Insurance - Legitimate Business to Consumer Scam

Today's issue is about insurance, what it was and that into which it has morphed.

A long time ago (I haven't taken the trouble to research exactly when), some people took note of certain costs that a lot of people routinely encountered and figured out a way to make it cheaper to afford those costs.  They set up a risky, legalized gamble where they would collect certain small sums of money from large groups of people as security against a future loss, and then when a loss occurred, they paid for the loss using the proceeds from the monies they had already collected.  The idea was a pretty good one, and soon enough, it caught on like wildfire.  Insurance became less of a risk because the odds, which the insurance companies researched as deeply as they could afford to without adding to the potential losses, were pretty good, as long as the insured people were honest and didn't file too many false claims (and get away with them).

After many years of these practices, the sharks moved in and took over.  They figured out that this insurance stuff looked pretty lucrative, and they could make it even more so with an number of provisos.

First, they had to prosecute false claims.  Then, they arranged to make it a serious crime (probably with massive campaign contributions) to defraud an insurance company.  Gradually, they expanded insurance to the point where it covered lives, property losses, health care costs, car damages, liability for damages in virtually all areas, and more.

But it was still a risk.  When people had catastrophic losses, they expected to be able to collect astronomical damages, maybe even more with punitive or exemplary damages as well.  So, the insurance companies went to their friends in the legislatures again (and we all know that these are the kinds of friends that money can buy, over and over again, with or without term limits - probably more in the latter case) and arranged to make automobile insurance a legal requirement for a person to be able to register a vehicle.  They went to the banks and mortgage companies and convinced them that a mortgage wasn't safe without casualty insurance on the property.  They went even further and convinced the bankers to require title insurance on every sale of real property, which reimburses the buyer (i.e., the buyer's lender) if the property turns out not to have been owned by the seller.  (How often does that happen in real life?)

They even managed to convince the lawmakers that the costs of the fields that were insured could be brought down by placing legal limits on how much an injured person could collect from insurance (in the guise of the insured ones who caused the problems and were shielded by the insurers).  To everyone's surprise (haha), insurance premiums did not go down, but insurance company profits went up!


Then there were mergers and acquisitions, and each time the insurers grew richer and bigger, and the laws changed to allow them more and more latitude.

And still it wasn't enough.  There were risks that they might not be able to wring every possible dollar and cent out of an increasingly impoverished clientele (a.k.a. the public - you and me).

So they went back to the lawmakers and arranged to be allowed to cross the lines that were established to prevent another depression, like 1929 and its aftermath, so they could go into business with bankers, credit card issuers and other financial institutions.  They became too big to fail (which really means that they were so big that their failures would cause economic damage on a global scale yet to be fully realized).

Finally, they created the most colossally unbelievable financial insurance of them all - credit default swaps, commonly known as derivatives - as a way to insure against the loss of an insurance policy on a financial instrument that might actually have some value.  In other words, they created insurance for insurance.

A lot of this has been going on for years and years - decades, actually, but it was all carefully kept secret, hidden away from prying eyes of the average person who a) wouldn't understand what it was, b) couldn't possibly collect any money from it anyway, and most importantly, c) might think these things were pretty fishy and try to get them taxed or outlawed.

In the spring of 2008, to the great consternation of people who were completely ignorant of all of these things, some of these now gigantic insurance schemes began to unravel.  By fall, the unraveling could no longer be hidden even from the mainstream propaganda media, and more and more massive losses, staggering losses, began to pile up as first the real estate market and then the derivatives market began to fall apart.

So, the banks/insurers/credit-card-issuers, who can never get enough of our money, not even if they have all of it, pulled the greatest scam of all - they went back to their favorite toys, the lawmakers of the land, and convinced (most likely through covert bribery, also known as campaign contributions, overt bribery and outright blackmail) them to cover their losses with "tax money" (really just paper printed by the biggest insurance scam artist of all, the Federal Reserve, whose money is not even real money) because they had no prayer of being able to do so themselves.

After all, a lot of them were too busy going on multi-million dollar luxury cruises and buying expensive cars, land or other property that was also losing its value at a staggering rate.

Now we, the taxpayers of the United States, are getting stuck with a bill that has been predicted may run higher than $25 TRILLION, which is just less than half of the current market value of the entire resources of planet Earth, and enough to enrich every nation on the planet except - oh, yeah, U.S.

That's what insurance is all about.


Come back soon, when I'll talk about just how wonderful a thing health insurance is and why we need to reform it so the insurance companies can make even more money!

Just my $0.02, and not even worth that much (in 1960's equivalent copper pennies) any more....