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Showing posts with label European Insurance Industry. Show all posts
Showing posts with label European Insurance Industry. Show all posts

April 28, 2016

Why Health Insurance in America Is Like Playing The Lottery ("is the Netherlands's new Privatized Insurance Scheme on same route?)- by Josh Sabey

Insurance has followed a similar path, and shares more than a few similarities with the lottery. The two businesses hire from the same pool of actuaries and employ them to rig similar “games.”

To survive, insurance requires the vast majority of people to lose most of the money they put into it. It’s a gamble that instead of asking people to imagine the possibility of a jackpot asks them to imagine something quite the opposite. That’s why insurance is much more successful than the lottery, causing U.S. citizens to spend about a trillion dollars a year on it instead of the relatively modest $70 billion of the lottery. In the end, people hate losing things a lot more than they like getting things. The economic term that describes this phenomena is called “loss aversion,” which means people respond disproportionately to gaining $100 versus losing $100.

If a phone company raises its monthly cost, more people leave than would join if they lowered rates instead.People just hate losing things once they have them. This is also why people tend to overvalue their own possessions—a similar phenomenon titled “the endowment effect.” Ziv Carmon and Dan Ariely asked owners of NCAA Final Four tournament tickets to predict how much they could sell their tickets for.

The predictions averaged 14 times higher than the average hypothetical buying price. So while people are much more vulnerable to the rhetoric of insurance than the lottery, both succeed by convincing us to believe in a fundamental deception. In the lottery’s case, people are willing to throw away a few dollars at a time so they can imagine the bliss of winning.

Because the average lottery user’s day-to-day stresses and dissatisfactions are generally situated around money, they believe that obtaining a vast sum of money all at once would solve most of their problems. But this does not seem to be the case.

Several studies have explored the surprising dissatisfaction of lottery winners. One study compared lottery winners with people who became quadriplegic around the same time, and found that the lottery winners were no happier and took significantly less pleasure in simple beauties.

A lot of people are buying tickets just for the chance to imagine a happiness that does not seem to actually exist. The lottery doesn’t succeed because people aren’t good at calculating probabilities; they know they have almost no shot at winning. It succeeds because it convinces us to believe in an inaccurate equation: lack of money causes stress, stress drains happiness, therefore more money will mean more happiness.

A similar miscalculation takes place with health insurance. The average person assumes good health equals medical care, and medical care means access to care, which equals health insurance. Or, in the other direction, health insurance means access to care, which means good health because it mitigates the risk of disease and injury.

 But this also does not seem to be the case. People with health insurance are no more likely to be healthy than people without it.

The vast majority of health is the result of personal lifestyle, genetics, and environment. Health-care services account for less (possibly much less) than 10 percent of your actual health. This means access to health care has very little to do with what we think it does. The national debate about health care has focused around what Brent James calls “rescue care,” or the imperative we feel to save a life no matter the cost.

This is the dramatic rush to the hospital and end-of-life care. This sort of care has not actually increased life expectancy for several years. It is miraculous and wonderful, but it won’t make us live any longer or any more healthfully.

But, as with the lottery, Americans continue pouring their money into a system that does not actually perform. If, instead of focusing on a few rare cases, we spent our money improving our lifestyle—buy a better chair, change unhealthy habits, or (as some studies suggest) even meditating—our overall life expectancy would dramatically increase.

 But instead we continue to believe a false equation. In 2014, U.S. lotteries raised more than $70 billion. This number is astounding because it suggests the average person spends $220 a year on the lottery. But that’s assuming the price is evenly distributed across all people. We know children aren’t participating, and in certain states the lottery is still prohibited. So for those who play, the average is much higher. Several studies have also shown that poorer counties spend twice as much as wealthier counties.

In North Carolina the poorest counties produced $400 per person per month. That’s $4,800 a year. If those same people invested that money in any number of ways, they could have more than a million dollars by the time they retired. That’s winning the lottery. So just imagine what could be done with the much larger amount of money that is now being pre-allocated (before it’s needed) to a host of medical services.

Over time, lotteries have had the same basic story line, and health insurance now fits right in: "The state legislates a monopoly for itself; establishes a state agency or public corporation to run the lottery (as opposed to licensing a private firm in return for a share of the profits); begins operations with a modest number of relatively simple games; and, due to constant pressure for additional revenues, progressively expands the lottery in size and complexity, particularly in the form of adding new games. (National Gambling Impact Study)"

Insurance has followed a similar path, beginning as “friendly societies” and ending in nationalization—Obamacare. The nationalization is natural and even necessary. In England, early insurance agencies offered fire insurance, which meant homes were monetarily and physically protected because the insurance agency also ran the fire department.

But insurance companies drew criticism when they refused to put out the fires of homes whose owners had not previously purchased the insurance. This is an example of market failure. If the insurance company did put out the fire, then no one would buy the insurance.

The way to make sure all the fires are fought is to pay for a fire department through taxes. This way everyone pays into the insurance and every fire is extinguished. Today the same thing has happened with hospitals. A lot of people won’t pay for insurance if they can go to the emergency room and still get help, help that the hospital is required to give whether they’re paid for it or not. 

So we turn healthcare, like the fire station, into a “tax” that stops people from getting a free ride. There is certainly some utility here, so insurance ought to exist and it probably ought to be governmentally run, but the chance of you ending up ahead is about as likely as your house catching fire. A good health insurance system would be like a good fire station.

You call them when you need them, but most of the time you get your own cat out of the tree. That means low premiums and high deductibles. But that’s probably not what will happen. If this progresses like any other lottery, we can expect it to just get bigger, advertising higher and higher “jackpots” (bigger, all-inclusive packages) because as the government gets involved in the business it will be under pressure to sell ever-increasing and ever more inclusive health-care packages.

They’ll be tempted to insure more and more services, “to invent new games,” and “additional revenues.” But if our goal is to encourage actual health improvements, we will need to devalue insurance, cut down traditional health-care spending, and create policies that turn people away from doctors and towards things that have a much larger impact on health. We have to find ways to, as Dr. David Blumenthal says, “Invest our health-care dollars in ways that will allow us to live longer while enjoying better health and greater productivity.”

The biggest lie health insurance tells us is that it’s a way of mitigating risks. Bad habits, low exercise, poor hygiene, genetics—those are your largest risks, and health care has proven to be very ineffective at dealing with those risks.

If we want to encourage people to live longer, healthier, and happier lives, the best thing to do is convince them to eat well, sleep enough, and go to the gym rather than pumping their money into a system that will only produce yet another ineffective doctor visit. But we want to believe doctors can take care of us. It’s sure nice to imagine, so we commit to buying another ticket tomorrow.

Note Almere-Digest : hopefully some of Europe's "new" privatized insurance schemes  (like that of the Netherlands)j will not be not taking the same route as that of the US Insurance Industry?

Almere-Digeest
For the complete report go to : Why Health Insurance Is Like Playing the lottery /

July 6, 2015

Insurance Industry: "SURE" takes close look at readjustments and consolidations taking place in the European insurance industry

The Summer issue of SURE published by Koster Insurances takes a special look at the readjustments and consolidations taking place in the European insurance industry .

Also in this issue additional information on the upheaval in the European Insurance industry which comes not only as a result of new EU regulations affecting the Insurance market, but also as a direct consequence of changing economic times, circumstances and influences. Among these outside influences, probably one of the most important being the low interest rates.

SURE notes that For multinational companies, including those in the insurance industry, another dark cloud on the horizon seems to be that there is a general consensus among governments around the world, including the EU, that something has to be done about the tax evasion practices by many multinational corporations. To combat this problem the EU is presently developing a common EU tax base.

This issue of SURE also reviews the EU's sustainable energy strategy and how it can positively influence the job market, and looks specifically at market developments in Britain, Poland, Sweden, and the Netherlands concerning the insurance industry.

Koster Insurances, the publisher of the publication also announced in this issue that this would be the last issue of SURE in its present format. The publication was first published in 2006. 

EU-Digest

May 18, 2015

European Insurance Industry: Low Interest Rates Pressuring European Insurers - by Juliet Samuel

Low interest rates are taking their toll on some European insurers as they prepare to implement more stringent capital regulations being introduced by the European Union.

Results from three of the continent’s largest insurance companies Wednesday showed how low or negative yields are having an uneven effect, forcing some companies to change their strategies.

Tidjane Thiam, the outgoing chief executive of Prudential PLC, who is leaving to run Credit Suisse Group AG, warned about the “headwinds” of low long-term rates and said that his priority since 2008 has been to reduce the company’s reliance on rates for its earnings.

“It was my deeply held belief that if we wanted to control our destiny we needed to reduce the [interest rate] income in our earnings,” the chief executive said. “We’ve done that successfully.”

Prudential on Wednesday said total new business profits fell 6% from a year earlier in the first quarter, to £496 million. Total annual premium equivalent, a common measure of sales for U.K. insurers—reached £1.25 billion, up 7% compared with the first quarter of last year.

Prudential’s shares fell 1% on Wednesday in London.

Insurers are particularly sensitive to low rates. One of the main ways they make money is by collecting payments made by policyholders and investing them in the market for higher returns, mostly in bonds because they are seen as lower risk than equities. When interest rates fall, insurers’ margins get squeezed.

Low market yields also force insurers to put aside more cash because they can’t rely on high market returns to generate enough cash to fulfill their obligations to policyholders.

“There is a lot of jiggery-pokery they can do to manage these numbers to at least show a good number,” said James Shuck, an analyst at UBS AG.

Read more: Low Interest Rates Pressuring European Insurers - WSJ