Is Insurance Structurally Feral?

It is happening again.

Nobody talked about it the last time, and they are not talking much this time either. All across the country companies are closing their doors. Not because they cannot get customers, though that is a much talked about part of the issue, and not because the banking system is frozen, though that also is a big part of the cause. But there are many companies who could both be customers and have customers, and are not dependent on bank loans to stay in business. These companies are going out of business for lack of any or affordable insurance. Many individuals are also finding themselves in similar straits making themselves poorer customers even if they have a job still.

As long as there is plenty money to be made speculating with other people's money (and even AAA rated obviously carries the risk that it is not) Insurance companies are expansive, writing as much as possible, making unsustainable profits in the use of money, even if the actual insurance gamble is break even at best. Then as always the bubble bursts.

Now suddenly the geniuses who made great incomes when the bubble was growing do not want to see any losses, and there is not so much to be made speculating no matter how much cash is available anyway, so suddenly loss of customers is not a bad thing, especially if you get a lot more profit from the customers you don't lose.

So now that the economy is on its knees the long knives come out to make it worse. Normal business insurance that rarely sees losses may just increase tenfold in cost because the Insurance company needs the extra profit, and more money from fewer people lowers their own exposure. And places like Florida or the Gulf Coast who are very high cash when cash is flowing become suddenly unacceptable risk when raw cash is not as useful, and those who would actually pay claims abandon those areas to ripoff and run operations who will just go bankrupt if there is any major claims.

Each Insurance type will operate slightly differently because the arithmetic is different, but while they will claim secret vetting, and some will do more of what they promise for the money they charge, without some embedded scam there can be no profit. And without a guarantee over time that serious losses will be made up, an actual free market would dump the burdened Insurance company for the one without past promises to keep. In short the Insurance company has to do the job of a government, but is managed as a Pirate Fiefdom, collecting the taxes but avoiding paying the bills, and with little to hold them accountable.

I already wrote about Health Insurance a while back and the Gapminder that showed differences between countries now also shows some information about different states as well. This particular view shows an assortment of states with the accidental deaths per number of vehicles to be fairly constant no matter the size of the state. Those above the diagonal are doing better than those below who have more deaths per vehicle and those moving toward the upper left are improving over time, the red pay higher insurance rates and the blue to green lower rates.
As one can see Texas and Florida have nearly the same numbers but Florida pays much higher rates, similarly with Illinois and New York. The link above goes to similar settings where it is even more dramatic. The live Gapminder there allows you to adjust what you are looking at .

What the Gapminder shows is that risk of deaths is quite unrelated to the price of insurance beyond that there is an increase in price nearly everywhere, even when the number of cars or number of accidents ( and thus the risk) is dropping. (Off the topic a bit is the sudden change in almost all states at Y2K and what might have caused that)

There is much hype in the air about how the Society is in such danger of being Socialized, as if an Unsocialized Society like an Unsocialized Child is a preferable outcome. Much pointing is done at the Soviets as the prime example of a Socialized Society because they claimed that they were one, but they also claimed to be as democratic as socialized as indeed they were neither in equal amounts.

The true Socialized Society is the opposite of feral, such as is found in some failed states, as the Government drowns in a libertarian nightmare of competing militias, and rogue warriors, that destroys all that society can produce. In short the Insurance company does for the most able to pay that which is least needed, and tossing the rest under the bus, and taking a giant piece of the society's productivity with it.

That safety net is what government is supposed to do, whether defending against outside enemies or inside disasters. A more deeply thoughtful system needs to be devised.