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mayeram
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Insurance 2012-11-01 17:20:51 Reply

What is the purpose of insurance companies in our modern times? To me it seems like people pay insurance companies money, insurance companies keep some of that money and give the rest to people that need it that are also paying the insurance company.

To me it seems like a method to take money from those that are well off and give it to those that are not well off in exchange for the promise that if a person that is well off gets in trouble, they will be helped too.

Why should people pay an insurance company if they don't think they will take more money from it than they paid into it? Wouldn't it make more sense for people that are well off to just set aside a fund for a rainy day than to pay a company money that they will hopefully never see again?

With the current views that the republican party has of the purpose of government, how can they support the idea of an insurance company?

On the other hand, if you think that the feeling of security that an insurance company gives is important, why shouldn't the general public act as an insurance company? If a company is in trouble, but has been paying the general public its insurance tax, then the public would help the company in their time of need.

JMHX
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Response to Insurance 2012-11-01 17:39:44 Reply

At 11/1/12 05:20 PM, mayeram wrote: What is the purpose of insurance companies in our modern times? To me it seems like people pay insurance companies money, insurance companies keep some of that money and give the rest to people that need it that are also paying the insurance company.

Congratulations, you just described the concept of insurance.


To me it seems like a method to take money from those that are well off and give it to those that are not well off in exchange for the promise that if a person that is well off gets in trouble, they will be helped too.

It has nothing to do with you being "well off," it's called a risk pool. It covers calamities by limiting your risk exposure to potentially destabilizing costs.


Why should people pay an insurance company if they don't think they will take more money from it than they paid into it? Wouldn't it make more sense for people that are well off to just set aside a fund for a rainy day than to pay a company money that they will hopefully never see again?

Cost/benefit analysis.


With the current views that the republican party has of the purpose of government, how can they support the idea of an insurance company?

Because it's a private individual or firm contracting with a private company for private coverage.


On the other hand, if you think that the feeling of security that an insurance company gives is important, why shouldn't the general public act as an insurance company? If a company is in trouble, but has been paying the general public its insurance tax, then the public would help the company in their time of need.

This already happens. Or did you miss that?


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Camarohusky
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Response to Insurance 2012-11-01 19:33:42 Reply

At 11/1/12 05:20 PM, mayeram wrote: To me it seems like a method to take money from those that are well off and give it to those that are not well off in exchange for the promise that if a person that is well off gets in trouble, they will be helped too.

You kidding? ll it gambling, sure. Call it pooly managed, sure But hpng poor off at the expense of the well off? What? The better of someone is the more they get from insurance.

Why should people pay an insurance company if they don't think they will take more money from it than they paid into it? Wouldn't it make more sense for people that are well off to just set aside a fund for a rainy day than to pay a company money that they will hopefully never see again?

People pay insurace because when they run into a proble they will almost always get more back from the inurer thanthey paid. he vast supermajority of those times, they will gt back more money than they make in a year. In somecases more money than they will make in a decade.

orangebomb
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Response to Insurance 2012-11-01 22:47:38 Reply

At 11/1/12 05:20 PM, mayeram wrote: What is the purpose of insurance companies in our modern times?

Simply put, the point of insurance is that it's a financial safety net, in case some dumbass smashes your car, you get injured etc, etc. In a perfect world, we wouldn't need such a thing as insurance, and there are even people out there who think of it as gambling, but in reality shit happens, so that's why insurance companies exist.

With very few exceptions, you will always get more money from insurance than what you'll earn in a year or even longer. Why do you think some people would go out of their way to torch their old car or fake getting hurt? So that they can collect that insurance money, which is so much more than what they're making.


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Jmayer20
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Response to Insurance 2012-11-01 23:27:40 Reply

At 11/1/12 05:20 PM, mayeram wrote:
With the current views that the republican party has of the purpose of government, how can they support the idea of an insurance company?

On the other hand, if you think that the feeling of security that an insurance company gives is important, why shouldn't the general public act as an insurance company? If a company is in trouble, but has been paying the general public its insurance tax, then the public would help the company in their time of need.

I see what you mean. It does tend to go against there philosophy. I think the real reason they support it is because members of the government including those in the republican party get bribed by powerful company's in return for there support. This includes insurance company's. Also you got to remember politicians tend to be hypocrite's.

Saen
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Response to Insurance 2012-11-01 23:48:02 Reply

When you pay an insurance company, you and the company make a bet against each other. For example, when you buy life insurance, you're betting that is it probable that'll you'll die in the near future. The life insurance company on the other hand is making the bet that you're not going to die anytime soon. Same goes for health insurance, car insurance, flood insurance, etc.

Secondly, middle-class people who choose to pay for insurance is similar to paying a mortgage. Most middle-income citizens can't afford the upfront cost of a house all at once, so they take the path of paying in monthly increments. The same goes for insurance, most middle-class American's wouldn't be able to afford the immediate cost of a car accident or a doctor's appointment, so they pay for insurance on a monthly basis. Over time you pay more for a house on a monthly basis rather than up front because of loan interest, just as you may pay more for insurance over time than you may spend for on upfront medical bills.

So paying for most kinds of insurance isn't really a politically-based issue at all, it's a common sense decision.

mayeram
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Response to Insurance 2012-11-05 10:57:21 Reply

At 11/1/12 05:39 PM, JMHX wrote:
At 11/1/12 05:20 PM, mayeram wrote: With the current views that the republican party has of the purpose of government, how can they support the idea of an insurance company?
Because it's a private individual or firm contracting with a private company for private coverage.

Ok, so you would say that the reason that insurance companies are good and the government is bad is because you choose to pay the insurance company, whereas you are forced to pay the government?

Would you be in favor of a form of government where you are not required to pay taxes, but the services and rights you have vary depending on what taxes you pay?

JMHX
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Response to Insurance 2012-11-05 12:15:19 Reply

At 11/5/12 10:57 AM, mayeram wrote: Ok, so you would say that the reason that insurance companies are good and the government is bad is because you choose to pay the insurance company, whereas you are forced to pay the government?

Would you be in favor of a form of government where you are not required to pay taxes, but the services and rights you have vary depending on what taxes you pay?

Not really, because individuals are really bad at planning for long-term needs.


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Camarohusky
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Response to Insurance 2012-11-05 12:27:51 Reply

At 11/5/12 12:15 PM, JMHX wrote: Not really, because individuals are really bad at planning for long-term needs.

Furthermore, such seemingly personal mistakes actually have far reaching consequences for the whole of society.

SmilezRoyale
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Response to Insurance 2012-11-05 16:51:31 Reply

At 11/1/12 05:20 PM, mayeram wrote: What is the purpose of insurance companies in our modern times? To me it seems like people pay insurance companies money, insurance companies keep some of that money and give the rest to people that need it that are also paying the insurance company.

With the current views that the republican party has of the purpose of government, how can they support the idea of an insurance company?

It's a valid concern. Insurance is best when it covers something that is 1. Rare 2. Catastrophic 3. Unpredictable [or more specifically, random, you know roughly the probability of it occurring but your models are stochastic and not deterministic]

You can't solve all kinds of insurance fraud, but you can mitigate the problem of people being cheated of their premium dollars by

1. Trying as best as possible to put people of a similar risk-class in the same risk pool.
2. Denying a claim when it is blatantly obvious that there is fraud involved. For example, trying to collect insurance on a house that burned down due to self inflicted arson, or an insurance claim on a valuable piece of property that the customer is unable to prove was ever stolen or was even ever owned. [My mom worked for an insurance company and that latter scenario happened to her once]

Lastly with respect to the republican party, I'm really at a loss for what kinds of economic views an the average republican or the average republican politician holds, In general I think they're more "demokratik-socialiste" than they give themselves credit for; they just don't like taxes. I don't think a free-market person generally speaking would object to the concept of non-state-run insurance since the contracts are voluntarily entered into.

I wouldn't call this a politics-question per-say, but at unlike many posts this one is at least thoughtful.


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mayeram
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Response to Insurance 2012-11-06 09:55:28 Reply

At 11/5/12 12:15 PM, JMHX wrote:
At 11/5/12 10:57 AM, mayeram wrote: Ok, so you would say that the reason that insurance companies are good and the government is bad is because you choose to pay the insurance company, whereas you are forced to pay the government?

Would you be in favor of a form of government where you are not required to pay taxes, but the services and rights you have vary depending on what taxes you pay?
Not really, because individuals are really bad at planning for long-term needs.

So you are saying that a government is typically better able to decide your long-term needs than you are? Then why object to paying taxes or for that matter why would you object to anything that the government does if they know what is good for you better than you do?

Camarohusky
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Response to Insurance 2012-11-06 10:44:51 Reply

At 11/6/12 09:55 AM, mayeram wrote: So you are saying that a government is typically better able to decide your long-term needs than you are?

Categorically.

Then why object to paying taxes or for that matter why would you object to anything that the government does if they know what is good for you better than you do?

I don't object to taxes. I'm not some selfish piece of shit, nor am I stupid (the only two reasons to oppose taxes).

JMHX
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Response to Insurance 2012-11-06 11:02:45 Reply

At 11/5/12 10:57 AM, mayeram wrote:
So you are saying that a government is typically better able to decide your long-term needs than you are?

It depends. Unlike Camarohusky, I'm not going to say this is categorically true. You asked me about what kind of tax system I'd like, one in which taxes are a mandatory part of citizenship or one where I pay taxes only for services I need.

Being young, this would lead me to optimize earning power by opting out of certain taxes that don't affect me at this time (or ever). In reality, though, taxes have never been about an individual, it's a redistribution of money for some purpose or other. So when you say "only the services I need" or something along those lines, you're misrepresenting the purpose of the tax system.

But yes, on some issues a government (or indeed a private company, like what happens when you buy an HMO insurance policy) being an accumulation of individual data points, is better at structuring services for the long-term than an individual. Innumeracy and economic irrationality are just facts of life that require planning.

Then why object to paying taxes or for that matter why would you object to anything that the government does if they know what is good for you better than you do?

I don't object to paying taxes, on principle. I object to some of the uses of tax money, sure, and to some of the programs that redistribute it, absolutely. But that doesn't make me somehow hypocritical because I believe in the overarching premise of the institution itself.


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SmilezRoyale
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Response to Insurance 2012-11-06 21:45:42 Reply

At 11/6/12 10:44 AM, Camarohusky wrote:
At 11/6/12 09:55 AM, mayeram wrote: So you are saying that a government is typically better able to decide your long-term needs than you are?
Categorically.

I can understand being a cynic and saying that the class of strangers [arbitrarily?] classified as "civil servants" are more enlightened and knowledgeable about the individual lives of the class of strangers who would be classified as "Everyone else" -- But rarely do I see someone include themselves in that group. Not to disparage you personally, it's a pretty consistent and principled stand on an issue.

But it's certainly good cause to make it illegal for people to vote for candidates running for governmental offices.

That said I don't see the whole long term planning thing as relevant to OP, and this is again in response to the OP just to clarify some things.

I can't see a good or bad judgement being passed upon an entire insurance system without knowing...

1. The risk of a disaster occurring
2. the financial impact of that disaster occurring on an individual
3. the premium an individual will have to pay

if #3 is low and #2 is high, and #1 is in the range of between 'virtually impossible' and 'incredibly likely' [but not being either of those particularly] Then the insurance is worth buying. If the premiums are high and the risk-times-financial impact is sufficiently low, then the insurance is not worth buying. And of course in any instance where you can actually save up money to

And, again, of course, it's always possible to do a mix of savings and insurance through the magic of deductibles.


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Camarohusky
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Response to Insurance 2012-11-06 22:03:11 Reply

At 11/6/12 09:45 PM, SmilezRoyale wrote: I can understand being a cynic and saying that the class of strangers [arbitrarily?] classified as "civil servants" are more enlightened and knowledgeable about the individual lives of the class of strangers who would be classified as "Everyone else" -- But rarely do I see someone include themselves in that group. Not to disparage you personally, it's a pretty consistent and principled stand on an issue.

My view is not even based on government or not. It's a 1st person v. 3rd person view. A person who is deciding for their future is always distracted by quick gains and quick comfort to themselves. A third person is not susceptable to the immediate comfort and quick pleasure of the subject. A third party may be vulnerable to corruption and their own gains, but the risks of that a far lower than the risk of a person going for the quick fix over the long term solution.

SmilezRoyale
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Response to Insurance 2012-11-07 11:37:34 Reply

At 11/6/12 10:03 PM, Camarohusky wrote:
It's a 1st person v. 3rd person view.

Fair enough


On a moving train there are no centrists, only radicals and reactionaries.