Multi-Billon $$ Bamboozle

I’ve been studying the political and business concepts of insurance for a while now. Boy have my opinions and beliefs changed in the past ten years.

Back in the early 1990’s I was what I called and “insurance mans’ dream”--I owned at least a little bit of practically every form or insurance available to the American consumer.

Term life, whole life, universal life, health, hospitalization, professional disability, replacement value homeowners’, auto insurance, boat insurance, business liability insurance, and get this--a million dollar “umbrella” insurance policy that would kick in and cover me if some other form of insurance fell short of my needs--real or imagined.

I forget the details now, (and I refuse to re-live the pain and agony thinking too hard) but I bet I was paying nearly $1000 each month out of pocket for my INSURANCE. I admit that most of it was optional like my $400K life insurance and professional disability insurance, but some of the costliest insurance was government mandated or otherwise a necessity like my auto insurance and my homeowner’s insurance required by my government backed mortgage company.

When I first moved to Georgia back in the late 1970’s, it was up to the individual if they owned auto insurance. It wasn’t against the law to not have insurance, you just took your chances being able to pay a claim if you ran into someone and you were uninsured. I had full coverage insurance on my car. That was a good thing because I was a stupid little bastard driver back then and had a lot of “fender bender” wrecks that my insurance (and my dad) paid for.

Then the government of the state of Georgia, in their infinite wisdom, decided to make auto insurance mandatory and in addition, make it no-fault. This means that it is against the law to drive without insurance, but people still do it anyway, and like everything else that is mandatory, the price of insurance went up. I still owned insurance on my car while others’ didn’t--then only difference was that the State of Georgia gets to write a ticket and charge a fine if they catch you driving around without insurance. The situation has degenerated in most states to the point where it is a careful balancing act deciding whether to report an accident to your insurance company and make a claim for fear that your premium cost will exceed the cost of the claim or worse yet--that your insurance will be cancelled.

The good news is that I haven’t had a car wreck since 1985.

Homeowner’s insurance is the latest insurance racket that is going to self-implode right before our eyes. While it is reasonable for the mortgage companies to require borrowers to insure property held as equity for the loans, the government is forcing insurers to take ridiculous risks from hurricanes in states like Florida and the rest of the US Gulf and Atlantic coastal regions, and from risks like wildfires and earthquakes on the west coast.

After hurricane Andrew in 1992, the Florida Insurance commissioner required all insurance companies to create a “pool” and provide insurance in coastal areas if they intended to write insurance policies in the interior areas of Florida. This is counter to supply/demand marketing. Add the Federal Flood Insurance Program on top of all of this, and toss in FEMA that runs behind disasters and pays people that are too stupid to take advantage of the already unrealistically low priced insurance made available by state mandate, and I say we are going to see the availability of homeowner’s insurance evaporate practically overnight in the southern coastal regions of the US.

I’ve overheard news estimates that Katrina’s final cost could be between $20 and $25 Billion dollars, overtaking Andrew at $21billion (adjusted for inflation) as the costliest hurricane in history.

The American Taxpayers should not be forced to subsidize people living in flood prone regions, and I believe that there is big trouble on the horizion if substantial changes aren’t made…

Take it from someone that lives on an Island…