Sunday, January 08, 2023

Is insurance good for the community?

Insurance is good for the community if it is run properly. It performs a useful role in protecting economic losses and generates employment.


It can also be bad for the community if it is run badly. It can imposes a high cost to the community and create unproductive jobs to resolve disputes that can be avoided.

Let me compare the role of insurance with the road of private cars in the economy.

Private cars are good for the community if it leads to the following outcome:

a) The drivers observe traffic rules to ensure road safety
b) There is effective control to avoid congestion on the roads

Private cars are bad for the community if it leads to the following outcome:

a) The roads are not safe, due to lack or disregard for traffic rules
b) The roads are overcrowded and travel time is long

To ensure that the private cars are useful, the authority needs to set and enforce the rules on traffic safety and prevent congestion.

The same principle applies to insurance. The authority needs to set and enforce the rules on the safe operation of insurance contracts. It cannot be unregulated and left to the free market.

Tan Kin Lian
https://fisca.sg/ArticleDisplay.aspx?ID=1289

2 comments:

Anonymous said...

When it comes down to money, there is always room for exploitation.

Most do not cover outpatient.

In event that you have kidney or gallstones with non-surgery treatment eg shockwaves, you can leave after treatment but are not allowed to drive. If you intend to claim from insurance bcos it is not cheap (a few thousand dollars) at a private hospital. The hospital will jack up the costs and prepare you to stay overnight so as to become an inpatient. Inpatient qualifies for claim from the insurance even though most only cover 80% of the costs.

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