Insurance Reform

Transparency

   Insurance companies are not very transparent regarding their coverage policies. For example, does a typical consumer really know the odds of being protected by their insurance policy?

   Suppose an insurance company had 1,000 homeowners each paying $1,000 in annual premiums. That would result in a total of $1 million per year. If the average home costs $250,000, that would mean only 3 out of 1,000 households would actually be covered by the policy (after the insurance company takes their cut). Even after a longer 50-year period, that's still only 150 homeowners being covered while 850 lose out.

   After considering those lousy odds, it may be better if the money was saved in a separate bank account to cover any potential damages. If so, then the $1,000 per year in insurance premiums may be invested in the stock market. If that was done for the past 50 years, the amount may grow to $1,164,026 with historical averages being considered.

   That seems to be better compared to a total loss of money if the premiums were paid to the insurance company over the same period. Again, that would apply for 850 out of 1,000 policyholders over a 50-year period.

   To ensure greater transparency, federal law should require insurance companies to provide statistical information regarding their chances of coverage both at an annual and accumulated rate. Such clarification should be required in all advertising as well (e.g., our policy protects you 0.003% of the time).

Forced Participation

   Due to the nature of insurance essentially being a pyramid scheme where there isn't a guarantee that every participant will benefit, it would be unethical for governments to force their citizens to purchase insurance policies for any reason.
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   For example, governments that require drivers to carry auto insurance or they may lose their driver's license. Or, requiring citizens to purchase a health insurance policy or end up paying a hefty fine (e.g., original version of Obamacare in America). Or, force citizens to participate in a retirement pension/insurance plan (e.g., Social Security).

   As the above example shows, people may be better off if they saved their money in a separate bank account and invested their money rather than pay insurance companies their annual premiums. However, if citizens are required to purchase insurance policies, consumers lose their ability to make a choice in the matter and it may end up costing them in the long run.

Territorial Boundaries

   Since some areas of the country may experience a greater number of natural disasters than others (e.g., fires in arid regions, flooding near coastal areas, etc.), it may be better to restrict the payout of insurance claims to be limited within a state's/province's boundaries. Doing so would be more fair to those who live in safer regions than to pay for those who live in high-risk areas.

Financial Liability

   Insurance companies typically insure more than what the company has in capital than they are able to pay out in claims. The problem is so extreme that the entire insurance industry as a whole has insured more than what the world has available in money. Which is fraudulent and provides a false sense of security for policyholders. Legislation needs to be considered that requires insurance companies to have the necessary funds to cover their policies that is not to exceed their company's capital.