The Umbrella Has Holes
A few years back, when my financial condition had reached the point of collapse, I became desperate to find a way to get more money. I was under a pile of debt and saw no way out. I must admit the pressure made me succumb to temptation and I ended up in a profession that I fear will one day be exposed to the public. As a result, I compromised almost all of my core values and beliefs and nearly ended up as a member of the underground refuse of society. So to avoid any future disgrace of discovery, I have decided to confess my sin now.
No, I had not the class to become a convenience store thief or bank robber. I did not sell child pornography. I did not star in or make other kinds of pornography. I did not become a drug pusher or a purveyor of the white slave trade. No, my employment was much, much more sordid than that.
I became an insurance salesman. Even worse, I became a life insurance salesman.
Primerica Financial Services, the Amway of Insurance Companies, caught me in my time of weakness and flagging moral resolve and enticed me with promises of prosperity. They called and told me of the extra income I could make as part of their organization. They even made selling insurance sparkle with a glamour heretofore unknown. I soon would be making money, and at the same time "helping people" overcome their own financial burdens.
For the most part, you sell insurance to all your friends and at the same time hope to get them to sell insurance for you. Luckily, I had very few friends (and even less after my Primerica experience) so my involvement did not go very far. I petered out with no income earned and a lost $200 "application fee." In return I gained a knowledge of how far I would slink down the social ladder with the promise to make a buck.
Jesus forgave the prostitutes, so there still may be hope for me someday. Someday.
Part of Primerica's philosophy was to be "meeting driven." By this, they mean that you attend meetings to get yourself "fired up" to sell insurance. One thing I do remember is the leaders of the CitiCorp Group (the parent company of Primerica) bragging about how lucrative the insurance business was. They were the fastest growing business in America if not the world at that time. As proof, they basically said that they had so much money that they did not know what to do with it all. So they invested it in buildings, land, and other less-than-liquid assets. And those assets still made more income in terms of rentals and other fees, so they bought more and more buildings. I saw pictures of large, glass skyscrapers and other photographic proof of the financial wealth of the firm that had roped me in..excuse me, condescended to give me this great opportunity .
Even back then, the alarm bells went off in my head. The investments that the companies had plowed their "extra" resources into, and I am certain that Primerica was not alone in this, were not the sort of things that could be used to quickly pay off any large and unexpected claims. After all, there is not huge buyer's market base for glass paneled skyscrapers.
And what is even worse, the companies regard them as "their" skyscrapers despite the fact that they were purchased with the premiums of their insured customers. By way of proof, all of the insurance companies are now saying that they must raise their rates to cover the "unexpected" costs of repairing damage from the hurricanes that hit this country in 2005 and 2006. No mention of selling off those "assets" to pay for the claims so incurred.
Though Primerica is not a member of this consortium of rate-raisers you can bet if there is ever a situation where as a life insurance company they would have to pay out a large number of claims they would be in a similar situation. CitiGroup had better pray that the coming bird flu epidemic is a mistake on the part of scientist who had nothing better to do than create a news story. They had better really, really hope that Al Gore is wrong and cancer deaths don't sky rocket due to global warming. For believe me, they would be as unprepared as were the property and casualty companies for Florida and New Orleans. And with most term policies, you cannot raise your rates to your present customers. Any occurrence of death or destruction outside statistical trends are, if you excuse the expression, prime for destroying the insurance industry.
Yet, if you go back to the origins of the insurance industry, this was not the case. It started as groups of people who pooled their risks and contributed to a common fund. If one farmer failed or lost his property, then he received the whole fund to use to rebuild. If no farm failed, the fund was not spent or returned. Instead, the funds remained and the farmers or other business contributed yet another share in the next year. They knew that if the funds were not needed that year, then they probably would be in the next year, or the next. If not soon, then eventually. The longer the disasters held off, the larger the fund against that disaster and the better prepared the investers were to meet it when it came.
They all knew eventually such a disaster would come and the funds would be needed. All of them.
Later, a small portion of the funds were used to pay some people full time to manage and guard the assets. On its own, this was a necessary step since not every business man wanted to spend the time it took to keep the funds safe. So they turned it over to a steward to manage it for them.
The insurance industry was born. This on its own was not a bad thing. It let someone guard and manage the funds while those who invested were freed up to live their lives and do the work that they were paying to protect. It increased the productivity of society overall.
The real problem developed when the statisticians got involved. Even then, the problem was not immediate. Using mathematical models, the insurance companies were able to access risks and determine just how much each person should pools into the system in order to fairly cover those risks.
The flaw that developed was ethical. It came when the insurance companies became short term thinkers and followers of immediate gratification. They saw that often the risks did not immediately pan out as predicted. Indeed, things were often in much better shape than the models would show. So suddenly they found themselves with large amounts of premiums coming in and few payments going out. They had extra. But instead of recognizing, like those that started the insurance fund idea, that the disasters would eventually come and that those funds would eventually be needed, they considered them profit. They hijacked them for themselves. They bought the fore-mentioned buildings and other flashy assets. They considered the "extra" funds their own.
And now the big disasters for at least part of the insurance companies have come. New Orleans and Florida were hit with unprecedented floods and weather damage. New Orleans is still in the process of recovering, indeed if it ever can. Yet anyone with common sense could have predicted such damage would happen eventually. Statistics are averages. The fact that you have been under those averages for awhile only means that eventually you are going to be driven over the top in a huge way.
Yet the insurance companies spent like God entitled them to the money they made when the averages worked in their favor. Investments were made like the windfall was permanent.
Nothing in the past would have suggested to the stewards of the insurance funds that hurricanes could not strike and wipe out an American coastal city; yet they spent the funds over their (short term) statistical averages like it would not. If anything, an astute observer would have noted that such American cities have been lucky so far. Such luck had to run out. It did this year, yet the Insurance agencies, whose jobs it was to reserve against such eventualities, acted like they were betrayed by nature instead of their own greed and lack of foresight.
In the same light, the life insurance agencies spend the funds over their short term statistical averages like it is their own money. Yet nothing says that a tornado cannot wipe through a large American city at the height of rush hour, taking a massive amount of lives in the process. The fact that tornados have not yet struck a major American city does not say they cannot. An astute observer would say that we are about due; if not a tornado, then some other disaster. If not by nature, then perhaps man-made. If not accidental, then deliberate.
In that case, the insurance agencies would probably avoid their responsibility, citing "Acts of God" or "an Act of War" or some other such small print cop-out. They would leave the Government (which means you and me) to pick up the tab and protect their sorry lives. So count on insurance to save you only if the national average for disasters remains low. When the "big one" comes, odds are you or your survivors will be pretty much on your own.
Yet, even if they wanted to act and do the right thing, the state of their investments and collateral would probably make that difficult to impossible. Again, there are just not that many buyers for sparkling, glass covered skyscrapers. Even if they could sell them, it would be at a terrific loss. In simple truth, the insurance agencies are as little prepared for disaster as are the people from whom they collect their premiums.
There is one major difference, however. The people who pay their premiums are expecting them to be so prepared. After all, that is what the premiums are for.
In this they have betrayed our trust and faith in their integrity. They have become unjust and untrustworthy stewards of the funds we have put into their hands. The umbrella protection they promised, no matter what its color, has became full of holes. Worse yet, they robbed from those who relied on them for protection.
Those of whom they will rob are those who would be the most helpless and the most dependant upon their stewardship. They would be those who would have been the beneficiaries of the defaulted policies: the widows and orphans of their premium payers.
God had some pretty harsh things to say about those who cheat those most helpless members of society. If you dont’ believe me, just read Amos or Hosea. Such an attitude on the part of the Insurance companies only rushes them faster toward judgment.
But they are not prepared for that certain disaster either.