The Wide Gulf Between Uncertainty and Gambling
Blue Cross Blue Shield of MI “Legacy Plan C” Example
One of the laziest, most inaccurate over-generalizations people make? “We can’t predict the future, so insurance is like gambling.” Nope and it’s an expensive lesson people do learn, and when they do, it is frequently too late.
In 2016, this Newsletter existed, and you could read “BCBSM Legacy” premiums. It was an alert, that BCBSM held rates artificially low, due to a legal agreement it made, and the expiry date approached. Further, there was a “way out” into alternative, much cheaper and very similar coverage (Plan N).
I contacted the carrier after the “free get out” period expired, and stunningly, the carrier told me that over 70% remained in the existing Legacy plan. That told me a number of things:
- People didn’t correctly know the options
- People didn’t believe me
It is fine, I call the second point “Tuesday,” i.e. this happens all the time.
The entirety of every article and the book?
- We cannot predict the future, but we know the inputs to how decisions are made by the carrier, and the we should know that the carriers are smart, but have to play by the rules of regulation and fierce competition.
- We know that the ripple effects can last a long time.
The Definition of Gambling
People lump together the idea of “uncertain outcomes” with “gambling.” Gambling is when you know and understand the probability, and when you choose to do something that run opposite to that knowledge. Insurance carriers are not in the business of gambling. That said, they have to adhere to regulations, and cannot set the price too high, because there are other, equally-smart sellers.
Look at the evidence:
- Medigap pricing in Midland MI for T65 female: TEN SELLERS within $10/month. We don’t need to know a thing to know this is the correct price, the topic does not need to be Medicare/health insurance/blahblahblah.
- Medicare Advantage: 5% profit margin.
- Exceed 20% profits? Federal regulations to return the difference to you.
We Are Grateful to Those That Listened
The fact is that we guided people out well before this occurred (years), because this outcome was self-evident. We literally shepherded as many people out as would listen to our reasoning. Sometimes the outcome is unknown (a hurricane doesn’t exactly strike a predicted target), but since we knew the rationale, this wasn’t “anything can happen” situation. It was entirely loaded towards “this is very, very likely to occur.”
Does this exist elsewhere in the world, on financial matters? You bet. GH2 Unfiltered.