ARE INSURANCE COMPANIES FOR PROFIT?

ARE INSURANCE COMPANIES FOR PROFIT?

ARE INSURANCE COMPANIES FOR PROFIT?

Introduction:

All commercial businesses are set up the primary motive of maximizing profit. The most popular of questions, is, whether insurance companies are for profit. Are they primarily set up with the intention of making profits or are they nonprofit­-oriented? It might you to know that insurance companies are mostly profit driven and strive to safeguard the Interest of their own businesses first and foremost before taking into consideration the welfare of their “insureds”. This is why most the stories of insurance companies refusing to pay the claims put forth by their customers are quite popular. Let us take a look at how insurance companies profit.

Also read: ARE INSURANCE COMPANIES FOR PROFIT?

How insurance companies profit

The insurance industry is the only sector of the economy which makes all of its money by limiting the amount of money it loses. Comprehend that insurance agencies generate income by accepting premiums from their policyholders. These companies then increase their revenues by investing the premiums in the market for an additional return.

For that reason, any personal injury or wrongful death claim paid by an insurance company (either by way of settlement or through the satisfaction of a jury verdict) will affect the overall profits of that company. Also, because insurance companies make secondary revenue by investing in the market when the economy is in a downturn the insurance companies find themselves in a less profitable position. Accordingly, when the economy is weaker insurance premiums across the board tend to go up, insurance claims are resisted even more ferociously and cries for “tort reform” and campaigns about “too many frivolous lawsuits” get amplified and become more frequent. This “insurance cycle” resulted in the “litigation crises” of the mid-1970s, mid-1980s and today’s “crisis”. It is no coincidence the “crises” and the movements to limit individuals’ rights have all taken place simultaneously with a downturn in investment markets.

Given the insurance industry’s unique business model, it is obvious why individual insurance companies delight in collecting premiums yet vigorously resist paying legitimate claims for fair value. This also explains why insurance companies will even cheat their own “insureds” and fight their claims to the last. It is “just business” and the decisions of an insurance company have nothing to do with fairness regardless of what their deceivingly “caring” slogans indicate. Insurance company profits are always the motive.

ALSO READ: ARE INSURANCE RETURN CHECKS REAL?

A CRY TO INSURANCE COMPANIES

It is obvious that health care is costly in the U.S. But why is American healthcare so expensive? Some experts blame the desire for profit. Russell Andrews, a neurosurgeon and author of Too Big To Succeed laments “the morphing of American medicine from a function of a humanitarian society into a revenue stream for human healthcare profits, drug and medical device companies, hospitals, and insurance agencies. In essence, we have transformed healthcare in the U.S. into an industry whose goal is too profitable.” Andrews goes on to characterize the profit motive as “a virus” infecting the system.

Sachin Shah, a physician affiliated with Doctors For America, contrasts the struggles patients have paid for their medical bills to the enormous profits of American insurance companies: “The five largest health insurance companies – WellPoint, United Health, Aetna, Humana, and Cigna – … earned over $3.3 billion in profits [between April and June 2011].” Shah goes on to contend that “Profit in the health insurance industry is the single greatest barrier to building an efficient, sustainable system of healthcare in this country.”

He further stated “Imagine confiscating all the profits of all the famously greedy health insurance companies. That would pay for 4 days of healthcare for all Americans. Presently include the benefits of the 10 greatest ‘rapacious’ drug companies. An additional 13 days.”

Who is right: Goldhill, a cable television executive who wrote a book after his father had a horrible medical experience, or Andrews and Shah, two physicians who claim to have seen the effects of the profit motive up close, in their own patients’ lives?

ALSO READ: ARE INSURANCE PREMIUMS TAXABLE?

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Conclusion

Making profits is one the driving forces of ventures in all sectors of the economy. However, the drive is too abnormal and fantastic profits to the peril of other enterprise and individuals {especially in the health sector,} is thoroughly no matter how one looks at it. Insurance companies are beckoned to stand up to the claims made by their customers after adequate investigations, premiums and documents are been verified.