I may have gone a little overboard on this as it’s 3am in the morning and a 1 paragraph email turned into several pages.

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Open competition for insurance is part of what the problem in the insurance industry is today! In the mid and late 80s insurance companies were paying out >95% of their income from premiums to claims and by the late 90s, thanks to deregulation, this percentage is down to <85%.

When competition is a factor, companies know not to compete on price, business students are taught this in standard curriculum. By having open competition, companies are now spending that additional 10% of premium income on MARKETING and ADVERTISING – something that government granted monopolies don’t have to do as much.

At one point, insurers were owned by the policyholders – effectively making insurance a not for profit industry. Not for profit does not mean that staff/administration don’t make money, but it does mean that shareholder’s are no longer interested in a bottom line.

Open competition : pretty silly – see comparison of energy deregulation in GA, why is your electricity and cable regulated?

Tort reform: needs to happen, I believe both sides want some. This can not happen with competition, as the current competition has every insurance company suing every other insurance agency or stakeholder to avoid paying out of that insurance that you purchased. (I have a great real world example of this if you want me to tell you the story.)

Pre-existing conditions : I recently met a man who was denied his insurance claim due to pre-existing conditions when he broke his neck biking during a triathlon. I can’t even begin to think how that works.

Media Influence Note: John Grisham’s the Rainmaker came out in 1996. In it, Great Benefit Health Insurance denied a claim (and all claims made by policyholders.) While the client won a settlement that was never paid, there have been no major health insurance regulations made since.

Republican Note: If the GOP really hated “socialized” health care on principle, then they should suggest getting rid of medicare and medicaid. Beyond that, they could go with the local government measure of having state/county insurance (which they do for state employees anyway) to stress federal conservatism and states rights.

>The bill does not involve a massive, centralized budget busting takeover of our healthcare system
This is a Joe Wilson style, “You Lie.” While, the health care bill was written to be budget busting it is written to be in a reducing the budget and costs to Americans. Have you read the news? Americans are #1 in % GDP Spent on Healthcare. (and 17th below numerous “socialized” systems in actual care) This means that the U.S. must be either extremely unhealthy or that there are huge inefficiencies in the system that don’t seem to be prevalent in the other “socialized” systems.

Healthcare, insurance, Politics

So as I noted yesterday in my post on Gold, I breezed through Dave Ramsey’s book. I’m also pretty familiar with his other financial advice due to members of my family also being very financially acclimated. Dave and Clark Howard both have a group of every day expenditures that they like to call the stupid tax.

Cars

I drive a fancy 20 year old Mazda RX-7, it’s stylish and I paid for it in full in high school, and I come to the somewhat painful realization on road trips that maybe 1 in 10 cars is close to the age or older than mine. I think that the truth that reflects on societies is that my car is noticeably one of the oldest daily driven cars at most colleges and high schools, where it is typically safe to assume that the driver did not pay for the car outright and probably does not pay for the insurance.

1989 Mazda RX-7

In his book, Ramsey has done the research that suggests that the average person with a car loan pays $376 a month, every month of their lives. I don’t know about you, but that is absolutely shocking what people will do for luxury.

In addition to this loan cost, consider your costs of insurance, especially if it’s an almost dead car worth hardly its value in steel, you will save a ton in not having (your fault) collision insurance. For teens, that can double the insurance premium.

Furthermore, when you finance your brand new car, it loses 60% of its value in the first 4 years as a depreciating asset that is likely to suffer damage and wear.

Dave Ramsey goes on to suggest that you should look at cars that are 2-4 years old and that the majority of millionaires own these older cars as their “new” cars. That warranty tends to not be worth it either. As an example, I was looking at cars this December and ran into a premium edition Infiniti G-35 with 50k miles for only $15k (the new ones were right around $30k.) Bringing me to a small and optional point Learn to Drive a stick… you might enjoy it and you will save about $2k on many cars.

The 14-20 year loans that some financing arms offer is the most ridiculous part though! I can’t think of anybody who buys a new car and plans on driving it for 10 years… and you would still owe most of the loan amount at the point anyway. So when you sell your car 5 years later without GAP insurance you would still be paying for your own car. (By the way, at the Atlanta Boat Show this year there were $200/month terms for $35k boats over 20 years — which is equally as appalling – especially at the 7% interest they wanted to charge)

Market Wise we all know that GM, Chrysler, and Ford (U.S. companies) are having dreadful sales and I think that a lot of it has to do with the car industry overselling their products. The SUV has changed America, but people don’t need or want to buy a new Suburban, Escalade every two years. And then thing about work trucks, like the F150, most companies keep these trucks for just over four years. But what this means is that there is a limit. GM Sold More cars than they had every sold before in 2007 barely beating Toyota. But there are limits to the  driving need, and unless GM can get that marginal cost down and stop depending on selling infinite  cars in the future then it will never survive in the long run.

I added this to the Environmental category as well because, well, getting more use out of the same 4000lb piece of metal is environmental. My car may not get 35mpg, but it gets slightly above 20 (very comparable to the RX-8), but by not buying another car, I’m reducing the parts and minerals being used in a new one. I’m also saving junk yard space.  Reemember – Reduce comes before recycle, so I’m reducing and encouraging you to do the same.

Finally, I’m going to make your kids hate me. Don’t buy them a brand new car. Don’t give them a car that is worth much or amazingly appealing. I used my dad’s 1991 pickup form 2002-2005 that was won at auction from a company for a reduced price. It got me around just fine. It was pretty safe, reasonable looking, and I had my first off-roading experiences among with other in it. So, get that junker like they suggest in Transformers and let your kids figure out what kind of car is for them.  And remind them not to complain about something that they’re getting for free (or on discount.)

Cars, insurance, kids, Loans, Long term, parenting, Saving