Many Americans rely on their cars to go to work. No car is not a job, no rent or mortgage money, no food. A single mother of struggling to make ends meet in the suburbs than 100,000 miles on it, would probably welcome the opportunity to be provided for a period of cheap insurance, maintenance of all kinds of repairs to its car coming up the date he collapses or 200,000 miles, whichever comes first. Especially if the insurance is valid regardless of whether it also changes the oil in the meantime. So why not car insurance companies writing such coverage, either directly or by using car dealer? And given the importance of reliable transportation, why does not the public demanding such coverage? The answer is that auto insurers and the public that such insurance can not know for which premium the insured can afford to be written, while allowing the insurer to remain solvent and profit. As a society, we intuitively understand that the costs associated with support for all mechanical needs of an old car, especially in the absence of regular maintenance, are not insurable. But we are not the same opinion with regard to health insurance seem to have. If we take the emotions of insurance which is certainly difficult, even for the author, and watch health insurance is an economic standpoint, there are results of auto insurance that can lighting design, risk selection and evaluation of health insurance. Car insurance comes in two forms: traditional insurance purchased from your agent or directly with an insurance and guarantees, which are purchased by car manufacturers and dealers. Both are risk transfer and sharing of equipment and I speak in general, as well as insurance. Because self-insurance liability is not reflected in health insurance, auto insurance, traditional, I will examine only collision and comprehensive insurance – insurance for the vehicle – not liability insurance . Bumper to Bumper Here are some generally accepted principles of motor insurance * Bad maintenance voids certain insurance. If a car owner never changed the oil, the powertrain of the vehicle expires. In fact, not only the oil should be changed, the change must be implemented by a certified technician and documented. Collision insurance does not cover the targeted car drove over a cliff. * The best plan is available for new models. Bumper to bumper warranties are offered only to new cars. When they leave the assembly line, cars have a low and relatively homogeneous risk profile, meets the test of actuarial pricing of insurance. In addition, automakers usually at least some coverage in the price of new cars scarf to promote a sustainable relationship with the owner. * Insurance Limited is available for models of old cars. Increasingly limited insurance is proposed for the old model of car. The bumper to bumper warranty, powertrain warranty expires at some point, and regularly the amount of collision and comprehensive insurance reduces the market value of the car is based. * Some older cars will be eligible for insurance. Some older cars may qualify for additional coverage, either in the form of guarantees for used cars or high-impact and fully comprehensive insurance for classic cars. But this insurance is available only after careful consideration of the automobile itself. * No insurance is offered for normal wear. Wiper blades should be replaced, wear pads, and bumpers Dings. These events are not insurable. To the extent that a new motor vehicle dealers, sometimes cover these costs, we understand intuitively that we pay “for her” in the cost of the car and they are “not really” insurance. * Accidents are the only insurable event for older cars. Accidents are generally insurable, even for older cars, with few exceptions, the interview is not. * Insurance not return until all vehicle accident condition. Auto insurance is limited. If the damage exceeds the car at any age, the value of the automobile, the insurer then pays the value of the car. With the exception of classic cars, is the value assigned to the car in time. Thus, whereas accidents are insurable at any age of vehicle, the amount of accident insurance is increasingly restricted. * Insurance is the price of risk. Insurance is based on the risk profile of the price of two of the automobile and the driver. The auto insurer carefully examines both setting the rates. * We pay for our own insurance. And with few exceptions, auto insurance are not deductible. Because of the fear of higher insurance premiums because of traffic violations and / or changes in our behavior based driving accidents, and sometimes we choose our cars on their insurability. Each of the above principles is supported by sound actuarial theory. Although most Americans can not describe the underlying actuarial theories, of course, most any of the above principles of auto insurance at the intuitive level. For sure, as indispensable to our way of life are cars, there is no strong national movement, accompanied by moral outrage to change these principles. Unsustainable market However, similar principles are routinely violated in health insurance. To illustrate this, let us return to the same S-mother in the first paragraph. She is busy working, traveling to and from work and drive their children to school and activities. She ends each day exhausted, sitting on the couch with fast food. She is overweight, a sedentary lifestyle, poor nutrition, and did not have time to go to the doctor over the years taken. After an injury will not heal for weeks simple, it turns into an emergency room and learns she has type II diabetes, although diabetes is controllable, changing diet and exercise habits and monitoring adequate state requires time and effort, and it is never very successful in implementing the necessary changes in lifestyle. Thus, the emergency room first is that the first of a long list of health care associated with uncontrolled diabetes and other problems associated with obesity. She has individual or group insurance, insurance of their pay for each episode of care, without singling them for a premium increase, and without paying more than their cost of participation is the most medically sound and carefully carried calculated. Your coverage will continue until she voluntarily changes insurance companies and / or employer or to take advantage of Medicare. When they met under the assurance that they can not even pay a premium. Your insurance is intact, although the disease was caused by the negligence of his body and he is a poor lifestyle is also known for the disease. This would apply not only in auto insurance. This scenario is the equivalent of auto insurance guaranteed access to cheap car insurance, maintenance of all kinds of repairs, including damage already expired the day outside the car completely if it is not to save (death) reaches or 200,000 miles (Medicare), regardless of whether they also change the oil (takes care of himself) in the interval. As a society, we do not expect car insurance market and the private sector, but it expects the market for private health insurance. In addition, there is a chorus of national and state interests, which continually draws us further away from the principles of auto insurance. The current market for private health insurance is not viable. Prices have grown faster than inflation for decades. Each year, more health insurance than ever before and more people have no insurance at all. Most actuaries and others in the market for private health insurance does not want the national system of health insurance with its bureaucracy and its one-size-fits-all benefits. But we try, a private insurance system, which we know very violated the enduring principles, are necessary for the private insurance market. Yes, health insurance is the sanctity of human life and is therefore different from auto insurance. But if we have suffered in a private market solution to health insurance, actuaries need to explain to the whole society, that society is understood in the sense that the grounds of the following principles: * Is so sacred as health care, it is still an economic transaction, which may be covered by individuals and corporations must, in relation to other economic opportunities. It can not be unlimited. Sometimes it is secondary to other decisions. On any given day, for example, the mother in our scenario, their cars more than their health value. * Insurance premiums must be paid by each individual and tied to controllable risk factors. This will be the best incentive to control risk factors. * Although it is difficult, the line between abuse, neglect and ignorance, should not take self-abuse to be insured, and we must draw that line somewhere. * The private market can not provide unlimited health insurance self-directed. * Routine care and ongoing treatments of chronic diseases can be pre-funded, can even be subsidized, but they are not “insurable events. * Insurance can not expect to keep all the human body in perfect condition. No amount of health care is to prevent ultimate death. * Full, unrestricted, non-subsidized private insurance is not possible for people with severe health. * The private health insurance can be a limited market for non-subsidized health insurance, such as protection against accidents, and even human health impaired. * People who can afford them and who might well be on their own to buy the “ability to provide better care. People have the opportunity to buy everything in life. The discussion of these principles is absent from most current debates about health insurance. If society can intuitively understand how the same principles apply to health insurance, then they should be able to understand the principles in the context of health insurance. We must engage the debate. This commentary is solely the opinions of the author. It does not represent the official policy of the American Academy of Actuaries, but not necessarily the views of each officer of the Academy, members or employees Contingencies, January / February 2007

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