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Does Insurance Industry runs on Scare Tactics

BY: Swati | Category: Others | Post Date: 2008-10-24
 



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   Swati
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Yes, if you think about the model of any kind of insurance ( health, home, life or car insurance), it means a group of people contribute towards a common fund, a part of that fund is used to pay the salary of insurance companies, another to fulfill the insurance claims and some goes towards the overall profit of the company. The scare people by telling that you should have insurance, because what if a disaster happens to you, the possibility of which ever happening is 0.0001 percent.

The worse part is when you actually go to get some money from these companies as a part of claim, they try their best to give you the minimum possible payout. From where I see Insurance industry is basically employing the scare tactics to generate money and for their employees. There have been studies which claim that atleast 30% of money that goes in the insurance pool goes towards the management fees and salaries of insurance workers. For simplicity sake, say $100 were contributed, only $70 is left for claims rest is all the fees and salary of insurance company itself.

The story does not end here, there is additional overhead where you actually use the service. For example if you visit a doctor, the doctor (or his staff) himself spends a considerable time dealing with insurance companies. this additional cost is eventually passes on to us in some form or the other back to us. The bad part of insurance is that people who are healthy and careful actually pay indirectly for unhealthy and careless people. Therefore the biggest ploy which insurance industry plays with you is "What is an emergency situation happens". I have been paying for my car insurance for the last 10 years but never did I ever use them. Even if you want to use there are deductibles, co-pays etc ..

Why can't we do things the old fashioned way, if you are sick, just go to the doctor. But we do need a common insurance cover which can be used in case of an accident, disaster or acute illness, which should be in control of a non-profit organization. People pay home insurance throughout their life, frankly I do not think that not more than 20% people must be ever using it for major issues. When we go to a doctor, they do additional tests just because they can make a case for insurance company, we should just pay for these things out of the pocket. This will help the cost of many services to use become extremely cheap. If the claims and payout ever become too high, an Insurance company can always go under by declaring the bankruptcy ( I suppose).

There are certain cases when we really need insurance and payout for insurance company is bigger than the total of what you have contributed ever, but by paying that money they are not doing any favour, they are simply redistributing the contributions they receive from all the customers.

Its nice that insurance sector provides employment to thousands of people, but unfortunately the basics of this have been forgotten. Insurance was just an emmergency day fund, not something we use very frequently like health insurance. Even though it's optional, but if one does not have it you are basically helpless.

I hope some day these scare tactics of the Insurance industry backfire and we are left with the good old way.There should be just one emergency fund run by a non-profit institution and not an insurance fund for every small thing.

To get a complete list of insurances we have today, see en.wikipedia.org/wiki/Category:Types_of_insurance

These are my personal thoughts and nothing more.

Article Source: http://www.saching.com



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