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Showing posts with label insurance as tax. Show all posts
Showing posts with label insurance as tax. Show all posts
Wednesday, October 28, 2015
Waxing philosophical
Talking with my daughter about a school assignment today (writing fortunes for fortune cookies, if you must know) led me to this John Donne poem. I knew the beginning and the end. The middle expresses how I feel about property loss from natural disasters. Whether or not there's ultimately insurance coverage for a building that has been damaged or destroyed by a hurricane, a family losing its home has repercussions throughout the fabric of our society.
No man is an island,
Entire of itself,
Every man is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.
As well as if a promontory were.
As well as if a manor of thy friend's
Or of thine own were:
Any man's death diminishes me,
Because I am involved in mankind,
And therefore never send to know for whom the bell tolls;
It tolls for thee.
Along the same lines, the Boston Herald has this article about the effect of FEMA's new flood zone maps on flood insurance in Boston. I've posted before about the intersection of liability insurance and taxes. Given that higher flood risks are likely related to climate change, a result of the workings of our society as a whole (see above) and out of the individual control of longtime homeowners of property near major bodies of water, it seems only right that moderate-income families who can't afford higher insurance rates should receive subsidies. Assuming that the new maps accurately show the risk, as someone who is adamantly pro-insurance, I do support requiring homeowners in flood zones to have flood insurance; moreover, as I discussed here, I support flood insurance on the value of the entire property, not merely to the extent of the mortgagee's interest as the current regulations require. It's a fair way to spread the risk and will prevent the even worse economic devastation that would occur if entire neighborhoods are damaged by a hurricane and the homeowners are uninsured. It can be the difference between a few awful weeks or months and long-term homelessness.
Saturday, October 10, 2015
Insurance as a kind of tax, and a foray into socialism and outside my area of expertise
My recent posts here and here on cases addressing flood insurance under the National Flood Insurance Program got me thinking about the similarities and differences between insurance and taxes.
As we all know, taxes are one of the two things in life that are certain, and insurance is not the other thing. But -- sometimes insurance is required by the government. Flood insurance, for one, if you have a mortgage and live in a flood zone. Health insurance, in Massachusetts and soon nationally for the most part. (Don't start calling me with health insurance disputes -- I don't do those. They are different from liability insurance disputes.) Worker's comp insurance, generally. Car insurance. A fee the government requires you to pay sounds like a tax to me.
Insurance is a for-profit private-sector business. But in the case of flood insurance, the insurers are merely the plan administrators, with the losses paid by the government. In other words, the government itself is the insurer.
Taxpayers are a larger risk pool than insureds. Even if only 53 percent of Americans pay income taxes (I take no position on that), that's a whole lot of people and it makes it pretty easy to spread the risk. Then again, according to my Google search 95 percent of Americans own cars, and therefore buy car insurance in states where it is required. The insurance risk pool is subdivided, however, into insureds of each insurer.
My taxes are based, more or less, on my income. My insurance premiums may or may not be based on my level of risk. My auto premiums are based on where I live, the kind of car I drive, and my driving record. But my health insurance premiums are not based on the likelihood that I'll get sick -- everyone with my plan pays the same. That means that, like with taxes, healthy people are subsidizing health care for people who need more of it. It seems to me that, given that reality, it would make more sense to spread the risk more broadly -- among all taxpayers. That way who is subsidizing who is not based on the almost accidental decision of what health plan you happen to have, but on what you can afford to pay. (And, yeah, I know, that's socialism.)