Insurance is a huge topic these days, from workers comp in CA to Medicare in Washington, we all want coverage and benefits but don’t what high premiums. So where is the magic line that gives us the best bang for our buck?
Let’s look just a little deeper at the focus on cuts as opposed to premiums. What are the insurance companies going to cut? Jets for executive travel? Nah. How about employee benefits? Probably not. Salaries? Number of employees? No, no, no.
They are going to cut claims payouts. That’s their cost. They simply won’t pay out as much as they used to. So medical insurance will cover less and provide a lower care level. Car insurance will be even slower in paying and look even harder for a loophole to not pay. Homeowners won’t this, and Disability won’t that. The key to controlling costs is not paying claims. Its more profitable to hire people and increase overhead to try get out of claims than it is to pay them in many cases.
Why is this almost a uniform opinion among executives of insurance companies? Because they know that selling involves a combination of three things, price, quality and service. They can’t sell below market price and try to make money. They can’t sell above it and not have clients go next door. Also, they have to spend money on service to keep clients that haven’t had claims happy by handling billing and other issues. But where they can cut without affecting sales is in the quality of their claims payouts. They don’t want a client that has a lot of claims anyway so if they get frustrated and leave, that’s fine with them. So the business model is to make it easy to get the premiums in, and make money on not letting them out.
So as for them making themselves more efficient, I have to wonder if that’s true. Cynical aren’t I?