Insurance Reform

Transparency

   Insurance companies are not very transparent regarding their coverage policies. For example, does the average 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 their policy (after the insurance company takes their cut). Which isn't very good odds for the policyholder.

   Even after considering a longer 50-year period, that's still only 150 out of 1,000 homeowners being covered while 850 lose out. That's 85% not being covered after 50 years.

   After considering this, it may be better for consumers to save their money in a separate bank account to cover any potential damages. If so, then the $1,000 per year in insurance premiums may be invested elsewhere such as the stock market. If that was done during the past 50 years, the amount could have grown to $1,164,026 with historical averages being considered.

   That seems to be a better result than a total loss of money if the premiums were paid to the insurance company. Again, that applies to 850 out of 1,000 policyholders over a 50-year period who won't be covered by their policy.

   To ensure greater transparency and to protect consumers better, legislation should be considered that requires insurance companies to provide accurate information regarding their customer's 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 being a pyramid scheme where there isn't a guarantee that everyone 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, requiring 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 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 than pay insurance companies their annual premiums. However, if governments forced their citizens 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 particular state's/province's boundaries. Doing so would be more fair to those who live in safer regions compared to those who live in high-risk areas.

Financial Liability

   Insurance companies typically insure more than what they are able to pay out in claims. The problem is so severe that the industry has insured more than what the entire world has available in money. Which is fraudulent to say the least and provides a false sense of security for policyholders. Legislation should require insurance companies to have the necessary funds to cover the payout of all their policies with the total amount not to exceed their company's capital/reserves.