Is there some way to pool people's money so we don't have to pay any insurance?

Question

At the end of the year after all claims have been payed off what's left is given back to people.

You would still pay insurance premiums. What I'm suggesting is if we make a profit at the end of the year that money is returned. And if necessary we'd raise the premiums to cover our costs.

Answer 1

yes, it is called a Mutual Company - I'm sure there are some still around, just can't think of any examples right now . . .

Answer 2

Yes. AND IT IS NOT A MUTUAL COMPANY. Mutual companies are companies where the policyholders are the shareholders thus SOME profits are returned in the form of a dividend. I believe AMICA is mutual as is USAA (for non-active duty folks-if you're active it goes into a savings account or something) and many others. You can form an insurance cooperative, check with your state insurance department for the details. It is a BAD idea, however because on the off chance something big happens then all of your personal assets could be at risk. Like with Lloyd's of London syndicates where you're literally backing the risk with all members assets. If nothing happens you make loot, if something does you could lose your shirt... I am oversimplifying but for common insurance needs you're much better off buying in the standard marketplace.

Insurance companies haven't exactly been knocking'em dead lately... why think your cooperative would be any different.

Answer 3

You are describing an insurance company. If you refer to health insurance, many large employers do exactly that. They self-insure and keep the 'leftover' money in their own bank account. They pay some other company, often an insurance company, to administer the claims and most often they buy a stop loss policy so that if their claims go above a certain preset amount, an insurance company picks up the rest.

Be very careful about doing this yourself. If someone needs an expensive treatment and you need to raise the 'shared costs' to every other employee, how many do you think will stick around?

Talk to an experienced insurance agent.

Answer 4

What do you do when one person gets cancer or needs a transplant and the expenses more than wipe out the plan assets?

Is everyone going to dig into their pocket and make up the difference? If not, what if you're the one who gets sick and there isn't enough money to cover your bills. Medical expenses are the number one reason for personal bankruptcy.

Given the number of financial companies with huge resources, don't you think that if medical insurance was a gold mine for the providers then others would be getting into the business also?

The fact is that medical expenses go up at several times the inflation rate. In order for health care to get twice as good it takes 10 times more money. Insurance providers are always scrambling to make sure the premiums they receive cover the expenses they're responsible for.

Answer 5

You have just described the basic functions of an insurance company. A 'participating' company pays dividends at the end of the fiscal year, just like you propose.

I would imagine you could do that on your own, but the risks would be tremendous. Even the big boys go bankrupt.