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The Big Squeeze

Insurance Wickedness

By James Donahue

I always insured the cars I drove. We had a bank president in my home town, considered the richest person in the community, whose son-in-law was in a fatal car crash. He was driving the bank president’s car and the vehicle was not insured. There was a law suit and the bank president lost everything. After that my father began insuring his cars and strongly insisting that I did the same. If I objected, Dad reminded me of what happened to the bank president.

After I got married, I learned one day that my father-in-law did not carry insurance on his car. I remember debating with him about the benefits of auto insurance. He pointed out that he considered himself a poor man. He owned his car and house, but worked hard in a factory job for just enough to maintain his family. He had little if any money saved in his bank account. His argument was that insurance was for rich people. They are the ones that get sued, he said. “I don’t have anything that anybody would want.”

My father-in-law never had an accident and never tested his theory about car insurance. I continued to buy it, however, because it was not costly and it gave me peace of mind on the road. One day I struck a deer and the collision caused severe damage to the front grill and a fender of the car. The insurance company paid the total cost of the repair.

Our relationship with automobile insurance companies went well in those early years. But then the insurance industry hatched the concept of “no-fault” insurance in the 1970s and lobbied state governments, including Michigan, to put laws on the books mandating that all automobile owners buy car insurance. The idea was that with all drivers forced to buy insurance, and with restrictions on the right to seek damages in car crashes, the cost of insurance would be reduced and affordable for everybody.

So what happened? Once we were forced to buy coverage, the cost of car insurance went through the roof. We had all been ripped off by the insurance companies. My personal way of rebelling was to stop buying new cars and being forced by the banks to buy full insurance coverage while the vehicle had a lien on it. Instead, we bought older vehicles that we could pay cash for and carried the very minimum coverage, which was personal liability and property damage. This insurance was now costing more than I once paid for full coverage on new cars.

What amazed me about the big car insurance fraud was that the people seemed to accept what had happened to them. I think it had a lot to do with the fact that nobody understood all of the gobbledygook drafted into the no-fault insurance policies. Even news reporters couldn’t explain exactly how it worked. It seemed that we were all driving around thinking that if we got in an accident we were never at fault, even if we were. But what we discovered was that this wasn’t the way the program worked at all. If two cars collided, the innocent driver got his damages covered without penalty. The driver that the police ticketed had his car also fixed, but his cost of insurance went even higher or he lost his insurance carrier. He was considered a poor risk. If both drivers were found at fault, both insurance policies went up in price.

During the years I was working on a news bureau in Sanilac County, there was a big spike in the cost of liability insurance for not only cars but for doctors and most entertainment businesses. Many popular amusement programs closed down rather than pay the price of insurance. I remember a popular water slide in a nearby city closed down. A small attraction along the Lake Huron coast that offered pony rides for children stopped operating because of the cost of the insurance. Medical doctors raised their prices to help pay the high cost of their liability coverage. It seemed as if the insurance companies had us all over a barrel.

When the county fair opened I noticed that the carnival rides were operating as usual, and the price of the various rides was still about the same. As a news reporter I made it a point that year to talk to the carnival manager. I asked how the hike in liability insurance was affecting business. The man just smiled.“No problem at all,” he said. “We don’t buy liability insurance.”

I asked how he could get away with operating a carnival with all kinds of dangerous-looking rides without having liability insurance. His answer: “As soon as they find out we don’t have liability insurance, they don’t bother to sue.”

Carnival people know all about scams. A lot of the things that go on among the carnival concessions involve elaborate scamming of the public for a few coins. Consequently it was easy for this man to see right at the heart of the insurance/lawyer racket that was occurring. He knew a scam when he saw one and knew just how to avoid it. Just don’t buy the insurance and everything will be just fine.

That probably worked just fine for the carnival business. And it would have been all right for the water slide and pony ride businesses. But medical doctors have targets printed on their backs. They are perceived to have their pockets full of cash and that makes them perfect subjects for litigation by people seeking a fast buck. What they don’t realize is that the only winners in liability lawsuits are the lawyers. They get the cash even if they lose the lawsuit. The client still pays. And the litigant is stuck with huge legal bills..

And that is how the lawyers fit into this massive public scam.

Today the issue is all about health insurance. As the battle rages in the halls of Congress and the courts we have yet to see how everything shakes out. All we know now is that insurance companies have been getting very rich on the insurance policies they issue, and most Americans do not see much benefit from their insurance until they fall victim to a catastrophic medical problem. Even then the insurance companies win. They put caps on the amount of money they will pay for claims, they require patients to pay a portion of the bill which is called the deductable clause and in many cases, if the patient requires constant high cost care just to stay alive, insurance companies may drop their coverage.

One of the big issues in the Obama health care bill is a requirement that health insurance companies provide coverage for people with pre-existing conditions. The insurance companies are getting around this by raising the price of insurance for these people so high that most folks can’t afford coverage.

Dental insurance has been another scam. Before the unions at the Detroit automobile plants bargained for and got dental insurance, the cost of going to a dentist was something most of us could pay for. After my employer began providing dental insurance, I noticed the cost of just getting a cavity drilled and filled more than doubled. The deductable I paid went higher than the amount I paid the dentist before I had insurance.  

Then there is the insurance policies we are required by our mortgage holders to purchase to cover damage to our homes. These policies are supposed to cover all of the various types of damage that might happen to a home. But outside of the usual stuff, like windstorm, fire, vandalism and theft, the fine print in these policies often excludes some of the things that really count. These include such things as floods, acts of domestic terrorism and even hail storms.

In all the years that we have had house insurance, the only time we got a settlement to pay for damages was when we hired a lawyer to fight the insurance company. In the end we got our house fixed, but we spent years paying off the price of that lawyer.

The bottom line for insurance companies is always profit for the shareholders. As soon as insurance is involved, the price of service goes up. I believe everybody was better off before we started borrowing to purchase all this expensive property and were forced to buy all of this insurance.