Insurance Reform

Issue

   All insurance policies are pyramid schemes that may not be beneficial for everyone when they are examined in greater detail.

Transparency

   Does a typical consumer really know what percentage chance they have being covered by their insurance policy? Insurance companies intentionally hide this information because the result is quite dismal for the policyholder.

   For example, say an insurance company had 1,000 homeowners each paying $1,000 in annual premiums for a total of $1 million. If the average home costs $250,000, then that would mean only 3 out of 1,000 customers would actually be covered by the policy (after the insurance company takes their cut). Having only 3 out of 1,000 being covered per year isn't very good for the customer.

   Even after considering 50 years of paying the insurance company, only 150 out of 1,000 homeowners would be covered. That's pretty dismal. It may be better if that money was instead saved in a separate bank account for emergencies (e.g., 50 years results in a $50,000 bank account compared to a total loss if paid to an insurance company).

   So, the first suggestion for global insurance reform is to require insurance companies to provide greater transparency and fully disclose the percentage chances of coverage for the policyholder (both at an annual and accumulated total). This will be necessary to inform the consumer what they are getting involved with when purchasing the insurance policy.

Territorial Boundaries

   Since some areas of the country may experience a greater number of natural disasters than others, perhaps it would be better to restrict the payout of insurance claims to be limited to within a state's/province's boundaries. Doing so would be more fair for those who would have to pay for others who live in high-risk areas.

Financial Liability

   The total value of insurance policies by insurance companies is greater than the amount of funds that the companies have on hand to pay such claims, making the policies essentially fraudulent in nature.

   Allowing insurance companies to insure more than what they can actually pay is not only immoral, it should be illegal. The problem is so excessive that the global insurance market collectively insures more than what the entire world has available in money. Which provides a false sense of security for policyholders.

   So, the third proposal that should be considered for insurance reform is to require insurance companies to have the necessary funds to cover their liabilities that is not to exceed a certain percentage of the company's capital.