Friday, November 17, 2006

Our State: The only insurance we really need

Is there any politician in the state with the balls to step up and admit that the private market has collapsed, and to propose banishing the private insurance business entirely from the state? That is the solution I suggest to deal with the retreat of the national protection racket industry from the Gulf and Atlantic coast.

For the first time in a crisis a year old, today's Times Picayune contains a suggestion that the government may need to directly interdece. The insurance industry is predictably unimpressed, but do we really care what they think any longer? The private market has failed us, has become a dark alley down which we are all forced to march to await our turn to be robbed. The private insurance racket is poised to destroy the Gulf Coast in a way no hurricane could.

Unlike the forces of nature, the insurance racketeers are a force against which we can fight back.

Imagine if the auto industry or the oil companies decided they have grown weary of California's endless air pollution regulations, and announced that they would no longer sell cars or pump gas in the state. How long would that state's leaders in Sacramento, or the federal government for that matter, allow that to stand? Not for a minute.

The theory of insurance is simple. A group of people pay money into a pool which is invested and grows, and out of which those who file claims are compenstated. From the remaining funds in the pool, the insurance company takes a modest profit for administering the trust. It is a model that has worked for a millenium and enabled commerce to flourish in a risk world.

But times have changed since the first traders banded together to reduce the risk of medieval sea voyages. The theory of modern insurance is that large corporations take people's money, then attempt in every way possible to avoid paying out any claims thus maximizing profit and mininum cost and risk. In Mississippi it appeares the insurance companies may have engaged in organized criminal conspiracy to deny payments. If forced to pay out, the companies raise rates to collect the cost of claims a second time from policy holders. If anything interfers with this one-way flow of cash into their coffers, they threaten leave the market.

It's time to simply throw all of the bums out of the state, and move everyone into a state pool for all insurance: property, life and casualty, auto, busines continuation: everything. If the national companies will not write property insurance, I see no reason to allow them to continue to profit in other business lines.

We can expand our market pool by refusing to recognize out of state auto policies, for example. Visitors would be able to purchase temporary coverage at the visitors centers in the same fasion people driving into Mexico purchase insurance from Sanborn. Transportation companies would purchase insurance for their Louisiana routes and deliveries in the same fashion that multi-state companies purchase workers compensation insurance, on a state by state basis.

We should work with other coastal states to move in the same direction, so we can create a reinsurance pool for storm damage that covers the entire hurricane coast. When our neighbors get hit, we help them out, and vice versa, with the cost spread out over millions of policy holders.

The state insurance company should set actuarially sound premiums, and purchase sufficent reinsurance agasint catastrophic loss. It probably won't be as cheap as property insurance in the Midwest, but it would likely be cheaper than relying on the current private[er] market. The Social Security and Medicare insurance programs operate on overhead of less than three percent, with no margin of profit, and I see no one complaining. Take the mechanistic and insatiable greed of Wall Street out of the equation, and we will make insurance a practical calculation of risk and payments again.

It's time to quit pussy footing around with these people. They are prepared to lay economic waste to the coast by removing a key underpining for all economic activity. Without insurance there are no homes, no cars on the street, no business and so no jobs. The executives of these companies are a greater threat to us than the gangbanger on the corner with a .40 caliber tucked in his wasteband. We should treat the insurance crime lords and their agents in the same way: as a dangerous criminal element that we can not get off our streets soon enough.


Comments:
Making everyone buy auto insurance at the border of the state--That will really help tourism and commerce. You might want to do a re-think on this one.
 
Buying insurance doesn't seem to slow down travel to Mexico, but I'm willing to start negotiating with the insurance companies and others from this position. Given diesal prices, it would just be a matter of balancing the cost against rerouting to make it a wash for commerical interests.

The point is that the insurance indusry as legitimate business has collapsed, and drastic measures need to be taken to ensure that commerce can continue in Louisiana.
 
can i buy a set of balls on ebay and give them to the state insurance comish?

the plantation is in shambles.

time to quit being a fucking colony and join the lower 48.

these nola blogs are gonna be part of our slingshot path into the present.
 
Insurance markets are always cyclical. In time they will come back. We need reform, but it needs to be oriented towards creating a fair market.

Louisiana has a bad name in the Insurance Industry for over regulation in many ways. This discourages companies from doing business here.

Oh yes back in the original coffee house days of Lloyd's, the investors were never happy yo pay out and tried to avoid it as well.
 
Oh behave! That makes for interesting reading, all right, but how would we enforce that? Last I checked, Louisiana, unlike Mexico, was not a foreign country (not anymore, or not yet, depending on your point of view).

Why penalize companies like GEICO and Progressive that only write auto insurance? Our beef is clearly with one company; we'll call them "Somestates" for privacy's sake. Maybe we could just say that Somestates auto insurance is no longer valid in La. and force Somestates customers to purchase an additional rider?

Right after the Federal Flood, I was wondering how to deal with a potential insurance pullout. I had thought to use electronic markets to offer chunks of our risk to investors around the world, sort of a 21st-century version of Lloyd's of London. I even envisioned this as an iconic Louisiana company, with a logo prominently displayed in the CBD, that would be in a position to sponsor bowl games and what have you.
 
The insurance industry has being investing increasingly large sums of money in the state for years, they are entitled to their profits…Of course, those dollars were invested in politicians pockets and the profits come in the form of rate increases, dropping coverage and denial of claims, but basically this is what happens when the system works as it is supposed to.

http://www.publicintegrity.org/report.aspx?aid=462

We just have to realize that the system has absolutely nothing to do with our interests. It never did.
 
Have you priced GEICO or Progressive for Louisiana rates? No one would miss them. If you're paying their rates, you're being ripped off.

I would be willing to agree, however, that only companies that don't write 64 parish coverage should lose their right to do other business here.

Still, I think having a state insurance company is the only pratical way to go in the near term (at least as a starting point for negotiating with the thieves and cheats operating the big companies).
 
You remember me, right? I am not (yet?) paying La. rates for anything, and if I were, it sure wouldn't be auto insurance. You may recall from my nola.us posts about the near-demise of RTA that I am transit-dependent. Auto insurance problem solved; many other problems crop up in its place.

GEICO ripping people off? But, but, they say they save you 15 percent! They even have a talking gecko! I'm shocked. Shocked!
 
YES! Details, like auto, could be massaged somehow.
 
Mark, I wrote about this same issue a week or so ago and my suggestion was that we do what California did.

After the earthquake in 1989, insurers decided to pull homeowners' policies, same thing, refusal to issue policies. The California legislature, the way I recall it, passed a law saying basically, you don't cover homes, we won't let you cover cars. The insurers naturally were horrified at the idea of losing all those car policies, and they stayed.

Maybe we should look into that kind of thing.
 
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