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Life Health > Health Insurance

Our Business Should Not Be Taken For Granted

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One of the most prophetic of modern economists, the late Harvard Professor Joseph A. Schumpeter, hypothesized that capitalism would ultimately be undone from within the system. This conclusion springs, at least in part, from two concepts that are significant to us today.

First, Schumpeter predicted that one danger to capitalism is found in its very success; in other words, it has been so successful that success itself will increasingly be taken for granted. So many people and businesses are successful today that it will soon appear that the achievement of success is not a great problem and that capitalism, which is really the necessary ingredient, is unimportant.

Obviously, Schumpeter did not make this prediction in the middle of a recession or he would have made it clear his prediction transcended periodic changes in the economy.

To continue the professor’s thoughts–most now view an uninterrupted supply of most things we need for an abundant life as ordinary and rather expected. Even the poorest in our society look upon such things as clean water as ordinary and its availability is taken for granted.

But the supply of such things is a product of our capitalist system. One does not have to travel far to learn that such things are not ordinary in large parts of the world and their lack of availability in other places serves as a constant reminder that they can be lost to us if we are not good stewards of our system.

On this point it’s clear that the public at large, for a long time, has been ignoring its stewardship role in a highly significant way. In its mad scramble to consume more and more, the public is ignoring the need for capital formation, as evidenced by a savings rate that has, over several decades, dropped precipitously. At the moment the savings rate has bounced up to about 6%, but this is more a reaction to the current recession and the fear it has created, rather than a long-term trend. Forty years ago, the savings rate in the U.S. was about 11% or 12% and fairly steady year-to-year and we were good stewards.

Clearly, capitalism is being taken for granted and to the extent that it is viewed as unimportant, the first steps toward its downfall have been taken. Considering the vital role our industry plays in the formation of capital, does this not pose an enormous challenge to each of us?

Responding to this challenge is always difficult, for Schumpeter also maintained that capitalist societies tend to create an intelligentsia hostile to capitalism. By its very nature, capitalism produces dynamic people–people who are innovative, inquiring and dissatisfied with the status quo.

Not only will such people be produced, but also they will be supported, encouraged and even protected by the capitalist system. And, according to Schumpeter, they will ultimately subvert the system.

I see three areas in which this prophecy is being fulfilled: academia, the media and government. The anti-business bias is so prevalent in all three that it seems redundant to mention the fact. Thus, some of these people represent a formidable obstacle to our own efforts to support the system. Moreover, the frustrations and criticism we must endure in such efforts make this kind of labor difficult and, at times, painful.

But we are caught in a dilemma. For who among us would even think of eliminating, or even modifying, the protections which grant academic freedom, a free press and the right to govern ourselves freely? Yet, the danger exists and is growing. When administration people assert that we need a public option in healthcare to keep the private insurance companies “honest,” the implications are ominous. Clearly, disdain for the private sector shines through such remarks.

The answer lies not in repealing the Bill of Rights, but in stiffening our backbone in defense of our system. Such action requires leadership akin to that which built the system in the first place and an understanding of what constitutes a proper defense.

Our business lies at the heart of the free enterprise system. Our products alleviate the threat of poverty at the loss of a breadwinner, and hope for the future through funds available during emergencies and at retirement, and for most, bills paid when illness or injury strike. We cannot allow this contribution to society to be taken for granted.

The key to our defense has to be in public relations and education. I’m not talking about the “fine print” people complain about, but rather the basic concept of insurance that is not well understood. For example, the unit cost of insurance has not risen. What has increased is the item or items being insured. People can reason that it costs more to insure a million-dollar home than a half-million-dollar home, but have difficulty transferring that concept to health insurance. People rarely complain about the high cost of healthcare; rather they grouse about the high cost of health insurance, so we get the blame.

Another concept seldom fully understood is the sharing aspect of insurance. Fundamentally, insurers manage a pool of money to pay the claims of their policyholders. Contributions to the pool (premiums) must support claims. When they don’t, rates increase. When juries make outrageous awards the pool is penalized and policyholders share the cost. Contrary to what many believe, such awards are not “sticking it” to rich insurers–rather they are picking the pockets of policyholders.

Of course we need to be vigilant on the legislative front, but we also need the public on our side. We cannot allow that which has taken decades to create to be swept away by unfounded criticism.


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