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Auto Insurance Principles Applied To Private Health Insurance

Many Americans rely on their automobiles to get to work. No automobile means no job, no rent or mortgage money, no food. A single parent, struggling to make ends meet in the suburbs with 100,000 miles on the odometer, would presumably welcome the guaranteed opportunity for low-priced insurance that would take care of every possible repair on her auto until the day that it reaches 200,000 miles or falls apart, whichever comes first. Especially if the insurance is valid regardless of whether she even changes the oil in the interim.

So why aren't the auto insurance companies writing such coverage, either directly or through used auto dealers? And given the importance of reliable transportation, why isn't the public demanding such coverage? The answer is that both auto insurers and the public know that such insurance can't be written for a premium the insured can afford, while still allowing the insurers to stay solvent and make a profit. As a society, we intuitively understand that the costs associated with taking care of every mechanical need of an old automobile, particularly in the absence of regular maintenance, aren't insurable. Yet we don't seem to have these same intuitions with respect to health insurance.

If we pull the emotions out of health insurance, which is admittedly hard to do even for this author, and look at health insurance from the economic perspective, there are several insights from auto insurance that can illuminate the design, risk selection, and rating of health insurance.

Auto insurance comes in two forms: the traditional insurance you buy from your agent or direct from an insurance company, and warranties that are purchased from auto manufacturers and dealers. Both are risk transfer and sharing devices and I'll generically refer to both as insurance. Because auto third-party liability insurance has no equivalent in health insurance, for traditional auto insurance, I'll examine only collision and comprehensive insurance -- insurance covering the vehicle -- and not third-party liability insurance.

Bumper to Bumper

The following are some commonly accepted principles from auto insurance:

* Bad maintenance voids certain insurance. If an automobile owner never changes the oil, the auto's power train warranty is void. In fact, not only does the oil need to be changed, the change needs to be performed by a certified mechanic and documented. Collision insurance doesn't cover cars purposefully driven over a cliff.

* The best insurance is offered for new models. Bumper-to-bumper warranties are offered only on new cars. As they roll off the assembly line, automobiles have a low and relatively consistent risk profile, satisfying the actuarial test for insurance pricing. Furthermore, auto manufacturers usually wrap at least some coverage into the price of the new auto in order to encourage an ongoing relationship with the owner.

* Limited insurance is offered for old model autos. Increasingly limited insurance is offered for old model autos. The bumper-to-bumper warranty expires, the power train warranty eventually expires, and the amount of collision and comprehensive insurance steadily decreases based on the market value of the auto.

* Certain older autos qualify for additional insurance. Certain older autos can qualify for additional coverage, either in terms of warranties for used autos or increased collision and comprehensive insurance for vintage autos. But such insurance is offered only after a careful inspection of the automobile itself.

* No insurance is offered for normal wear and tear. Wiper blades need replacement, brake pads wear out, and bumpers get dings. These aren't insurable events. To the extent that a new car dealer will sometimes cover some of these costs, we intuitively understand that we're "paying for it" in the cost of the automobile and that it's "not really" insurance.

* Accidents are the only insurable event for the oldest automobiles. Accidents are generally insurable events even for the oldest autos; with few exceptions service work isn't.

* Insurance doesn't restore all vehicles to pre-accident condition. Auto insurance is limited. If the damage to the auto at any age exceeds the value of the auto, the insurer then pays only the value of the auto. With the exception of vintage autos, the value assigned to the auto goes down over time. So whereas accidents are insurable at any vehicle age, the amount of the accident insurance is increasingly limited.

* Insurance is priced to the risk. Insurance is priced based on the risk profile of both the automobile and the driver. The auto insurer carefully examines both when setting rates.

* We pay for our own insurance. And with few exceptions, automobile insurance isn't tax deductible. As a result, the fear of increasing insurance rates due to traffic violations and/or accidents changes our driving behavior and we sometimes select our automobiles based on their insurability.

Each of the above principles is supported by solid actuarial theory. Although most Americans can't describe the underlying actuarial theories, most everyone understands the above principles of auto insurance at the intuitive level. For sure, as indispensable automobiles are to our lifestyles, there is no loud national movement, accompanied by moral outrage, to change these principles.

Unsustainable Market

In contrast, similar principles are routinely violated in health insurance. To demonstrate this, let's return to the same suburban mother from the opening paragraph. She's busy working, driving to and from work, and driving her kids to school and activities. She ends each day exhausted, sitting on the couch with fast food. She's obese, has a sedentary life, a bad diet, and hasn't taken the time to go to the doctor in years. After a simple injury doesn't heal for weeks, she turns up at the emergency room and learns she has type II diabetes. Although type II diabetes is controllable, changing diet and exercise habits and properly tracking her condition takes time and effort and she's never quite successful in implementing the necessary lifestyle changes.

So the initial emergency room visit is only the first of a long list of health care related to non-controlled diabetes and other problems associated with obesity. Whether she has individual or group insurance, her insurance pays for each episode of care, without singling her out for a premium increase, and without charging her any more cost sharing than is charged to the healthiest and most medically diligent insureds. Her coverage continues until she voluntarily changes insurance companies and/or employers or becomes eligible for Medicare. If she's covered under group insurance she may not even pay any premium. Her insurance continues unabated, even though the disease was caused by neglecting her body and she maintains her poor lifestyle even after the disease becomes known.

This just wouldn't happen in auto insurance. This scenario is the auto insurance equivalent of guaranteed access to low-priced auto insurance that takes care of every possible repair, including damage already done, until the day the car falls apart so completely it's unsalvageable (death) or reaches 200,000 miles (Medicare), regardless of whether she even changes the oil (takes care of herself) in the interim.

As a society, we don't expect this in private-market auto insurance, but we expect it in private-market health insurance. Furthermore, there's a chorus of national and state interests, which continuously pushes us further away from the auto insurance principles.

The current private medical insurance market isn't sustainable. Prices have been consistently increasing faster than inflation for decades. Each year, insureds use more health care than ever before and more people have no insurance at all. Most actuaries and other people in the private health insurance market don't want national health insurance with its bureaucracy and one-size-fits-all benefits. Yet, we're trying to sustain a private insurance system, which violates the very principles we know are necessary for private insurance markets.

Yes, health insurance involves the sacredness of human life and is therefore different from auto insurance. But if we're to sustain a private-market solution to health insurance, actuaries need to explain to the larger society, in terms that society understands, the rationale for the following principles:

* As sacred as health care is, it's still an economic transaction that has to be balanced by individuals and societies, against other economic choices. It can't be unlimited. Sometimes it will be secondary to other choices. On a given day, for example, the mother in our scenario may value her car more than her health.

* Insurance premiums should be paid by the individual and tied to controllable risk factors. This will provide the best incentive for the control of risk factors.

* Although it's hard to draw the line between abuse, neglect and ignorance, self-abuse shouldn't be insured and we need to draw that line somewhere.

* The private market can't provide unlimited, self-directed medical insurance.

* Routine care and ongoing treatments of chronic conditions can be pre-funded, can even be subsidized, but they don't constitute "insurable events."

* Insurance can't be expected to keep every human body in pristine condition. No amount of health care will prevent everyone's ultimate death.

* Comprehensive, unlimited, non-subsidized private-market coverage isn't possible for people with severely impaired health.

* The private health market can provide limited non-subsidized medical insurance coverage, such as protection from accidents, to even health-impaired individuals.

* Individuals who can afford to do so and who take good care of themselves should be able to "buy up" to better coverage. People have the option of buying up for everything else in life.

Discussion of these principles is lacking from most of the current health insurance debate. If society can intuitively understand how similar principles apply to health insurance, then they should be able understand the principles in the health insurance context. We need to initiate the debate.

Post Solar Light

Post solar light are fast turning into a useful and ecological gadget for properties and commercial establishments all across the world. Offered the rising cost of energy, it produces much more sense to go for solar lamp posts, rather then the usual regular electricity lamp posts. This is because standard electricity lamp posts suck power from the grid instead of the Sun.

Solar lamp posts are just as useful as the ordinary electric lamp posts, and operate just like any solar appliance. They are equipped with solar panels that very first store energy derived from the Sun using the photovoltaic effect, and then use this stored energy to light up the bulbs within the lamp posts.

These lamp posts are very quick to install and are far more economical, within the long run, than regular electric lampposts. There is no wiring essential when staying installed, and the best thing about them is that they can be positioned just about anywhere!

Apart from helping you cool off global warming and saving on energy expenses, they will not demand to be switched on and off. They've in-built sensors that which enable them to turn on and switch off at the proper time. They also use LED bulbs which use a smaller amount electricity than traditional bulbs, allowing them to run longer for the stored charge.

These posts come in a variety of models, styles, colors and shapes and finding one that appears chic during the front yard is an trouble-free job. You'll find several lamp posts types that go nicely if these are positioned next to trees and there can be styles that look great when they're positioned for the ground next to stairs. Solar lights that are mounted on fixtures enhance ambiance and are ideal and need to be utilized for walkways and driveways.

Finally, solar lamp posts save income. Though they price about the same as an typical posts, they're free to use, as you don't ought electricity to run them. Usually you may anywhere from ten dollars for the smaller ground level post to several hundred for the solar lamp post over a tall fixture. They will pay for themselves over time. These are sturdy as well and final for the long time.

If you're looking to save time, electricity, and money whilst enjoying the convenience of not switching on and off your lamp posts, then solar lamp posts are just what your home demands.

Buying Coffee Online

How To Best Budget Your Business Finances

Introduction

Learning to budget your income is one of those things where some people have no problem, yet others cannot do it for the life of them. Those of us who find budgeting easy and satisfying don't really understand those people who can never manage their money properly.We all know someone who is always broke, and we all know someone who although they might not be rich, always has money for the things they need.

Financial planning and budgeting are the basis of all financial success. Irrespective of whatever financial level you are operating at the principles are the same. I recently watched the Secret Millionaire program where each week a wealthy business person who has made their fortune goes undercover into a rundown area and lives amongst some of the poorest people in the country for 10. The twist is that they are only given the equivalent job seekers allowance of about 56 pounds, so they have to manage on 8 pounds a day.

Inevitably over the week they get involved in various community and charity projects and find people that they could help financially. Well I love this program, especially at the end when the millionaire presents somebody with a cheque for an amount of money that is generally more than they have ever had in their life. I like trying to work out from their expressions if they have guessed they are a secret millionaire or not, some of them have obviously worked it out and try to put on their surprised face!

There was a couple of interesting finance related things I picked up from watching these programs though. The first was on one of the programs that featured a millionaire lady who had come from nothing into a millionaire in the period of about 30 years. She said she got started when her uncle gave her 5 pounds when she was a child and she saved it. What was interesting though is that when she went undercover she still managed to save money whilst she was living off her 8 pounds a day. She put her savings, which were only a few pounds, into a sock in her sock drawer.She was spending less than her daily budget.

The other interesting part was where a wealthy Scottish business man decided to help out a flailing cafe owner and his wife. They were foreign, Greek I think, and interestingly when they did the follow up segment of the program, when he returned to see how they were getting along, the business had still gone under, in spite of the fact that they were helped out by the millionaire!They must have been spending more than they had available.

Can you see a pattern emerging here?

The two examples help to demonstrate the one basic fact of financial success: If you want to be financially secure you have to spend less than you have got. If you spend more than you have got you are doomed to financial failure.Both of these examples demonstrate that one basic fact.

Consider these three facts

1. Mr Macawber in David Copperfield by Charles Dickens, purports the concept of budgeting. "Annual income twenty pounds, annual expenditure nineteen pounds six, result happiness. Annual income twenty pounds, annual expenditure twenty pound nought and six, result misery." Charles Dickens, David Copperfield, 1849 English novelist (1812 - 1870)

That basic rule has not changed since the 1800's and never will!

If you consistently spend more then you earn you will always feel poor, or lacking financially, in the SEO web design business I run I always make sure that expenditure is less than income, follow that simple rule and you will always feel well off.

Spend a penny less than you get and you will always feel abundant and this is something we have now achieved. This may seem very apparent, but how often do we find we are spending more than we can afford? There are tempting offers or investment opportunities within our grasp every day and it's difficult to resist when they try to make us believe we might never get such an opportunity again.

Hands up if you are someone who has difficulty controlling your finances?
Hands up if you do not know how to budget your money?
Hands up if you find it impossible to resist tempting offers?
Hands up if you are always overdrawn?
Hands up if you don't know how you are going to make ends meet for the next week?

If you have all your hands in the air (and your feet!) it's time to do something about it. (In other words take yourself in hand!!) Please excuse the pun.

The first thing you need to understand is that people who are selling are in business to make money and they want their businesses to grow. To do this they have to increase sales, so they have to make things irresistible to the customers like you and me.

So remember, the next time you are in debt and struggling to pay the bills, and you see something you want to buy, there is some big guy out there who is going to be raking in the profits as you slip further into debt. They are taking your hard earned cash and leaving you poor so be strong and just say no to the things you don't really need.

Change of Mindset

If your business is unlucky enough to be subject to a tax enquiry audit then you will need to make sure that the professional fees you incur as a result are covered by a tax enquiry insurance policy.

People who do not budget and find it difficult to manage their money seem to have a particular mindset. For instance, there may be an idea from childhood that being careful with money indicates to the world that a person is miserly. Being reckless then equates with generosity and open handedness. If you are loaded then spending money freely is not a problem, but if you are on a limited income or just never seem to have enough, then keeping accounts is essential.Move yourself into the group of people who can manage their money.

3. One of the ways to change your thinking is to ask yourself, 'who is the best person to benefit from your hard earned money'? Is it the big companies who are making loads of profit already(Fat cats) paying their executives million pound bonuses, or would it be better if you benefitted from it?

Anxiety about your ability to manage your money and fear of figures may cause you to ignore. I had a friend who admitted this to me and when I said I enjoyed the online banking system and being in charge of moving my money around and how easy I found it; she immediately changed her mind set and decided she could handle the online banking system and researched the best way to invest her money to make more of what she had.

Give yourself permission to think that being in control of your money is a practical way to remove the stress you experience around finance. Being good with money is more often than not just about monitoring what is going on closely, so that you can respond to anything that happens that you were not expecting. By getting control over your finances will give you more energy to enjoy life more and as a result you will make more money too.
Guidelines to Liquidity

The most difficult thing to do is to face the truth. When someone is on a spending spree they are out of control and out of touch with reality. The fantasy ignores the hard fact of the cost and the very real consequences of overspending (ie. How it's going to be repaid).

So the first thing you need to do is keep an account of everything you spend your money on. At the beginning, if you have not done this before, do not try to change what you normally do, just make a note of everything you spend as you go through the month. Have a cash note book and write down all the things you can think of that you buy. This includes household bills and food, mobile phone, TV. Put a figure in the corresponding column. If you have actual amounts put them in, if not make an estimate. Leave space for the things you don't remember or even consider expenses. Beer, cinema, clothes even the coins you toss to street entertainers. Categorise it as fun money or entertainment funds.

Every time you take money out of your pocket/wallet/credit card/bank, write down what you use it for. Do this over one month, and by then you will have a fairly comprehensive list of your expenses. Make a total at the bottom of the page and on the opposite page write down all your income. When I first did this I found that one of my largest expenses was shop bought sandwiches every day! I ended up saving about 5 pounds a day just by making my own lunches.

Compare the totals. Have you spent more or less than you receive? Is your life going towards happy or miserable? It is at this point you really need to make a shift in your thought process if you want to gain control of your finances, and move yourself into the group of people who are well off.It really is that simple.

Start by being mean to people who want to sell you things. Look around for the best deals and always ask to renegotiate deals. I went on a negotiating course some years ago and the following week I put into practise what we had learnt. I reduced my spending by 350 pounds, just by asking! Most of the time these days, people expect to be bartered or negotiated with and most prices are generally based on the fact that the advertised price is not the final selling price.

Carry only a minimum amount of money on you so that you are not tempted to fritter away 20 pounds on some impulse purchase you don't need. Those notes add up fast and before you know it that 100 pounds that was in your pocket is gone. Have you ever noticed how when you haven't got the cash but you know you could get it, you rarely go back for the item you were going to originally buy.

Another way to make your money go further is to ensure that you are claiming back any business expenses you incurr. Sometimes when you are in a hurry it is easy to not bother saving receipts but recently whilst working at link building services across the UK I started saving all my receipts and was amazed at how much money I was able to claim back.

Cut up your credit card unless this is the most convenient way to pay regular items and you clear the balance at the end of each month. Use only one credit card, and find one that gives points for purchases. Whilst it can sometimes be an inconvenience to have to get another card out these points mount up over time and you can claim vouchers to spend in your favourite shops. Personally I don't like loyalty cars and feel that companies who give points away ought to just provide a discount on the sale price and make everyone's life easier, but the world is just not like that and it does pay dividends now that I have managed to get past that!

Also find a credit card that will take the full amount by direct debit every month so you don't miss payments, accrue interest charges and generate a large fine.

Make a list when you go shopping and only buy what is on that list. OK, some things you may have forgotten to put down but make sure you avoid the impulse purchases. Keep a list in the kitchen and only put things on it when you have run out. Use up products in the icebox and freezer to reduce waste and keep spending to a minimum.

Become a prudent shopper and consumer. Try and use up coupons, saving a few saved pence per purchase can really add up. Searching through clearance sections in stores is another way to save money. You may be pleasantly surprised to see how much you can reduce your bill on your usual grocery haul. Not everything on the clearance shelf is always rubbish!

Conclusion

Budgeting is not for the fainthearted. It means fighting the urge to buy what is not needed. It means trying to always find ways to reduce costs and trim down the fat, could you get some of your service for free or at reduced costs by renegotiating with suppliers, for example.

I run my own business and if you are like me the temptation is strong to buy all the latest gadgets. But if you can think yourself into a new mind set you will find it much easier to change the habits of a lifetime. Be sure that all expenses are accounted for when you take stock of your situation. Once you have your finances under control, there will be enough surplus to save and allow to grow for the special events you may want to splash out on in life.

If you still have difficulty curbing your shopping habit, take a friend or relative with you on outings. Someone you can trust to steer you away from temptation. Once you conquer your shopping demons, you will be proud of yourself for doing so and feel a great sense of accomplishment. So don't be overwhelmed, grab that pen and paper start doing your budgets and get on track to a debt free existence and a happy life.