Back in my grandfather’s time, hardly anyone had insurance. It was looked upon with at least some disfavor by many churches. If someone bought insurance back then, it was almost definitely a life insurance policy. Few had insurance on their house. No one insured their automobiles. No one had health insurance. Yet they all managed their everyday affairs mostly without any undue hardships.

Let’s examine how this could have been, and what happened to change this perspective. To begin with, insurance as a major industry, has not been around all that long, and many of the early companies were considerably less that desirable. People who bought a life insurance policy, and paid premiums for many years, would have been shocked when their beneficiaries went to collect. Over the years, these massive cases of fraud were slowed and nearly stopped by tough regulations in every state. Actuaries drew tables of loss probabilities, and companies began to offer standardized policies covering more and more areas. People were bombarded with salesmen and advertisements for insurance.

In the Fifties and Sixties, much of the stigma of insurance was overcome. Mortgage companies required a fire insurance policy. By then, many states had even begun to require a minimum amount of liability insurance on automobiles. Still, it was very unusual to insure the value of the vehicle, (collision insurance). Also in the fifties and early sixties, some companies began offering health insurance for their workers. But, they were in the minority. Almost no small business could or did provide such luxuries as health insurance.

By the Seventies, it was becoming more common with major industries, public employers, and even some smaller businesses to offer some medical protection, although in most cases, the employees were required to pay at least a portion of the premium. That trend continued until about the end of the century.

Well before then, complete multi-peril insurance was required by mortgage holders as a requirement to receive a loan. Automobiles were so much more expensive that it made sense to insure them against damage whether you, or the other driver, were at fault. Or at least so the insurance companies said.

By then, the health care industry had mushroomed into an indispensable portion of our lives and expenses. One of the reasons for the burgeoning increase in medical premiums, was due solely to the influx of patients with insurance, who would otherwise never have even considered asking for medical attention for such minor ailments as colds, sore throats, scratches and sneezes. Hospital emergency rooms are filled with these types of patients. As an example, Texas authorities recently disclosed that a small group of 9 people had emergency room expenses of three million dollars, over a period of five years. None of those people were admitted to the hospital, and none of the expenses were for major medical issues.

Someone has to pay for such treatment. And there lies the beginning of the whole insurance problem. Basically, there are only two reasons for obtaining an insurance policy. The first is to avoid the cataclysmic expense of an unexpected situation such as an illness or an automobile accident, or a death. The second is really an adjunct of the first. By stipulating a periodic payment, you can budget expenses and therefore plan more effectively and reliably for future activities. Now these may appear as very sound practices for any individual or business. And they would be, except for two factors.

As alluded to in the previous paragraph, it should be obvious since the cost of all of the claims is shared by everyone, such things as unnecessary treatment, inefficient medical practitioners, and, unfortunately, less than adequately trained personnel, along with a drastically increasing need for those medical people and facilities, has driven the cost of health insurance much higher.

There is also the overhead and profit of the insurance companies to consider. When health insurance first began to be offered to employees, the misuse of it was much less. Overhead expenses were based on little more than what the average person would pay for his medical bills for that year. Now, however, that same overhead and profit is based on a total average expense very much greater than what a reasonable and prudent person would expect to pay for his expenses. In addition, that person must pay his share of the actual expenses incurred by those who drastically misuse the system.

Perhaps the dropping of the practice of requiring those who have higher medical expenses to pay their share or at least a premium closer to that share, has also drastically increased the premium of the rest of those insured.

An automobile built 50 years ago, could run into something at 20 miles per hour, and suffer little damage to its steel bumper. One built today, would incur several hundred dollars of damage. Also, today, we have become a much more litigation prone country. The insurance companies agree to pay your expenses, and that is sometimes totally out of proportion to the accident, but it is frequently more cost effective to pay than to go to court. But they get the money back by higher premiums for everyone. And all those higher premiums and court cases cause an extra need for overhead and profit. And you pay that too.

The vast amount of data that has been generated about actuarial tables has reasonably stabilized premiums for life insurance. In fact, the preponderance of information available to the individual, has, along with an increased lifespan, actually lowered some premiums. Unfortunately, this has been greatly offset by the perceived need for more and more (money) to be bequeathed to the beneficiary. Still, life insurance, particularly term insurance, is probably a better buy today than it was fifty years ago.

Now, in all of this, one point has not been specifically mentioned, but it remains the key issue. All of the prevailing news and government information seems to be oriented toward the fact that health care insurance is a necessity. That is just plain nonsense. Over your lifespan, you or your employer, or someone, will pay a great deal more in insurance premiums than you would ever incur in the underlying medical bills. Don’t forget, you must pay not only for your necessary expenses, but also for all of the waste caused by the unnecessary expenses of others, which also includes the extra overhead and profit of the insurance companies and the increased overhead and expenses of the doctors and medical facilities attempting to cope with this overload.

Your automobile liability insurance premiums will be more than the cost of any repairs and expenses. Your life insurance premiums over time, will, when adding interest, be more than the benefit amount. Probably. That word is the only reason to purchase insurance. If you happen to be one who incurs high medical or automobile accident expenses, or who dies early, then insurance will be an advantage. A portion of the premiums of the rest of us will go to paying your expenses that year.

Granted that you could have a catastrophic expense, and that is the one type of major medical insurance that might make some sense.

Insurance is not something that has always been around. It is not an absolute necessity. It is not very efficient. It frequently causes inefficiency and waste. We have seen the exaggerated claims paid by insurance companies for minor hurricane losses, and also the claims denied for a variety of reasons. Most of us today, have come to accept and believe in insurance as normal and necessary. That is a lie. Unfortunately, for most people, it has become easier, and perhaps readily more sensible to accept it as a normal part of everyday life.