Jack is a gambler. However, he does not bet on card games or slot machines.
Jack: Hi, I want to place a bet on my actions at a place called State Farm. I will bet 200 dollars a month I will get into an accident soon. And if I do, I bet the accident will be more costly than all the money I put into this bet by the time I actually get into the accident.
State Farm: Okay sir, and if you win this bet and we suffer a net loss, then understand that we will raise your rates to compensate for the loss if you wish to continue with the gamble. If your accident isn't expensive and we can cover it without suffering a loss, we will still raise your rates. If you drop out of the gamble, we will require you to give up your privilege to drive.
Jack: So... the only way I won't suffer a net loss of money, which is why I'm making this bet, is if I either wreck into an insanely expensive vehicle or if I nearly kill someone??
State Farm: That's right. Also, we will fight you and try to make you pay for as much of the accident as possible. If we can't do that, we will drop you and you will have to give up your driving privileges.
Jack: Oh, I see.
If you want to drive, you MUST gamble.
It's the law.
That can't be right. I must be missing something that justifies insurance.
That can't be right. I must be missing something that justifies insurance.
If Jack wrecks into the insanely expensive vehicle the owner of said vehicle doesn't have to pay for the damages Jack's insurance does. This prevents individuals not at fault in an accident from being punished for others actions.
Nope, you aren't missing anything about insurance. That's all it is. People pay money monthly so that if they ever need it then they have the insurance, and insurance companies determine rates and eligibility based on factors which make their clients more or less likely to need their services. It's just one big huge gamble.
i don't have insurance, and i havent gotten into a wreck or anything since i was 16, when i started. its clled drive safely, and only when you need to. plus its a small mountain town, and if i did wreck, i could just go get it with my backhoe.
This prevents individuals not at fault in an accident from being punished
But other individuals are punished. The insurance rates for everyone else are raised. The more other people get into accidents, the more money you have to pay.
If Jack get's into an accident, it saves Jack and the guy with an expensive car money, while it everyone else covers the cost with raised rates. That's why insurance companies make young adults pay more money, to compensate for the loss.
I understand that without insurance, the guy with the expensive car would lose a lot of money. However, someone always loses.
Also Accident Forgiveness?
Another way of saying "You already gave us thousands of dollars throughout your life time, we'll lower your rates because we are not confident you won't cost us any more money than what you already payed."
In my (very limited) experience, insurance is a rip off. The fact that the law helps it rip off many, many people indicates teamwork.
Actually it is the laws which are a rip off. For instance, I'm sure many of you heard the case of the woman who spilled her McDonald's coffee on her lap and was awarded over 2 million dollars in damages. Who do you think pays that money? The insurance company that insures McDonald's. They also had to pay her legal fees and other expenses.
In order for insurance companies to stay in business they must make more money in payment than they have to pay out in claims. This is fairly obvious, but then look at how many millions are paid out for ridiculous claims, or claims that may warrant some monetary compensation, but definitely not millions of dollars.
This is also closely tied to the costs of healthcare, especially here in the US. Hospitals must carry millions and millions of dollars worth of coverage, and every time someone on the staff makes a mistake (they are human, after all) millions are paid out, whether the mistake was severe or minor, not to mention the many wrongful death suits filed annually, most of which have nothing to do with negligence on behalf of hospital staff. Even if the filers don't make any money the hospital's insurance company has to pay legal fees to the lawyers who handle the cases.
It is not the insurance companies who are ripping us off, it's the government which allows repeated frivolous lawsuits, grants outrageous sums of money for damages, and refuses to step in to reduce these monetary grants paid out by insurance companies.
The insurance industry is about risk management. The insurance company takes a risk by insuring people. They charge based on a number of factors. For cars, they adjust the price based on your age, gender, accident history, type of car, and how high your deductible is. In my case, I've had zero accidents in the 6 years I've been on the road. I've paid $330 every six months which comes to $3,960 for them. Their risk is paying off so far. My brother on the other hand has been in multiple accidents. The insurance company he is with has shelled out around $10,000 to repair his cars, even though they've only collected around $5,000 in payments from him.
In the world on insurance, you win some and lose some. It's called risk management because they have to price their customers at a rate where they can most likely make a profit, while still keeping the rate low to attract customers.
In the world on insurance, you win some and lose some. It's called risk management because they have to price their customers at a rate where they can most likely make a profit, while still keeping the rate low to attract customers.
Very true. However consider what would happen if that company had to shell out $10 million on your brother alone? Rates would go up for everyone, on account of only one person. This is the issue with our legal system not placing a more reasonable cap on monetary awards. One guy gets whiplash, is awarded 5 million dollars in damages, and everyone else suffers through increased rates, increased coverage requirements, et cetera.
well lets say you run into a nice looking Ferrari, and you dont have insurance. you pay all that money from your pocket. if by any cahnce you couldnt pay it off, you could go to jail. Even if its corrupt thats the way it is, and its not worth the risk
Here is where I disagree with you. How many nice looking Ferrari's and other super expensive cars are on the road? How often do people wreck into them. How often do people wreck in general? How often are the damages more than what someone can afford out of their back pocket?
I personally think it is worth the risk. It's almost worth the risk driving around without insurance, but cops are a bit too abundant where I live.
In the world on insurance, you win some and lose some.
Actually, you just lose some to lose a lot.
They charge based on a number of factors. For cars, they adjust the price based on your age, gender, accident history, type of car, and how high your deductible is.
It's all discrimination. If you're a big company and you decide to make blacks pay more money on a product than whites, you get the gov. up your ass for being a racist. Not with insurance though.
Granted, if insurance was based off flat rates that only increased for people who got into accidents, then insurance companies would lose money. It's the only way they can make money... to discriminate.
Almost everyone loses money when buying insurance. Almost everyone is getting ripped off. As was mentioned before, another reason why insurance is so high is because of ridiculous law suits.
In short, it's hard to allow most of the people who have insurance to win without going into debt. There's just no winning, for anyone.
In short, it's hard to allow most of the people who have insurance to win without going into debt. There's just no winning, for anyone.
I think you should read listman's post a bit more carefully. Basically you can lose if you don't get into an accident but your rates will stay low or you can win if you do but your rates will increase. Personally I like the protection even if the system could be made better.
