Thursday, September 30, 2010

Who Can Best Administer Insurance?

Getting back to the subject mentioned earlier this week, the subject of government-provided insurance comes to mind.

The case for some forms of government-provided insurance is that the nature of a major catastrophe -- hurricanes, earthquakes and the like -- is far too great for private insurers to bear. Which is true.

Where the problem with government-provided insurance lies is in how it's administered. More specifically, by whom it is administered.

There are very, very few things the government can do more efficiently, either in terms of cost or service, than the private sector. Why? Simple. The private sector in an open market is actively competing for the consumer dollar. Therefore, each organization striving to be the end recipient of that dollar will expend maximum energy to be the best choice.

The government has no such pressure. It is the ultimate monopoly.

A strong case can be made for the government to act as a reinsurer in case a catastrophe strikes. But as a primary provider? It would be well advised to leave such matters to the professionals.

Sadly, it's advice that is seldom taken.

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