"There are worse things in life than death. Have you ever spent an evening with an insurance salesman?"
-- Woody Allen
Woody Allen is being funny, but not entirely accurate. Insurance may not be the most exciting topic on earth, but there are still plenty of fascinating things one might learn about it. Here are a bunch of things to know -- they might make you the life of the party and they might save you some money, too.
Even the history of insurance is rather interesting. Consider these tidbits concerning how people in the past dealt with risks:
- The first appearance of insurance in history reportedly happened in China, around 3000 BC. Merchants who relied on ship transport of goods were at risk of losing merchandise in shipwrecks. Some banded together and distributed their goods across a number of ships, so that one shipwreck would hurt each of them a bit but wouldn't deliver a total loss to anyone. Modern insurance works in much the same way, with money being collected and pooled by insurers, ready to be paid out in claims.
- America's oldest, continuously active insurance company was founded in 1752, well before America became independent, and it's still around today. Originally modeled on English insurance companies established after London's Great Fire of 1666, it's the Philadelphia Contributionship, and perhaps unsurprisingly, one of its founders is Benjamin Franklin. It took form after some city dwellers joined forces to protect each other financially against fire damage. It went so far as to have building standards that covered properties needed to meet, and it employed a chimney sweep to clean the chimneys of insured homes.
The Affordable Care Act, colloquially known as Obamacare, is quietly transforming healthcare. Our healthcare system has long been a fee-for-service one, but the ACA is morphing it into a value-based one. Why might that matter to you? Because focusing on outcomes more than on services can keep people healthier and save money in the process.
The fee-for-service model has doctors and the healthcare industry making money every time they provide a service to you. This isn't necessarily bad, but it does offer incentives to the industry to perhaps order more tests than they need to, to perform more procedures than are really necessary, to recommend more expensive treatments, and so on. This is one reason our nation's healthcare costs recently topped $3 trillion, accounting for more than 17% of our gross domestic product. Per person, that's about $9,900, with much of it paid out of pocket.
The value-based system supported by Obamacare rewards healthcare service providers based on the quality of care delivered to their patients. Doctors and hospitals, for example, can earn more if their patients get healthier, stay healthier, don't get readmitted to hospitals soon after being discharged, and so on. A particular model being recommended is the "patient-centered medical home" (PCMH), where a doctor's office has staff checking on patients, especially ones with pressing health issues -- making sure they're taking their medications, coordinating their care with other doctors and hospitals, and so on. It's a more proactive than reactive approach and has more of a focus on preventive care than the old system did. The PCMH is compensated for getting its population healthier while keeping costs down. Lower costs mean that insurers can charge lower premiums and that patients pay less, too. It's a win-win, and studies have shown the new model to save money while being more effective.
Here's a stark example from the Baltimore area: "CareFirst BlueCross BlueShield's patient-centered medical home reported improved care quality and $345 million less in costs than expected in 2014." More recently, last year the bipartisan Congressional Primary Care Caucus reported on evidence linking PCMHs with lower costs and improved healthcare quality.
Surprise -- you're covered!
Another fascinating aspect of insurance is that it often covers you for things you're not aware of -- and sometimes excludes risks you may be assuming it doesn't. For example:
- With car insurance, there's a good chance you're covered for damage from rodents (imagine, for example, a field mouse biting through some wires). Damage from riots and falling objects such as meteors is also frequently covered, as is damage from potholes. Policies will also typically cover some legal costs if an accident leads you to a lawsuit.
- With home insurance, you're usually covered for damage from volcanoes and even meteors, but not from flood or earthquake damage. Consider adding coverage for those if you're worried about them. (Earthquakes can occur in unexpected places.) Damage from riots is often also covered, but not damage from war. Your policy probably also covers your college students' belongings while they're in school -- and it may cover your family gravestones, too -- so if yours is vandalized, look into whether it's covered. Libel and slander will also often fall under your liability coverage, so if you're sued because of what you said about someone on a social-media site, your homeowner policy may help you out.
- With health insurance, your plan may offer free or discounted gym memberships, some time with health coaches, smoking-cessation and weight-loss programs, access to doctors and nurses via video consultations, and perhaps even financial or couples counseling -- which can reduce your stress and improve your health.
It's worth checking with your insurance companies to see just what benefits you currently have. Consider doing a little comparison-shopping, too. You may find a policy that costs less and offers more.
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