One may wonder what the difference between gambling and insurance system is. There are losers and winners in Insurance system. Some individuals obtain more than what they paid in their premiums while some others pays more than what they ever get back. Insurance is a system of voluntary collaboration between individuals which involves redistribution of incomes of individuals from the healthy to sick. The system involves teaming of individuals of common unpredictable risks and it involves completely unpredictable and unsystematic redistribution of money.
Unsystematic redistribution of income is the system of teaming up of individuals with Objectively similar set of (unpredictable) risks in a single group with proper unpredictable results.
On the other hand, systematic redistribution of income is the mixing of individuals of objectively different risks in one group for voluntary redistribution of money.
If the unpredictability of redistribution is denied from insurance system and it is regulated to be systematic, the individuals will try not to involve in such predictable system. As for example, a common 9 A.M to 5 P.M worker in some company or governmental office if teamed up in an insurance policy with a truck driver with higher risks of accidents, and with a cricket player with further higher risks of injuries, than it will be easily predicted that the office worker being under lesser chance of injury risks will end up a looser as hardly anything will happen to him while there are high possibilities of accidents and injuries for the truck driver or a football or cricket player. Obviously, no office worker would like to be teamed up in an insurance system along with a truck driver or a cricket player as it is highly predictable that he will be the looser. On the other hand, if there is a policy especially for office workers, all office workers will voluntary team up in it for the insurance against unpredictable accidents as in similar homogenous system of such workers, the redistribution of individual’s income will be random, uncertain and unsystematic.
India is a welfare state with deep roots of socialism based on principles of “common good” and “collective welfare”. More than 80 percent of Indians do not have any health insurance policy irrespective of all “mandatory” efforts of government and private insurance providers. The banking and insurance policies of India are regulated by IRDA, SEBI and RBI. Till 1991, insurance and banking was completely under government’s authority and even now, the rules and regulations of insurance and banking are under governmental authority, although some private bankers like Bajaj Allianze, ICICI, Birla, Reliance and others are rising in the market but the policy making is completely under Indian bureaucratic and socialistic governmental frame.
Result is lack of insurance policy buyers and higher premiums.
In a socialistic welfare system like India, it is highly impossible for the individuals to identify that there are systematic winners and losers in Insurance market. As a result of which, there are highly misgrouped people (low-risked clients grouped with high risked clients) being misinsured.
In a free-market system, even if there will be similar difficulties for the individuals to distinguish the systematic predictable losers and winners, free competition between companies will remove all the systematic errors of misgrouping and misinsuring. Any insurance company engaged in the mistake of misgrouping individuals in any systematic redistribution of income will loose the market competition to any company that will not engage in such type of ill-practices. Another insurance company may notice that the 9 am to 5 pm workers sitting behind their office desks rarely fall off their chairs and hurts themselves, while a horse jockey or bike racer or cricket player or an athlete or a stuntman in bollywood is constantly at higher risks of injury and a city-bus driver is more prone to road accidents. The company may mark out that they could profitably bid lower premium to office workers and insure them in a separate team than a professional athlete or a stuntman. And by offering lower premiums and better profits, the new companies will entice the clients who were previously misgrouped and misinsured. As a result, the companies that have misgrouped clients will have to raise the premiums for their higher-risk clients to their proper higher levels.
Free market competition in insurance market will cause further more-refined groupings and sub-groupings of individuals to groups with internal homogeneous structure. This discrimination of individuals will crop up on the basis of actual and objective risks involved with them in accordance with their work, abilities, behaviour and lifestyles etc. Such groups will show up actual insurance risks for a particular group and the innate free-market will cause the prices involved in insurance for the individuals to fall on average. For correct grouping, the companies will discriminate the individual clients according to various criteria. They may use biological or genetic characteristics in the case of health insurance, and some behavioural criteria or life-styles like tobacco/ alcohol addicted, non-addicted, smokers, non-smokers or people who are involved in certain occupation that causes higher or lower risks, for insurance against floods, fire, earthquakes, storms, they may use regional and geographical criteria and so on.
Furthermore, risks cannot always be insurable. There are insurable risks and uninsurable risks. A risk, if can be affected individually cannot be insured in any group. Anything or action that is completely or partially in control of an individual actor cannot be insured and falls under dominion of individual responsibility. As for example, Suicide cannot be insured as it is totally personal behaviour.
Any risk that can be influenced by one’s action cannot be insured, only that is insurable which is uncontrollable. Also, that which is insurable now, may not remain insurable tomorrow with improvement in technologies and medical facilities.
Can AIDS patients be insured?
Some months ago, I supported the idea of demanding a health and HIV test before marriage rather than matching horoscope.
Is it possible or “right” for a private insurance company to ask for HIV test before providing insurance for a client, and if the client is an AIDS patient, then insure him in the especial grouping policy for AIDS patients?
Is it right to discriminate individuals on the basis of genetic or biological medical tests to provide specific insurance policy for the clients?
Actually it is not only right but it is objectively beneficial for the individuals and the group also.
It is indisputably true that the health risks of an AIDS patient are much more than a normal person. So, if an insurance company asks for mandatory AIDS test before providing a health insurance policy, it will be for the benefits of the individuals in a group. On the other hand, if a person acquires some illness like AIDS or cancer after being insured in a group of healthy people, he cannot be denied any insurance policy profits on the basis of his nature of illness. It can only be questioned before providing him an insurance policy as a client. It is the era of technological innovations and biomedical discoveries and inventions. There are companies like 23andMe which are now able to offer comprehensive genetic profiles that can reveal predispositions towards certain health problems . In a free-market, insurance companies will surely try to incorporate such technologies and innovations to group out people for various sub-grouping to provide proper pool for insurance policy grouping. As it will be beneficial for the insurance company, it will make such genetic profiles for the clients before providing an insurance policy. This will not only be profitable for the insurance companies, but it will also avoid the problem of misgrouping of clients and will insure further rectified uncertain redistribution system of incomes. Why a non-smoker or non-alcoholic should pay for the risks of an alcohol addicted person for whom various health problems are highly probable? Why should a healthy person agree to pay for someone who already is an AIDS patient? One may voluntarily donate money for helping AIDS or cancer patient, but it is wrong to team up AIDS or cancer patients along with the normal individuals for some Insurance policy. Hence, provision of genetic profiles and proper medical tests before provision of insurance policies will be beneficial for the individuals too. Also, as the insurance companies will bear the responsibility and charges of the genetic profile making and medical tests, it will become free and easy for the individuals in common to have a proper medical knowledge about their own on the basis of genetic profiles and then they may have proper precautionary steps against the sickness if there are some genetic traits, and hence, the genetic discrimination by these insurance companies of free-market will save life of the individuals also.