Insurance...and the ten-minute victory

I have this friend. We'll call him Mike...cuz his name happens to be Mike. Most of you know Mike...but for those that don't, Mike is an interesting character. His life experience has rendered him just a little bit cynical, so that invariably determines his position in our debates. He's one of the friends I was talking about in my first post, so you'll hear a lot about Mike. Maybe he won't like me callin' him out like that, but so what...it's my blog.

Anyway...Mike made a comment the other day that the whole "threat of lawsuit" thing sometimes works out in our (the consumer's) favor. He went on to relate how his son was recently in a car accident (he's okay...no serious injuries), and his insurance company called a few days ago, offering him money. They told Mike they were sending him a certain amount to cover his son's medical bills, and an additional sum of equal amount to cover "hardship and suffering"...or something like that.

Now...being the evil Capitalist that I am, I didn't see how this worked out in anyone's favor. Even Mike acknowledged that the extra money was merely a buy-off to help prevent the possibility of litigation effort to procure further payment for "hardship and suffering", which could potentially amount to a much higher sum. I pointed out that this sort of activity was just another line item that would push insurance rates even higher.

Mike's answer was that his rates were going to go up anyway, so why shouldn't he get some of his money back? After all, it was his money in the first place. He considered it a victory...albeit a small one.

Here's where I made my mistake in the debate. I asked Mike why his rates were going to go up. This had the effect of sparking Mike's usual response about business in general, which punches my Free Market button every time. His answer was, "...because they're greedy f***ers." (my own censoring added for the benefit those who may not appreciate our urban vernacular)

Now...I don't deny that many of the people who run insurance companies (or any other company, for that matter) are greedy f***ers. I'm sure it's true of many of them. The point that I (and I'm sure many other laissez-faire types) have been trying to make about this is that it wouldn't matter if every single last business owner in the world was a greedy f***er...The fact remains that a free market doesn't reward purely greedy behavior.

The factors that go into setting a price for a particular service or product are many and varied, but one thing is consistent...it's never arbitrary or based solely on greed. An insurance company won't simply raise prices "because they can". To do so would risk pricing above what consumers are willing to pay, thereby driving customers to do business with its competitors. (At this point, Mike would probably invoke the danger of the ominous specter of collusion, but that's another post)

I'm intrigued by the overall attitude of the general public that business owners are greedy, heartless, and conniving. I've realized that it's basically an emotional outburst, and that this is what makes it so difficult to undo. The question is, who is to blame for this unreasonable position? Have we (consumers) done this to ourselves because we're unwilling to take responsibility for the decisions we make about the products we buy or services we pay for? Is it government's fault for demonizing some business owners in order to protect others? Is it the fault of business itself for being opportunistic and selling people whatever they'll buy?

Comments, please...