Monday, May 03, 2010

Insurance and Government...

The other day we had this interesting discussion and here is the outcome…


Let’s consider a hypothetical model …where we could actually replace our current government tax-collection model with an insurance-based model…


In this new model, the central government would buy every insurance company in the country…and ultimately becomes the formal and official insurance provider for the country. (and perhaps the rest of the world..or poorer world).

The profits from selling insurance would replace taxes…The government would become a “for-profit” enterprise.


In a way, the government is actually already a sort of big insurance company.

When something catastrophic happens, from floods to war, the central government steps-in,(providing relief funds to state governments etc..). All  I'm suggesting is…just formalize the arrangement and try to monetize it, with most of the profits coming from international sales (from poorer neighboring countries like Bangladesh maybe).


Consider that an insurance company does more than just premium collections and pay-out for losses. They also do work to reduce risks.

This is similar to what a government tries to do for its people. Governments urge you to quit smoking, and they force you to wear seatbelts, helmets...

Governments form armies to keep the homeland schools to keep future generations from needing aid.


For all practical purposes, the government is already a big insurance company. All I'm suggesting is that we become more efficient at it, and make some money in the process.


It would be interesting about this new model to lead to practical laws, especially if law makers had some sort of profit motive.

For example, you might see the legalization of any activity that lowered financial risks. I think you'd find that in most cases, the majority of citizens coincidentally support just about every policy that saves money in the long run.

That's because the best way to save money in the long run is to keep citizens safe and healthy and prosperous.


In this imagined future world, politicians will still be elected by the people. And the big moral issues could still be decided based on cultural preferences over profits. The difference is that the voters would always have an estimate at hand to see how much those preferences might cost them.


Another benefit of this arrangement is that citizens would have just one policy for all sorts of risks, including motor, health, home, etc. etc.

Your premium costs would depend on your specific situation. Just check all of the appropriate boxes on a web page, and enter your bank account number for automatic deductions…and you just paid your taxes and handled all of your insurance needs in ten minutes.


I can would make the world safer in the long run. Imagine two smaller countries spoiling for a fight, and one of them is an insurance client. The plodding and ineffective current governments would be irrelevant, but the new Insurance backed government would step in fast to protect its investment.. J

And no one will ever misjudge its intentions…because its motives would obviously be entirely transparent…profits!


PS: I agree that this imagined future can never happen…but it’s fun to imagine stuff.

1 comment:

Siraj said...

Wow !
Thats a thought!