All insurance is a bet against yourself, and therefore it is tempting Fate and bad Karma.
Miles Mathis
The purchasing of insurance – in most forms – is generally considered the ‘smart thing to do’. The general consensus (wherever that came from) appears to be that people who choose not to pay for insurance are short-sighted and irresponsible.
Interestingly, the perception around people who sell insurance is that they are annoying, disingenuous and willing to damage personal relationships in order to profit from their product.
So which is it? Is insurance a good idea or a scam?
I would suggest that any industry which is driven by high pressure salespeople and which uses fear as its primary motivator ought to warrant some extra consideration before you go reaching for your wallet.
Since you probably are all-to-familiar with reasons why you should buy insurance, here are some reasons why you probably shouldn’t:
Medical insurance restricts choice
Once you commit to your policy, you are essentially at the mercy of what kind of treatment and service the insurance provider (with its associated pharmaceutical companies) wants to cover. If the ‘treatment’ you happen to want is drugs or surgery then you’re probably in luck – if you decide you would like to go in another ‘alternative’ direction then you will likely be paying out of pocket and probably wondering why you have insurance in the first place.
False economy
After forking out money on your monthly premium for years and years in exchange for seemingly nothing, the temptation can be to recoup some value in whatever way you can.
Interior: Doctor’s office:
Doctor: Okay so we found a benign polyp inside your colon – we can just leave it as is, or if you’d prefer, we can cut it out.You: How much would it normally cost?
Doctor: The surgery normally costs five thousand dollars.
You: But you’re saying it’s free? Let’s do it.
The allocated spending allowance on Corporate health insurance policies also leads to a ‘frequent flyer mile’ style of spending at the end of the year. Would be a waste if you didn’t use up all of those points!
With so many ‘insured’ people purchasing things that they otherwise wouldn’t, there is a heavy inflationary effect on these goods and services. The doctors and optometrists don’t care, they’re getting paid – it’s those poor suckers without insurance policies who are now left spending obscene amounts for a few pieces of factory-produced aluminium and glass.
The cost of a free test
So you discover that your insurance policy has an allowance for certain diagnostic tests, all free of charge. What could be the downside?
Well.. just like any other ‘free consultation’ you may encounter in life.. the purpose here is to sell you something. Medical diagnostic tests are a sales funnel for surgery and drugs.
Ask any salesman the value of being able to get face to face in a room with a hot (ie. scared) potential customer, who has been conditioned for their entire life to implicitly trust anything that comes out of your mouth on account of the uniform you’re wearing – a white coat.
Consider also that with medical insurance policies you are effectively committing financially to a specific treatment many years in advance. How likely are you to consider alternative paths when you have already invested 10 years worth of premiums into a policy that only covers you for one particular mode of treatment? Probably not very.
Cash for critical illness
Conversely, with policies like ‘critical illness protection’ you can actually get paid out a substantial lump sum upon diagnosis of one of several ‘critical illnesses’. While you are ostensibly free to spend this money on whatever you choose, it does seem to create a perversely positive association with being labelled with that disease.
The helmet paradox
Ironically, many risky activities actually become more dangerous at a certain point due to the false sense of security people feel from using safety precautions. People may ride their bicycle faster and more carelessly because they think a helmet is somehow going to save them from getting crushed underneath a semi-trailer. Likewise people might text-while-driving in their airbag fitted SUV or have sex with mentally-questionable strangers while protected by an extra-thick condom.
Similarly, a juicy medical insurance policy can leave people thinking that their health and safety is no longer their own responsibility – hey I’m insured! Why not eat junk food daily and wash it down with liquid poison – I can always pay a doctor to fix me up later!
Insurance isn’t magic and doctors can’t make you healthy – only you can do that – so don’t fall into the trap of thinking you can pay your way out of injury and illness.
Misaligned interests
Unfortunately, your best interests and those of the doctor treating you may not be as aligned as you think. In order for licensed doctors to practice, they need insurance, and in order to be covered by insurance they need to follow a very prescriptive ‘standard of care’. Thanks to the power of money, that ‘standard of care’ happens to be written by the pharmaceutical companies, who happen to want to make more money.
For example: If a doctor notices that a patient of theirs has a very negative reaction to an injection of some kind – and common sense suggests they should not administer a second – the ‘standard of care’ may dictate otherwise.
In this situation, the doctor has a difficult decision to make – do they:
- do what they think is correct, and abandon the second injection, but in doing so breach the standard of care (and thus be liable for potential claims.. e.g. for damage which arose from the first injection)? or
- do they go against their own judgment and follow the standard of care (ie. administer a second dose) which will likely result in a negative ‘outcome’ for the patient, but keep the doctor fully insured and protected from financial harm?
One would like to think that doctors would put the health of their patients above their own concerns about licensing and financial liability – but you may be surprised.
If you asked me would I rather have a procedure performed by a doctor who is fully licensed, insured and immune to financial damage arising from accidentally cutting my leg off, vs a professional who was operating in their own private capacity and liable for tort claims against everything they own.. I think you see what I’m getting at.
Forcing stupid or risky behaviour
Complying with (supposedly) well-intentioned insurance requirements can actually result in more risk.
For example, boat insurance for cruising yachts will generally dictate that to be covered when crossing an ocean you need to have a minimum of 3x sailors on board. Seems logical, but what if you and your partner are already both experienced sailors who always travel together, and you are more than capable of handling this familiar vessel as a two-person team?
Well to be ‘covered’ you still need to get an extra person – but who? If you’re travelling through an unfamiliar port you will likely need to improvise and take on someone who you barely know. This isn’t like picking up an extra passenger to cruise in the transit lane during peak hour – you’re crossing an ocean.
So now you’re putting your life in the hands of a questionable sailor whose skills you can’t vouch for – complying with the insurance requirements is literally making your passage more dangerous.
Similarly insurance policies often dictate that your vessel is not insured unless you move it to certain ‘approved’ areas during cyclone season. What if you get stuck somewhere that is actually a safe and protected cove, but in an area that is not ‘approved’? Many people end up racing through unsafe (aka dangerous) weather conditions just in order to get to somewhere that their boat is technically insured. This is like running on a slippery floor to get to a room that has insurance coverage. Give me the choice between being insured and alive, and I’ll take the latter.
No guarantee of payment
Anyone who has tried to make an insurance claim before knows that trying to get your money is often where the real work begins. The most responsive you will ever see an insurance agent is prior to handing over your credit card details, and the least responsive when you try to claw some of that money back after an accident.
In many cases if it’s something small then you probably won’t have much trouble, but on big claims (ie. where you really do need the money) is usually where problems arise.
I know people whose house flooded, destroying pretty much everything they owned and leaving the house as basically a pull-down job. They had flood insurance though, right?
Well the problem is that so did all their thousands of neighbours – and all of their houses flooded too. That means they’re in a queue for potentially years struggling to get quotes approved meanwhile there are not enough tradesmen to do the work so you need to get in a queue for that and the labour costs are going up and so now the quotes need to be redone and so on and so on…
Hindsight is 20/20 but maybe there is another way – so what’s the alternative?
Be your own insurance
Some industries and associated licensing mechanisms require insurance – if you desire to operate in the ‘public’ – so if you want to play in that world then that’s one thing.
However, for situations where insurance is not required, you may consider these:
- You can always take the money you would otherwise spend on insurance and put it aside – either as an emergency fund and/or investing in reducing the chance of an adverse outcome. These funds can be used to make your body/bicycle/boat/business/whatever safer and less likely to have an issue in the first place.
- You can do some research into where you are going – e.g. the hospital system in a country you are visiting – to ascertain what is available and what is on offer, rather than blindly getting ‘travel insurance’ and assuming that someone else will come to your rescue when you get yourself in trouble.
- You can be your own risk assessor, and do or do not do things according to your own analysis – after all, it’s your life.
- You can weigh up different precautions and safety measures according to your own judgment – not according to some arbitrary rules from someone who is unfamiliar with your particular situation.
- You can operate in a private capacity and use contracts in your dealings such that other parties agree that you are not liable for (whatever), and that disagreements must be resolved at a given venue of arbitration (as opposed to going to court or becoming tort claims).
In other words, bet on yourself.
