It is not the purpose of this blog to make popular statements. It is our purpose here to expose you to truths about insurance in general today and, in our next blog, health insurance—truths that have by-and-large been lost in today’s discussions on the subject. With over forty years’ experience in the field of health insurance, I’m in an almost unique position to discuss this subject.

Of all the political leaders you’ve heard discuss the subject in recent years, how many have any real experience in the field? How many have vested interests in getting you to support the programs they espouse—and their own re-elections? Having retired from the business and owning no stock in health insurance companies, I have no vested interest except disseminating the truth.

The only reason that insurance companies can underwrite your potential losses is that none of us can know what the future holds. If we did, either we wouldn’t buy insurance or they wouldn’t sell it to us. Today, we’ll discuss insurance in general. Then next week we’ll home in on health insurance.

Over the last 60 years of driving motor vehicles, I’ve never been involved in a serious accident. Does that mean I couldn’t possibly have one tomorrow—or next week—or next month? Of course not.

If I knew absolutely that I was going to have a bad accident next week, or whenever, I’d probably want to increase my policy. On the other hand, if I knew for sure I’d never have one, I’d likely quit paying for the stuff. Waste of money.

Conversely, if my insurance company knew I was going to have an accident next week, they wouldn’t consider letting me increase my policy. In fact, they’d be apt to cancel it so they could avoid that claim. But if they knew for certain I’d never have one, they’d love to see me increase it.

INSURANCE WOULDN’T WORK IF WE KNEW WHO WAS GOING TO HAVE A LOSS WHEN. Only a vote-seeking politician would try to convince you otherwise.

Okay, if no one knows that, how do they set rates? Looks like they’d have to know before deciding what to charge.

The key is that they don’t know WHO will have an accident this year—or WHO will die this year—or WHOSE house will burn down this year, but they DO know approximately how many accidents there will be this year and what the dollar cost will be. And how many people in a given age group will die this year, and how many houses will burn down this year and what the financial loss will be.

It’s only because actuaries can figure nationwide (or statewide) totals but cannot pinpoint what individuals will suffer loss that insurance is possible.

Everything so far is pretty much common sense. Almost anyone—at least those not living within the Beltway—can understand these things.

We wouldn’t expect an insurance company to sell us a policy to cover a car wreck that happened yesterday. A life insurance policy to cover Aunt Sally, who died last week. A homeowner’s policy on a house destroyed in last night’s tornado. Trying to collect on such things as that is called fraud, and that can’t be allowed to happen.

Ever hear someone make this statement? “Well, it’s only insurance company money.” Or “Insurance companies have plenty of money. They’ll never miss it.”

This is one of the Great American Myths: INSURANCE COMPANY MONEY.

There is no insurance company money—it’s all POLICYHOLDER MONEY. Insurance companies get their money from premiums paid by you and me. If we inflate their costs by allowing fraud or unreasonable government requirements, we simply take more money out of our own pockets.

We’re the one’s paying the bills, and we should demand that ONLY LEGITIMATE BILLS BE PAID. Regardless of how much we may feel sorry for whoever is involved, payments must be governed by POLICY PROVISIONS—not emotion.

Ø How would you feel if you knew money was being siphoned out of your pocket to pay illegitimate claims?

Ø How about someone who cheats an insurance company by getting a mechanic to raise his bill a little and not charge you a deductible?

Ø Someone who was robbed and threw a few extra items into the claim?