhem"?



Here's a quick, practical run-down on how insurance companies work:



You are quoted a premium based on many factors - your prior history, your prior claims, current concerns about your future claims...and the remaining factors deal with the amount of funds available to the company - via investments, reinsurance, etc. These factors are also calculated against the type of policy you want, and the potential liability of the company.



Premiums do not cover the cost of claims. Insurance companies must gain additional funds from other sources (see above).



In addition, insurance is one of the most highly regulated industries in the US (I am assuming you are writing from here). There is a special kind of filing that must be done every quarter. This filing is designed to offer the worst case scenario...



If the insurance company closed today, how much money must be put into reserves to pay for all claims which are pending, and which haven't happened yet. The insurance company must honor the term of all policies, whether they are in business or not.

So, insurance companies must file these worst case scenarios, which are examined by external auditors, the state of domicile, the insurance commission, and so on. The insurance company must be able to prove they have the necessary amount of reserves on hand to pay claims - not creditors.

It does not pay for any insurance company to encourage claims. Quite the opposite.



I don't think the same could be said of hospitals, or mechanics, or auto body shops. :p

[A Karenina]

Korbin Dallas wrote: A Karenina you seem to know a lot about the official side of insurance companies but let's not forget that they are often multi national companies and these incitements / inticements could be arranged by people further up the chain than yourself who are, shall we say, less than upstanding.
I think there is a compliment for me in there, so thank you.



I can't deny the possibility that those further up the food chain have different intentions than I do. I speak from the accounting side of an insurance company - and numbers don't lie...however, those who eat better can and do affect which numbers we get to see.



My curiousity is over-active...how would companies incite/intice problems? Can you talk specifically about how you've come to this question? Thanks,



AK

[Jives]

I've got a bone to pick with "Big Brother", whoops..I mean insurance companies. Remember the diving boards at hotels? gone.

Remember swing sets with chains that were long enough to really get some height before you jumped out and broke your ankles? gone.

How about merry go rounds? I mean I consider it every kid's God-given right to fly around in a circle until you either fly off or throw up! Oh, and wasn't it cool when somebody would get dragged underneath? gone.

Jungle Gyms. Oh how fondly I remember the time I broke my arm. Now my poor daughter will never have that privilege. (sigh)

Why? Well I could blame the irresponsibility of people who sue, even after reading the "Swim at own risk" signs. But it's the insurance companies that raise the rates and cause the hotels and cities to remove this equipment.

Soon...we will all be playing with clay in our living rooms because everything else will have been deemed "too dangerous" for us.

[BabyRider]

Couldn't clay be a choking hazard??? :yh_rotfl

[Jives]

Yeah, that's right. They are obviously listening and now my rates will go up, just watch. (sigh) :-5

[A Karenina]

:wah: Too funny!

[Jives]

I'm always worried about those companies. The other day some stupid lady at the quicky mart wanted to... get this...scan my driver's license! Just because I was buying beer.

There's no way I'm going for that. Why should I? So that there can be a permanent electronic record of my alcohol abuse? So that my Medical insurance company can drop me like a hot potato when I'm 60??

My license says I'm 44, it's state issued ad that should be enough. and I only give it to police officers and bank tellers. I told the lackey of Big Brother to go take a flying leap at herself. She got uppity about it and I walked off, making her put the beer away.

[BabyRider]

Jives wrote: I'm always worried about those companies. The other day some stupid lady at the quicky mart wanted to... get this...scan my driver's license! Just because I was buying beer.



There's no way I'm going for that. Why should I? So that there can be a permanent electronic record of my alcohol abuse? So that my Medical insurance company can drop me like a hot potato when I'm 60??



My license says I'm 44, it's state issued ad that should be enough. and I only give it to police officers and bank tellers. I told the lackey of Big Brother to go take a flying leap at herself. She got uppity about it and I walked off, making her put the beer away.
Ah, Jives...I only just got to this reply of yours and I have come to realize...you and I have a LOT to talk about! The "bar code" or whatever the hell it is in that little magnetic strip on my license makes me a bit leery, too. :yh_nailbi Don't like it! Nope! Not one little bit!! Lemme ask you this: What do you think of OnStar? (I'm witholding my opinion till I hear from you...)

[A Karenina]

Korbin Dallas wrote: This makes me think that you were worried that I might know something?
I can't think of a single witticism...I must be losing my touch! LOL

My answer is no, I wasn't worried you might know something. I do like to hear about how other people arrive at things, so I ask...even when it's just bait.

[Jives]

BabyRider wrote: What do you think of OnStar?


Haha...sorry, BabyRider. The part of the country in which I live cannot be reached by OnStar. If fact it's difficult to reach by car. Or space shuttle. Hmmm....when was the last time I saw a caravan? Was it those guys on horses last year?

No, I'm just kidding. But seriously, you know where the Four Corners are? Where the four states meet? Well when someone uses that old phrase "the ends of the Earth" they are literally talking about my neighborhood. There are no big cities for 800 miles in any direction. (except for Albuquerque, but if you've ever been there, you'll know why I don't call it a big city.)

Well what I'm trying to say is....ummm...I know nothing of this "OnStar' of which you speak.

[A Karenina]

Sounds very pretty, Jives. Would you please post pictures?

[Jives]

I'm not sure I have the privliges to upload, but here are a couple of linls to some pics:

I live in the San Juan Mountains, we are close to monument valley so the area ihas both the high mountains and the desert. We are very isolated,and I'd guess about twenty years behind the rest of the country. Things change very slowly here.

We get 277 days of sunshine here, since we are at 5500 feet (over a mile high) the temperature never climbs above 90 and since we are also semi-arid it never drops below 0. Very temperate. With vast forests, beautiful deserts, large fresh water lakes with sandy beaches and no bad weather, we are kind of an American Shangri-La. A small but beautiful unknown pocket, lost in time.

This is close to my house:

http://www.bransonreynolds.com/wswildflowers.htm

But so is this:

http://www.philcherner.com/monument_valley.htm

See what I mean?

[A Karenina]

Shangri-la is a good name! Wow!! It's breathtaking.

[Jives]

Yeah..I guess we kind of take it all for granted. I've always wondered why people don't move here in droves, but I think the name "New Mexico" throws them. Most people don't think we are a part of the US, and those that do suspect we are just a dusty little re-creation of Mexico.

Well...they are missing out!

After I get done posting (and grading papers, which is what I'm supposed to be doing today)

I'm going to drive outside of town (about 5 min away!) drive up Chokecherry Canyon to the high bluffs, make a fire and hang out with my friends on the top (where the view is 50 miles in any direction.)

Later, we might go looking for Anasazi ruins and petroglyphs. I know a few that are not discovered yet. Very Indiana Jones-like, eh? :rolleyes:

[A Karenina]

Jives wrote: After I get done posting (and grading papers, which is what I'm supposed to be doing today)
Are you a teacher? What do you teach, and to what ages?



Jives wrote: I'm going to drive outside of town (about 5 min away!) drive up Chokecherry Canyon to the high bluffs, make a fire and hang out with my friends on the top (where the view is 50 miles in any direction.)
(huge jealous sigh) Sounds awesome!!



Jives wrote: Later, we might go looking for Anasazi ruins and petroglyphs. I know a few that are not discovered yet. Very Indiana Jones-like, eh? :rolleyes:
Very! There's a reason Indy is so appealing, though. The idea of finding things from long ago, and knowing that they are in their natural state...wow! Much more exciting than seeing them neatly lined up in museums (which I also enjoy, but still).

[Jives]

A Karenina wrote: Are you a teacher?


Yep! I'm a strange animal. I began as a fighter pilot, became a rock star for a while, went onto corporate management. Then went back to college, got my third degree and became a Math teacher. In between my careers, I worked in no less than 157 separate jobs. I've been to most of the countries on this side of the planet, a few on the other side, and almost every state of the US. It's truly been the "Forest Gump" life for me.

(Darn. I always sound conceited when I tell people my life story. sigh.)

What do you teach, and to what ages?


I began as the Math Department Head for Mesa View Middle School, but I have my own school now. it's very complicated....It'd be quicker for me to just give you a link to my school's home page:

http://fc.fms.k12.nm.us/~jives/

I run The Transition Academy. A school for kids who are behind their peers because they've had hard lives. a kind of "Educational M*A*S*H Unit." If you will. I handle educational trauma cases. With my help, they catch up and graduate from high school. I am a fixer, I find the problems and fix them.

All of my students are around 14, or 15. Good kids, not SPED, not learning disabled, just "Life got in the Way" It's rewarding in a way that is hard to describe. .....

I absolutely LOVE my job.

[jahamaa]

A Karenina wrote: No.



How on earth would an insurance company "incite mayhem"?



Here's a quick, practical run-down on how insurance companies work:



You are quoted a premium based on many factors - your prior history, your prior claims, current concerns about your future claims...and the remaining factors deal with the amount of funds available to the company - via investments, reinsurance, etc. These factors are also calculated against the type of policy you want, and the potential liability of the company.



Premiums do not cover the cost of claims. Insurance companies must gain additional funds from other sources (see above).



In addition, insurance is one of the most highly regulated industries in the US (I am assuming you are writing from here). There is a special kind of filing that must be done every quarter. This filing is designed to offer the worst case scenario...



If the insurance company closed today, how much money must be put into reserves to pay for all claims which are pending, and which haven't happened yet. The insurance company must honor the term of all policies, whether they are in business or not.

So, insurance companies must file these worst case scenarios, which are examined by external auditors, the state of domicile, the insurance commission, and so on. The insurance company must be able to prove they have the necessary amount of reserves on hand to pay claims - not creditors.

It does not pay for any insurance company to encourage claims. Quite the opposite.



I don't think the same could be said of hospitals, or mechanics, or auto body shops. :p


Hello Karenina

As much as I have learned to respect your opinion on this issue I must disagree.

I think insurance companies havbe turned their industry into one of the biggest scams ever in the history of mankind.

First of all their private companies and yet look at how many instances the government requires us to have insurance. Forcing us to deal with private companies and pay what ever premiums the company asks.

Here in my home state there are two non profit health insurance organizations. Both have raised their rates beyond what a private individual can afford to pay and just in the past few months rates have shot up and low and behold the papers have just broke a story on the amount of reserves these companies have. Billions in one case double the amount required by law yet the rates keep going up. And, man , you wouldn't beleive what the officials of these Not for profit outfits are paid.

Have you ever been owed money by an insurance company? Wait for months to get your money? My brother just waited 4 months for a small settlement on a car accident, less than 2000 dollars. yet if every insurance co. delays payment for 3 or 4 months on each rightfully owed claim can you see the interest earned by them world wide?

I think insurance co. have become just a scam. nesseccary but hardly legit.

[A Karenina]

jahamaa wrote: Hello Karenina

As much as I have learned to respect your opinion on this issue I must disagree.
Jahamaa, so nice to see you again. I sincerely appreciate the way you phrase things - elegant, kind, firm. I may try to copy your skill at this.



jahamaa wrote: I think insurance companies havbe turned their industry into one of the biggest scams ever in the history of mankind.

First of all their private companies and yet look at how many instances the government requires us to have insurance. Forcing us to deal with private companies and pay what ever premiums the company asks.



Here in my home state there are two non profit health insurance organizations. Both have raised their rates beyond what a private individual can afford to pay and just in the past few months rates have shot up and low and behold the papers have just broke a story on the amount of reserves these companies have. Billions in one case double the amount required by law yet the rates keep going up. And, man , you wouldn't beleive what the officials of these Not for profit outfits are paid.
Since I work for a not-for-profit health insurance company, I want to believe that we do business just like any other company. I'm not foolish enough to disregard what you are saying out of hand.



Would you be willing to send the article links about the companies mentioned?



I'm in a hard position at this point, caught between "explaining" it and revealing confidential information. I can tell you that I am required to keep near a billion on hand in cash reserves for one sub-company that is closed.



If a company has more cash reserves, then they are rated as a higher quality insurance company, which brings in more customers, which brings in more revenues, but also brings in more claims...the game is to try and anticipate to the nth degree how those new customers will play out for you. A.M. Best is the company who rates insurance companies. They have a website, and you can look through various financials there.



Some industries, insurance included, run at longer cycles. Insurance has been on a downswing for the past few years. We're now heading into an upswing. We measure performance over 3 and 5 year cycles. Currently, we appear to be profitable according to our numbers. But we must also take into account that we will downswing again. We must have the necessary reserves on hand to see us through that 3-to-5 year period.



Before I started working at this company, I was hell-bent determined that insurance companies were evil, that they denied people affordable health care, etc. Part of my change is probably because I get my bread and butter from them. But most of my change of heart is due to working with those numbers, and seeing the trends.



jahamaa wrote: Have you ever been owed money by an insurance company? Wait for months to get your money? My brother just waited 4 months for a small settlement on a car accident, less than 2000 dollars. yet if every insurance co. delays payment for 3 or 4 months on each rightfully owed claim can you see the interest earned by them world wide?

I think insurance co. have become just a scam. nesseccary but hardly legit.
I haven't been owed money by an insurance company, ever. I've never had a property and casualty claim (knock on wood). My health claims are paid directly by my company, and then I pay the difference. Even when I owe a deductible, I am asked to pay nothing until the claim is processed. Less confusing, they say. I've never had to go through what you brother did.



Claims processing can be time consuming, and is one of the "strategic cores" of our company. There is another company who measures claims and customer service performance among insurance companies, but I can't remember their name right now. Needless to say, some are good and quick, some are not.



(I keep mentioning rating companies because I think it's important that we compare facts in the same industry. We can't compare insurance companies with coffee shops and get any real value from it.)



I can also agree that there are some agents who are total scam artists. Years ago, I worked for an independent agent in Illinois - in property and casualty. By reporting them to the Insurance Dept of Illinois and giving testimony to the FBI, I shut them down. I'm not a hero. According to my accounting peers, I did the wrong thing. I should've just walked out on the job. More on that by request.



I've rambled enough, I think...Insurance is a hot topic. It affects our health and our wealth. I don't think anyone is going to be trusting of an industry that can have so much influence over those very important issues. I don't think people should be trusting of any large business, personally.



I am willing to look at public figures, history, and regulations and from there we can make a better determination.

[A Karenina]

Jives wrote: It's truly been the "Forest Gump" life for me.



(Darn. I always sound conceited when I tell people my life story. sigh.)
You sound like a fascinating person, not conceited at all.



Jives wrote: I run The Transition Academy. A school for kids who are behind their peers because they've had hard lives. a kind of "Educational M*A*S*H Unit." If you will. I handle educational trauma cases. With my help, they catch up and graduate from high school. I am a fixer, I find the problems and fix them.



All of my students are around 14, or 15. Good kids, not SPED, not learning disabled, just "Life got in the Way" It's rewarding in a way that is hard to describe. .....



I absolutely LOVE my job.
I'm happy dancing! It's awesome to talk with someone who loves their job and how found a niche like this. A modern day American Dream story. Sincerely!



I have about a zillion questions for you on the school. I can PM you, with your permission, or we could start a new thread. Please let me know which is preferable. <~~~~ oh look, I'm getting ready for my work mode, where I use formal meaningless phrases to say relatively nothing. LOL.



You and your wife are lovely.

[Jives]

A Karenina wrote: You sound like a fascinating person, not conceited at all.


Aaawww..thanks for that AK. (blushes)





I have about a zillion questions for you on the school. I can PM you, with your permission, or we could start a new thread.


Well, considering the amount of explaining I'll have to do (It's a brand-new concept of a school)

We'd better start a thread. That way anybody that thinks it would be interesting can peruse.



You and your wife are lovely.


Ahem. Yes, she is lovely. Both inside and out, she is one of those girls that can take an Algebra II class ,then go home and make a quilt.

I, however, am handsome! Calling me lovely gives me a funky feeling. :-2

Oh, and to the question of insurance companies, the entire idea is a little flawed. I mean, who thoght of the idea of letting people pay for something bad, before it happens?!! what if it never happens? Like car insurance, what if yo never get in a wreck? Then you paid for nothing.

Of course, the reason this all evolved was because if it did happen, it would be so expensive that you could never pay for it.

Since AK is ou expert, is there any way that the lone individual could save up some money and self-insure? That way when you pay your premiums, you would be paying yourself? You aren't likely to raise the rates on yourself, are you?

What did people do before insurance? They toughed it out! There was personal responsibility and hey! Bad things just happen sometimes!

Here's an example: In the 1870's if you needed a barn and couldn't afford one, the entire community got together and built you one. Why? because that way you became a contributing member of the community and made everyone wealthier.

If the barn burnt down, the community built you another one. People needed each other and tended to look out for each other. If a family was hungry, your family might give them food.

And people realized that life, itself, was risky. If a horse stepped on you and broke your leg, you didn't try to sue the horse breeder or the horse owner, you just hoped your leg healed OK and thought, "I'll be sure to stay away from skitish horse from now on!"

[BabyRider]

Jives wrote:



Here's an example: In the 1870's if you needed a barn and couldn't afford one, the entire community got together and built you one. Why? because that way you became a contributing member of the community and made everyone wealthier.



If the barn burnt down, the community built you another one. People needed each other and tended to look out for each other. If a family was hungry, your family might give them food.



And people realized that life, itself, was risky. If a horse stepped on you and broke your leg, you didn't try to sue the horse breeder or the horse owner, you just hoped your leg healed OK and thought, "I'll be sure to stay away from skitish horse from now on!"
> See? I just KNEW I was born about 100 years too late! What a much more pleasant way to live. :yh_sigh

[A Karenina]

Jives wrote: Well, considering the amount of explaining I'll have to do (It's a brand-new concept of a school)

We'd better start a thread. That way anybody that thinks it would be interesting can peruse.Good idea. I'll start one as soon as I'm done blabbering at ya.



Jives wrote: Ahem. Yes, she is lovely. Both inside and out, she is one of those girls that can take an Algebra II class ,then go home and make a quilt. She sounds smart, sweet, creative, and very talented. Would she be interested in joining our garden here?



Jives wrote: I, however, am handsome! Calling me lovely gives me a funky feeling. :-2 That one made me spit coffee at my monitor when I burst out laughing. Coffee spews are so messy! LOL



Jives, you are handsome, but I tend to avoid those kinds of compliments with new opposite sex friends. They can sometimes be messier than coffee spews, no matter how innocent they are. Sorry about the heebee-jeebies.



Jives wrote: Oh, and to the question of insurance companies, the entire idea is a little flawed. I mean, who thoght of the idea of letting people pay for something bad, before it happens?!! what if it never happens? Like car insurance, what if you never get in a wreck? Then you paid for nothing. Paying for nothing; you mean like our Social Security retirements?



Good point, regardless of my joke. With my perfect no-claim history (brag brag brag!), it could be said I'm paying for nothing. Or it could be said that I pay for security. What if something does happen?



If my house burned down today, my neighbors would put me up for the night, tell me how it sucks to be me, and then send me on my way. (grin)

I'd have lost just about everything I own. Insurance allows me the luxury of feeling secure about my possessions.



I love the stories of yesteryear, too...but that kind of thing doesn't happen the way it used to. We've become a society insulated from each other. We are expected to be self-sufficient. I think in some ways this is a good trend - but overall I think it's really done a lot of damage.



Jives wrote: Since AK is our expert, is there any way that the lone individual could save up some money and self-insure? That way when you pay your premiums, you would be paying yourself? You aren't likely to raise the rates on yourself, are you?If I am the expert, you are all in a heap of trouble! LOL. Oh, and don't forget to download the attached bill for my consulting fees...



Yes, you could self-insure for certain types of coverage. In fact, if you are highly unlikely to have a claim, it's perfectly legal for you to live without certain types of insurance, and you are well-disciplined financially - then I'd recommend you self-insure. Invest the "premiums" in a liquid investment...Lon is our expert on that.



I recently did a long, boring college essay on How I Chose My Health Insurance Policy for 2005. It was breath-taking stuff, lemme tell ya! It's only 2,000 words...let me paste it here for you.

bwahahahaha...ok, sorry, I'm tired and I get very silly when tired.



The jist of the paper was that it was better for me to choose a zero premium policy with a $1,000 deductible (my company kicks in $250) because my anticipated claims expense for this year is less than $600, barring any unforeseen accidents. For me, this beats my policy from last year where I paid over $1200 in premiums, a $250 deductible, and I had about $800 in claims expenses (total).

Of course, it was a finance class, so I rambled on about investing the savings, using time value of money calculations, etc...I think it will be a classic short story some day.



Point being, you're right in some cases. You can do the same thing with taxes, too. The only catch being that you really need to make sure you have the funds should an emergency arise. I do not recommend this with large investments like your home because the likelihood of you being able to save for major repairs without hurting your retirement is usually small.



But, go ahead and increase those comp and collision deductibles, for instance. Immediately start saving/investing the difference in your premiums. And again, make sure you have those deductibles on hand just in case.



Not sure if this helps?