Insurance Reform

Transparency

   Insurance companies are not very transparent regarding their policies. Does a typical consumer truly know their chances of being protected by their insurance policy?

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

   Even after considering a longer 50-year period, only 150 out of 1,000 homeowners would actually be covered by their policy. That's pretty dismal. It may be better if that money was instead saved in a separate bank account in order to cover potential damages (e.g., 50 years results in a $50,000 bank account compared to a total loss of money if it was paid to an insurance company).

   Insurance companies should be required to provide greater transparency regarding their policy's chances of coverage, both at an annual and accumulated total rate.

Forced Participation

   Due to the general nature of all insurance policies being essentially pyramid schemes (where there isn't a guarantee that everyone will benefit), it would be immoral for governments to force their citizens to purchase insurance for any reason.

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   For example, requiring drivers to carry auto insurance or they may lose their driver's license as a result. Or, requiring citizens to purchase health insurance or pay a hefty fine (e.g., original version of Obamacare in America). Or, force citizens to participate in a retirement pension plan (e.g., Social Security), which violates a person's civil rights.

   As shown in the example above, it may be better if a person saved their money in a separate bank account than pay insurance companies their annual premiums. If governments force their citizens to purchase insurance policies, consumers lose their ability to make a choice in the matter and it may cost 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., California fires, flooding near coastal areas, etc.), it may be better to restrict the payout of such claims to be limited within a state's/province's boundaries. Doing so would be more fair to those who would otherwise have to pay for those who live in high-risk areas.

Financial Liability

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