Insurance companies have been getting a lot of negative press lately, especially when it comes to health care. It seems that, generally, people believe that insurance companies exist primarily for social welfare rather than to make a profit for the shareholders. As a result, insurance companies are highly regulated to protect the people from purportedly their unscrupulous actions (the logic being, if government doesn't regulate them, they won't do the right thing for society as a whole). There are others who look at insurance companies as the simple and obvious outgrowth of people's desire to protect loss of their own property (e.g., their bodies, their homes, their belongings) and, as a result, are entitled to be properly compensated for such a service. What is "proper?" Whatever price the consumer and the insurance company agree to according to these capitalists. Interestingly enough, insurance companies do more than just compensate claimants after a loss - they actually work to prevent those claims in the first place. Why? Clearly, the more losses an insurance company incurs, the less profit they will receive. And, as capitalists continuously claim, the profit motive is the best motivation for progress.

Do insurance companies really do the wrong things for society when they aren't regulated? For example, did you know that fire departments were first started by insurance companies for the simple reason that preventing damage to the insured's property meant less of the insurance premium had to go back to the claimant? Isn't having a fire department to protect you from loss a good thing (after all, the government has now taken that service over)? Additionally, some insurance companies also have risk management groups that do training and inspect a customer's property to make sure that they are taking the proper safety precautions and, if they aren't, will either drop coverage or raise premiums. Now look what they are doing: similar to what they did with fire departments, they are creating their own navies to protect ships from pirates. Why? Again, to minimize the losses of their insureds in order to make more money for their shareholders. What's wrong with that? Aren't these all examples of good services to society that help make people safer? Are insurance companies really that much of a detriment to society that they need to be regulated so much? Are private companies having their own security forces a bad idea?

FTA:

A group of British insurers and shipping executives have started to roll out a new plan to fight pirates off Somalia, namely an industry-supported navy of 18 patrol boats meant to escort cargo ships through pirate-infested waters.

The Convoy Escort Program, a nonprofit company assembled by the Jardine Lloyd Thompson brokerage group in London, wants to sell a more efficient way to insure and protect merchant vessels, since the current method - of buying expensive ransom insurance and hoping that some navy ship will sail to the rescue if pirates attack - hasn't lowered the risk of piracy.

Through the CEP, ship owners would be able to buy, say, a few days of war-zone insurance on the Lloyd's of London market and also pay for a quasi-military escort past Somalia. The escort would give armed protection without the cost and hassle of armed teams on board every cargo ship. Shipowners have learned that expensive (and controversial) armed teams are one sure way to ward off a hijacking.

Britannia's (Insurers) Rule the Waves - London's new idea to fight pirates in the Indian Ocean: an insurance-led navy

DISCUSS!

Original posting by Braincrave Second Life staff on Feb 24, 2011 at http://www.braincrave.com/viewblog.php?id=482