The concept and practice of insuring mankind's property and operations against the certain and uncertain damage that can happen is an ancient one. The earliest evidence of insurance programs lie in Babylonia, where merchants established contracts with their investors to forgive any loans if their sea going cargo was subjected to piracy or sinking. Ancient Rhodes developed a codified set of laws for sea operations known as the laws "Jettison" or "general average". The Code of Hammurabi legalized a form of insurance protection in the event of trade expeditions being subjected to robbery and the participants placed into slavery.
The Greeks and Romans extended the concept of insurance to the areas of life, health, and burial assistance. The most advanced forms of insurance codification developed at that time, even extending to insuring the lives of pregnant women. In Medieval times, private groups and societies formed to pool their resources into a common fund that was managed by elected officials for mutual protection.
Today, insurance has developed and broadened into a legal and funding necessity for doing or expanding business, operating vehicles, owning property, obtaining comprehensive and catastrophic medical and life insurance coverage and owning property in hazardous areas, such as flood and fire zones. Very little of life goes uncovered by one insurance or another these days.
From professional indemnity, livestock insurance, kidnapping insurance, uninsured motorist coverage and a host of new coverages, we have a matrix of legal, natural, criminal and other liabilities and threats that are insured within a matrix of legal mandate, condition for getting loans or opening a business, or need to protect private property and to provide income for surviving beneficiaries.
Traditionally, insurance was a major engine for balancing risk and for stabilizing and restoring economy on individual and national levels. Catastrophic damage at both personal and infrastructure levels was alleviated by the pooling and withholding of monies, or the forgiving of loans.
The chance that not all premium payers would make claims allowed for their undistributed funds to go toward payment of claims. Increasing resources for conducting background investigations and risk analysis, combined with refusal to insure likely claimants would protect against irresponsible conduct or fraudulent claims.
This protection, combined with ways to reduce claims, would reduce the need for individual, businesses, and governments to file for bankruptcy or to completely default on loans, while the insurance agent could retain a safe fund or make profit.
The role of insurance today has evolved to the point where individuals no longer have a rational choice, are stopped from engaging in certain activities, can be jailed and fined, or are taking costly risks if they do not or cannot obtain insurance. The current (2009) argument over universal health care is an issue that has uninsured individuals finding even minor health care to be financially out of reach, leading to more acute conditions and even massive numbers of deaths from lack of access to medical care.
Even the myth of lifetime medical care if a service member is injured while on active duty is just that...a myth. If the service member is found to have been injured through his or her own fault, while off duty, or under similar conditions that apply to denial of workman's compensation insurance claims, then veteran's compensation and pension can be denied.
Insurance is now a system where investors, along with the premium paying customers of an insurance firm or enterprise, are competing with each other for the resources that the pool of money provides. This means that the pool or fund that is supposed to be inviolate and used to provide for the forecasted number of actual claims is reduced in order to reward investors in some cases. In other words, the trust is deviated to investor profits.
In other cases, the number of claims is increasing and delivery of the promised benefits is problematic. People who were expected to die in their 60s are now living into their 80s and 90s. People who were expected to have extremely profitable and healthy lives in their 20s and 30s are developing debilitating physical injuries, drug and alcohol addictions and otherwise incurring costly medical conditions at far too young an age. Also, thrill seeking behavior, crime, disaster, and other conditions are causing the predictions and forecasts, or the actuarial tables, to become inaccurate in planning for the amount of money to keep in the fund or to distribute to investors.
Insurance investors work at odds with the insured. They are essentially gambling on the probability that claims will be actually paid out, while the insured are gambling that their premium payments, over the years, will result in some protection, whether a claim is ever filed or not.
The insurance industries were part and parcel of the deregulation spree of the early 2000s, engaging in actions that would have been criminally sanctioned in the past, and contributing to near economic collapse. Legitimate claims in flood and storm damaged areas are still in litigation after decades, individuals were tossed out of health insurance plans for having non-existent, but potential disorders and diseases, and the hard core funds for paying out claims were bloated with excessive premiums which were then distributed to speculative investors, rather than to back to the individuals who paid the excessive premiums.
The future role if insurance industries will then be determined by voter and consumer revolt, an unlikely chance if conflict of interest is not eliminated for lawmakers who are financed by the insurance industry. After a period of devastating deregulation, there must be a restoral of regulation of this vital engine of the world's economies.
John Barrett, "The Role of The Insurance Company In Society"