Originally Posted By: billt460
Originally Posted By: grampi
What gets me about insurance companies is when they raise everyone's premiums in a given area because there have been more claims in that area. Shouldn't they be raising the premiums of only those who are filing the claims? Why make everyone pay more?
No, because they wouldn't be able to raise them enough to make up the difference. For example, after Hurricane Andrew destroyed the bulk of South Florida in 1992, (it wiped Homestead Florida completely off the map), and caused over $27 BILLION in damage. (Keep in mind that was $27 billion in 1992 dollars). If they only raised homeowners insurance to people who were effected by it, they would no longer be able to afford it.
So they raise everyone's rates unilaterally across the country. Remember, insurance involves the spreading of risk. So the more of that risk they can spread, the less per person it amounts to.
It's much the same with drunk drivers, and people who buy fast cars. If you've never driven drunk in your entire life, you're still paying for those who do. And a 65 year old with a perfect driving record who buys a ZR-1 Corvette, will still be saddled with a high premium. Because enough people with bad driving records will buy and wreck them more often.
Your explination shows why the insurance industry is nothing but a big scam. It's the only one I know of that has the means to ALWAYS make a profit. People paying for insurance are taking a risk that their premium will cost them less than a catastrophic loss would, so we opt to have insurance. Most of us will lose money on the deal in the long run. Insurance companies should assume the same risk in that they may have to lose money occasionally during times when claims are high. It's the nature of the business. Considering the amount of profits insurance companies make, they can afford to lose once in a while. This business of making customers pay to recoupe insurance company losses should not be allowed...