Posted in economics, history | 7 Comments »
How many insurance products are you paying for? How much do you pay? What do you really get for all that? Is it a good deal?
For American families, the list of insurance types they subscribe to includes most of the following at various times, with some variances:
- Homeowner’s or renter’s insurance
- Mortgage insurance
- Title insurance
- Life insurance
- Health insurance (multiple policies)
- Auto insurance (multiple policies)
- Social “insurance”, in the form of Social Security
- Credit insurance, via credit card fees
- Unemployment insurance
- Disability insurance
- Bank deposit insurance (FDIC, and does FSLIC even exist any more?)
All that adds up to a whole bunch of money over a lifetime. With the exception of Social Security — more accurately described as a fraudulent investment scheme based upon extortion — insurance premiums are almost always paid to (generally large) corporations with insurance and/or banking licenses.
Lots of folks will tell you that insurance is one of the best businesses to get into. Why? Because operating as a privileged corporation with an insurance license makes you a member of an elite cartel uniquely positioned to extract massive rents from the market. If an entrepeneur wants to start an insurance business, the barriers to entry are very high: university educations, certifications, licenses, capital reserve requirements, specific corporate and capital structures, legal fees, accounting and audit compliance, government reporting and so on.
There is no free market for insurance today. The economic distortions introduced by artificial barriers to entry, extensive government regulation and all the privileges which attach to holding an insurance license make it impossible to say that anything like free competition in insurance exists. Indeed, because of this, we can’t look at today’s insurance markets for a whole lot of guidance as to what free market insurance might look like.
It’s quite possible that today’s policyholders are being ripped off relative to a free market, in that premiums would be lower absent the distortions. It’s also possible that premiums for some types of coverage would tend to be higher, since many of the distortions can be interpreted as subsidies which allow insurance companies to offer lower rates than possible otherwise. Additionally, providers of mandated forms of insurance might enjoy fewer policyholders.
Much of the insurance market in the United States today is decidedly un-free, though you can spot signs of freer times in some insurers’ names, where they include words like “mutual”. Time was when a lot of the insurance functions being provided today by the state and by large, privileged and even global corporations were handled by local mutual aid societies, industrial sickness funds, benefit societies, rural co-ops, fraternal associations, churches and just plain old good neighborliness within local communities.
The modern insurance system seems to me a great game, a trick increasingly used to enslave people. And with America now heading full-steam toward some sort of either mandated or state-provided health insurance scheme, well… the profits for politicians and their buddies in the insurance and banking industries will be enormous, while the average American is shackled with ever more mandatory premiums and compulsory coverage while service quality falls.
For the agorist, this is a business opportunity.