Episode 104 - How insurance can screw up your life

We have all been told and encouraged to buy insurance. Insurance for health, your assets like housing, real estate, your car, etc. In many cases, insurance is mandated. “If bad things happen, you better have insurance.” But it has created a society of irresponsible and ill-prepared citizens who don’t have any idea about personal responsibility and are ill equipped to manage their lives. In this episode I’m going to deep dive the concept of insurance and the promises & lies we are told about it.

Click on the player above to listen to the episode or download it.  You can subscribe to the RSS Feed here.

Show Notes

These days I hear a lot of people touting their rights to freedom.  Freedom from government over-reach, having to wear a mask in the age of COVID, those opposed to vaccine mandates, and penalties for not having vaccinations.  Vaccine passports, etc.

But few really step back from what is going on and realize that it is a long line of being on the receiving end of personal behavior that we have exhibited for 50+ years.  The behavior of individual responsibility to the ways of the universe.

You see, we all live a biological lifespan.  The length of that is undetermined.  However we can look to statistics to tell us general trends and the best people to be able to guage statistical life expectancy happens to be the very same agency behind all of those vaccines, government policies, etc.   The CDC.

In 2021, the CDC published life expectancy data for US persons, and the numbers were completely the opposite of what almost every other government agency were saying, and what most people have been habitually told to believe.  Life expectancy was going down – not up.  And at rapid pace.

In 2016, the CDC published the life expectancy of the average US male at 79.5 years.  A mere 5 years alter, the same agency published 75.3 years.  A drop of over 4 years in life.

Now if you ask anyone on their deathbed what they would give for another 4 years of life, you’d pretty much get the same response.  Everything.  Time to be with their families, time to do those “buck list” items.  Time to establish a legacy, etc.

But the fact is that we ignore this data to our peril.  Meanwhile the same government tells us to delay retirement until 67 years (or in some places, even later).  That they don’t have the funds in place to cover social security – a government mandated insurance program that we’ve all been paying into since its inception in 1935.  Every time you get a paycheck, you see the premium you pay for this insurance.  Insurance that should give you some income after you stop working.

We don’t think of it as insurance, however.  But it is.  What you pay into the fund, is not what you will get back.  It is based on how well the pool of money does when re-invested back into the markets.

But this episode is not about social security.  It is about how a nation (and in many cases multiple 1st world nations) turned their back on personal responsibility, risk management and mitigation, and basic math to hand over control to some counter party, so they could have the peace of mind that they were covered in the case of disaster.  And as I’m going to tell you, this is pure fiction and yet we subscribe to it like a Disneyland adventure.

Let’s start with some general assumptions you were probably told from childhood.  You better have insurance.

The entire insurance industry is a part of the financial services industry.  So who tells you (and in some cases mandates it)?  The financial services industry.

Financial advisors who apparently know more than you about money, will tell you that you MUST have insurance.  They will analyze and talk about each different type of insurance, because it is complex.  It is designed to be complex.  That’s why they charge you the big consulting fees, or demand a commission for selling you said insurance policies.  No one in that industry would ever say anything negative about insurance.  I mean what if some disaster strikes?  Well, you better be insured.

However here’s where you start to see the cracks in this.  When disaster strikes, do you call your financial advisor?  Nope.  Why?  Because they just dold you the policy.  You call the insurance company.  Do you get some nice person on the phone who will help you?  Rarely.  What you get is someone who is an expert at being the bearer of bad news – “I’m sorry, your policy doesn’t cover that.”  Or “I’m sorry, but in the fine print, this is specifically excluded.”.  You know the drill.

Yet you still pay the premiums every month.  Like some religious devotion or tithing to the great god of risk management.

If you want to get a sense of how the insurance industry works, the best point of reference is Episode 4 of Nial Fergusson’s brilliant documentary, “The Ascent of Money”.  You can find it on YouTube.  Although produced in about 2009, the information is 100% correct today.  And that just makes sense because the entire insurance industry was created in the 1700s in Scotland anyway.

The concept of insurance is pretty simple really.  You accept a lot of premiums, and you invest them to get returns.  The goal is that you have minimum of risk, and therefore minimal exposure to having to pay out on claims.  The less claims, the more you profit.

How do you make sure you have minimal claims?  Really there are two ways – either you only write insurance policies to people that have minimum risk, or you just simply don’t pay when an adverse event occurs.

If you want to go really big on insurance, then you enter into some sort of partnership with government itself.  Or government sees the advantage of being an insurer to its own people because it then controls their behavior.  

If you have a very large data set (that is the population you are attempting to insure), you can analyze the data set to determine price of premiums vs. chance of claims.  The more data you have, the more likely you make an accurate calculation.  Hence if everyone voluntarily gives up their data, they empower insurance companies.  The same would be true of government provided coverage, such as public medical coverage or social security.

We really consider the modern concept of “the welfare state” simply as government insurance to the masses.  If you lose your job, the govt insurance policy kicks in.  If you get sick, the government insurance policy kicks in.  If you retire, the government insurance policy kicks in.

It sounds idyllic at first.  I mean there is little responsibility to the individual to mitigate risk because they are not motivated to do so.  And as a result, as found in many countries, the individuals take advantage of the welfare state.  This results in government acting more like private insurance companies and finding ways to not pay claims.  Even though they are responsible and on the hook to pay.  But what are you, the citizen, going to do?  Sue your government?

In 1995, I was involved in a horrific car accident in the outback of Australia.  I was sitting in the rear of the car, behind the passenger in the front.  Unfortunately the passenger died in the accident, and I was left with life-threatening wounds that put me in a coma for a week, and then I began a long and painful recovery process.  The government mandated insurance covered me, or so I thought.

In South Australia, where I was living at the time, when a motor vehicle was registered, it was mandated that the registered owner purchases 3rd party liability coverage for any passengers injured in the car.  There was no choice – the state government issued the policy and they paid if you had an accident.  Or so we thought.

After the accident, the parents of the girl who was in the passenger seat and died were distraught.  They took all of their anger out on the driver of the car, and convinced the local district attorney to charge him with negligent homicide.  He was found innocent of that charge years later, but this opened up a loophole in the insurance policy in that the insurance company didn’t have to honor the insurance anymore.  That’s the state government.

So after I went through the initial round of surgeries to put me back together again, I was denied coverage for further surgeries and rehabilitation.  I went to an attorney who decided to take the case on its merits, and after 8 years we prevailed and won by suing the state government for not honoring their insurance obligations.  But by then, I was a disabled wreck.  I had moved back to the USA to try and return to my work as all the money I had was gone dealing with my own rehabilitation costs, and of course US insurance providers would not cover me for my “pre-existing condition” so I succumbed to just accepting my lot and doing the best with what I had.  It wasn’t until 2019, almost 25 years later, that I found a way to get the surgery I needed by going to Mexico, and the results were outstanding.  I finally found a healthcare system that cared about me, and fixed the problems.  Sure, I had to pay for it, but by then Australia would never cover me due to the settlement.  I had to take it on myself, just as I had done after the accident.

Strange thing was that my sister-in-law went through a similar ordeal when she was in a car accident while working as a mobile nurse in the state of Victoria in Australia.  She was left with massive back and neck injuries, and when she hired an attorney to pursue the case, she didn’t have the right case to get an attorney to represent her correctly and consequently lost her case against the insurance company – in this case the state of Victoria’s insurance provider.

You see, insurance is not a guarantee of some magical and positive outcome.  Most of my friends don’t understand this.  They think it is all unicorns & rainbows and that is where the problem lies.  By existing in this illusion, they don’t learn the necessary skills to be able to assess and mitigate the risks to their own lives.  Hence when I hear some financial advisor talking up the value of insurance, I know that they have never claimed anything substantial in their own lives.  Its like the old Groucho Marx line, “Those that can’t do, teach”.

And they teach wrong.  But what do they care?  You might have paid in $50K in premiums but if it doesn’t pay out when you need it, that’s on you.  They still got their commission check.

Now imagine if you wanted to really ensure massive income levels at the expense of your citizenry?  What if you mandated insurance, but you had some way to motivate your population to live a low risk life.  Like all they had to do is follow some social mantra or contract.  Maybe from the start of education, you enslave them to have to work to pay off their debts.  They can’t take on high risk activities like starting a business, or traveling the world, or whatever.  You don’t want them doing unpredictable things after all.  I mean if they did that, how would you measure them by some mathematical formula or by some insurance underwriter?

So if you were forced to pay out, it would be for very “out of the box” cases.  But then you probably have no intention in paying out anyway.

In 2018, my daughter was rear ended at an intersection in Tucson, Arizona, by a guy with a horrible driving record.  He had some cheap insurance policy that he had bought – basically few insurers would cover him.  But that didn’t stop him hitting my daughter at the traffic lights.  Not huge damage, but enough to stop her trunk from closing.

When we went to get estimates, it was going to be expensive.  The insurance company wanted to write a check to get out of it, so they low-ball offered based on some tables in their spreadsheet on what they thought the car was worth.  But I never wanted to destroy her car.  This is a car I had hand picked and shipped from New York state to Arizona for a Christmas gift for my daughter.  It wasn’t hugely expensive, but it was her first car – a Mercedes 2 seater.  About 15 years old, but stylish and a collectable car.

The insurance company mandated that the car had to be salvage titled and give me about $2500 less than what it actually cost to fix the car.  Yet when I saw her car sitting in a wrecking yard, I almost broke down with tears.  Who would end the life of a perfectly working vehicle like this?  Why wouldn’t they pay the real value of the repairs?  Why?  Because they are evil insurance companies that don’t give a crap about making things right.  So I paid the difference and put the car back on the road.  It was a lot of work and I returned the car to great condition, but now its value was halved because it was now salvage titled – mandated by the insurance company.

In 2019, after returning from one of my surgery trips to Mexico, we got home and that night found that one of our hot water heaters exploded and flooded the house – a house with about 50% wood flooring.  I had no choice other than to engage with the insurance company.  They sent out some remedial company who promptly charged me $5000 to basically mop it up and blow out the water, then remove all the affected wood and drywall and then leave the house in a mess.  The insurance company sent out their guy who then assessed the damage, wrote us a check for $12,000 and denied replacing all the other matching wood.  Well that meant I was forced to company refloor the entire house, which took about 3 months, threw our Christmas holidays into a mess in a construction site, and left me about $25,000 poorer to pay for all the additional work I had to do.  And then 3 months later, the insurance company had the audacity to increase my premiums by double the amount.

Look I could go on, and I’m sure you have had something similar.  This is an industry that has no morality.  They don’t care about delivering on what they are selling.  Only to take your premiums and keep them.  They deny claims when they are excessive, resulting in the #1 form of bankruptcy in America as medical claim bankruptcy – often with people who have dutifully paid their medical insurance premiums every month, or just let their employer do it.

But it is actually much worse a problem.

You see, while you are sitting watching TV laughing that the Geico ads during the superbowl, ask yourself how can these companies afford the $25 million cost of the advertising space for their message?  Simple.  You pay for that with your premiums and they have enormous profits.

Why is it that when you look at the tall skyscrapers in the center of your city, you see the insurance company name on the top of the buildings?  Why is it that they are the owners of the very stadiums that the superbowl is being played at?

Because they have obscene level profits.  And it got that way not because they do great work, of offer some competitive product at some amazing price.  They do it by happily extorting their customers, selling a lie to them and then not paying out on the claims.

Now I know that after I’ve railed on the insurance industry here, there are some of you going to say, “But Myles, clearly you can’t advise people to NOT have insurance.  I mean what if something bad happens and they have no coverage?”

Sure, I get that.  That’s the sort of thing that someone who is hypnotized by the insurance industry would say.  It is easier to bury one’s head in the sand and pretend away the nasty things in life and hide behind some insurance policy so you can sleep at night.  And who wouldn’t want to sleep at night, right?

But you are a fool if you believe that insurance will cover you for life’s adverse events.  The best insurance policy you have is YOU.  Yes, YOU.  The person who is supposed to mitigate your own risks, takes control of their families fortunes and future and lives independently of counter parties.  It doesn’t matter if the insurance company is a private corporation,  a bank or your government.  In my opinion, you should live your life as if they don’t exist.  You are your own self-insurance company.  

You save money and put it aside in case of an adverse event.  You only look for coverage for things that are outside of your own ability to control and pay for.  If you are paying for insurance for things like buying some stupid extended warranty policy on that new flat screen TV you bought, maybe you should have researched if the manufacturer makes a decent product first?  If you were a sucker to buy some home warranty with your new home purchase, then watch the insurance company duck and weave when your air conditioner dies.  I’m sure they can weasel out of that.  I know mine did when I stupidly allowed an escrow company to sell me that stupid policy.

Here’s the worst result though….

I did some analysis recently.  I looked at the outgoing expenses in our family budget and did a comparison of what it would cost if we were living in Mexico vs. the United States.  The results were amazing.  The USA was literally 3x more expensive.  Well sure, it is the bastion of technology, all the streets are well maintained, the houses are nice, graffiti is cleaned up, etc.  It is like living in one big HOA.  You don’t get that overseas.  People have to take responsibility for themselves in their lives.

But when I looked at the actual expense lines here, I was shocked.  50% of the costs of living in the USA were insurance premiums.

I don’t have a job, so I pay for my own insurance premiums for healthcare for my family.  I guess it wouldn’t matter if I had a job and my employer paid for it, because ultimately I’m paying because that money would go into my paycheck which is why most Americans don’t realize that the average employer pays $20K per year into medical premiums for their workers.  But that was just the start of it.

The rest of the money went to car insurance, home insurance, business insurance, some umbrella policy here and there, and then I realized that all the products & services that we buy have insurance baked into their pricing. The manufacturers have to pay their insurance for their workers, their factories, their transport, and then the health care premiums to the workers as well.  That all gets reflected into the price of goods & services.

And the most obvious one is the cost of health care.  From my own personal experience, the US pricing on healthcare was 12x the price of what I paid in Mexico for what would be arguably a much better quality of care.  And because the entire healthcare industry in the USA is pretty much run by insurance companies, the level of care is sub-standard and only provided after you have been checked over by some computer program that requires you to take 20 different tests for everything under the sun, although you just turned up to have some dermatology thing done.

Insurance is out of control.  When I realized this, and I realized just how much it affects the average person’s financial welfare, I realized this is part of the overall banking sector take over of American lives.

If they can’t get you by inducing debt and extracting interest rates, they will do it with the “cup & ball” trick that is insurance.  And by injecting fear into the social construct, you naturally go happily running to the little gecko to make one of the world’s richest men, even richer.

But it is even worse than that….

Because of this setup on the American people, it has turned what should be proud and strong people into sniveling wimps.  Everyone is looking for someone to be responsible for their lives.  They want the govt to pay for everything and they never want to be responsible – even for the stupid Instagram posts they make that permanently records what sort of a moron they are.  

No one accepts that the randomness of the universe is their responsibility.  We empower out of control lawyers to milk the insurance industry for everything they can get, turning the normal workday commute down the freeway into a demonstration of roadside signage for every ambulance chasing lawyer out there.  Again, they are incented to milk the insurance industry and get 50% of the contingency cases that they can attract.

This is our world, people.  All because you won’t take responsibility for your lives.  Look I know I won’t make any friends saying that, but grow up.  It is true.  The shirking of your responsibility to risk to someone else is why you are dead broke.

If you learned how to analyze something thoroughly, understood risk and risk mitigation, and you factored in contingency into what you do, you might just have a chance and become rich.  It isn’t because you bought Dogecoin or invested in AMC that you are rich.  If you got lucky, I guarantee that money will go into the ether within 12 months of you earning it.

The truly rich understand that there is no progress without risk, but they learn to accept risk and a normal part of the human experience.  Those that can dance with it, have the best lives.  They make the most money, have the greatest life experiences, etc.  Those that can’t, are doomed to be losing half of their net worth to some insurance premiums for policies that won’t pay when they need them, and forcing them to fire sale their lives in the bankruptcy courts when they come face to face with the reality of life.

I’ve always said that you should never defer control to a counter party, but it wasn’t obvious to me that our society has been taught this from a very young age and now they are paying the price.  But to someone who was never taught to accept responsibility for anything, they shirk that onto the backs of those that should never have to shoulder it.  Like the landlords having to pay taxes, and then responsible for giving free rent to tenants through some eviction moratorium in which the government (again) shirks its responsibility to the social safety net for tenants to have a roof over their heads, and negligently extracts taxes from you and I, but never issues them out by way of rental assistance.  Why is this not a crime?  It would be if it happened in the private sector.

When I talk with a lot of Libertarians or Anarcho-Capitalists who believe in some ideological rationale behind removing government altogether, I wonder if they really understand what is going on here.  Yes, I agree with none or limited government.  And when someone tries a debate with me over “Well who is going to build the roads then?”  I tell them of my own experience in paying $25K to have the roads at our rental properties paved.  Yes, a cost one would expect the government to shoulder since we pay them tens of thousands in property taxes and city rates.  But no, I paid for the damn roads.  

You can see why I’m jaded.  The chance of living a life of dignity is slipping away from us because of insurance.  Whether it is private sector greedy corporations or shareholders, or it is our government shirking their responsibility at any level, thinking that you are safe because you have insurance is a fools errand.  Just ask anyone who lost property in the path of Hurricane Katrina.

And the worst, I’m sorry to say, is yet to come.  The obvious impact of climate change is affecting us all, and you have to know that the insurance industry already have found ways to weasel out of paying those claims in the case of fire, flood or hurricanes.  When the universe slaps back against those that abuse it, it hurts.  And no insurance policy will protect you.

So it is time for all of us to man (or woman) up.  Put on our big boy or girl pants and learn to accept that life has risks.  We will grow and be stronger for embracing that.  If you need insurance, then save up money and insure yourself.  An emergency savings fund would be a far better way than making some insurance company rich.  It is only since about the 1980s that people have learned how to play the insurance game with the insurance companies to benefit themselves through becoming their own banks.  But even that comes with the risks that the insurance company will be there when you need to borrow against your own funds.

Because if our government continues to sell us a bill of goods and never deliver on it, they will be bailing in money from our bank accounts, IRAs, 401Ks and insurance policies in order to fund their own negligence.   


Add Comments
These cookies allow us measure how visitors use our website, which pages are popular, and what our traffic sources are. This helps us improve how our website works and make it easier for all visitors to find what they are looking for. The information is aggregated and anonymous, and cannot be used to identify you. If you do not allow these cookies, we will be unable to use your visits to our website to help make improvements.