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In the Insurance Industry, Conflict of Interest Is a Business Model

Falling hundred dollar billsIn no other industry, besides insurance, is conflict of interest considered to be a good thing. Instead of a problem, it’s a business model. The intent of insurance is to provide coverage for risks and, should those risks occur, pay resulting claims fairly and in a timely manner. The ways by which insurance corporations earn revenue actually reward companies for breaking the promises they make to policyholders. Perhaps no other tactic illustrates this point as well as the insurance industry’s practice of delaying the payment of claims.

It all started simply enough. Once upon a time, after the insurance industry became commercialized but before it turned into the warped industrial juggernaut it is today, insurance companies earned money through a strategy called “float.”

It’s your money that the insurance company has floating around in investments, but they’re the ones enjoying the extra income while you can’t even get the coverage you paid for. Photo Credit: Corbis Images.

Money Floating Around Businessman on Cell PhoneThe Float Effect

What do you think happens to your money when you pay your insurance premiums? Your agent or the likeable characters from the company’s advertisements don’t just stick your payments in a shoebox marked with your name. They invest it.

And because they have quite a lot of money to invest, those investments tend to be highly profitable – so much so that even if the insurance company were paying out more money in claims than it took in in premiums, it could still afford to stay in business. Consider that for a minute – thanks to investments and the nature of the business, insurance is the only industry in which a company could lose money but still end up “in the black.” This investment income is known as float, and for many years, it made insurance companies rich without regard to the costs they paid out in claims.

Fortunately for the insurance companies, while the average American has been struggling through recessions just to even make ends meet, these investments have continued to prosper. Photo Credit: Corbis Images.

Float money can still enrich the pockets of the wealthiest insurance companies. That is, as long as these companies do one very important thing: keep that money invested for as long as possible.

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So, buying health insurance

by newdemocrat

Would be similiar to buying a car? How would this work with pre existing conditions? For example the helath insurance industry is busy building a data base on every American's health history.
You see, the problem is, health insurance does not abide by the same market forces as other parts of the economy. The business model in healthcare insurance is
1. Insure only healthy people
2. When people become ill, stop insuring them.
3. Never insure people who are already ill.
BTW, this does not negate the fact that people need to be responsible for their health through proper diet and excercise.

This business model

by newdemocrat

(HSA's) do not solve the basic problem we have in this country of increasing costs, combined with the basic economic drivers in the private insurance industry.
1. Only insure healthy people
2. Do not insure people who have illness/disease
3. When an insured becomes ill, drop their coverage

Applying models, size matters

by jobsearch

The size of the company can help indicate which strategic business model that you should implement. If your co. is a small one, every employee matters, literally.
If the office worker's performance is satisfactory, at least she is doing her basic job. The rest is pettiness. Many people are lazy. As for the insurance industry, that is a story of White collar crime. They use math models to insure themselves that they will make the biggest profit from their overall customers. Some insurance agents don't have to work much. They may inherit clients from former insurance agents who had to retire

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