Doctor Eclectic

Doctor Eclectic
Doctor Eclectic

Monday, March 23, 2015

Co-related Exclusions

If you are like me, you have probably never read the entire policy on any of your various insurances, excepting language on limits, minimum deductibles, co-payments for health visits and perhaps the premium.  As a matter of fact, inspired by this Post, I just cleared out my insurance folder and got rid of policies older than 2013 (and there were several).

Perhaps that is why I was intrigued by a recent feature that discussed a little known exclusion on most policies called: Co-related Exclusions.

Essentially it describes why an event that would normally be a covered casualty is excluded if it happens to more people at once than the actuaries expected in their calculations for risk.  An example would be a policy that has coverage for water damage, but excludes flood damage if your residence is one of several that were flooded during a hurricane.  Or if your house was one of several damaged in a forest fire.  Or if your residence in Syria, Gaza or even Israel was included in damage resulting from a conflict.

Not that you could not buy coverage for these occurrences, it’s just that that coverage would result in an additional premium.  In California I have to opt in or out of earthquake coverage every year, but am included with all insured drivers in the state for a premium to cover damage caused by uninsured motorists, a requirement by the state.  The risk from this latter coverage is spread across so many policyholders

Modern insurance can trace its origins to the Great Fire of London in 1666, which destroyed 15,000 homes.  It became apparent that such a societal catastrophic loss was more than any individual could bear, and ass the city rebuilt, there arose a commercial solution for individual loss.  Through time there are seven basic tenets for insurability, one of which is: limited risk of catastrophically large losses.  In London, that meant that any future reoccurrence of such a fire would be excluded from individual coverage and would be borne by the government.

In the United States that has been the case where flooding is the result of a natural disaster or wind damage from hurricanes.  Since 1978 the Federal Emergency Management Agency has coordinated relief in instances where the resources required exceed the state government’s capacity.  Although sometimes criticized, it is hard to see how a better solution could be made.

One of the major criticisms of federal support for natural catastrophes is that some states seem to have them more frequently than others.  Although California has few earthquakes of relevance, Montana has even fewer, and both states are prone to devastating fires.

There is some correlation between FEMA and dental insurance.

Dental insurance is not really insurance as much as it is a discount service.  Although actuaries do base premium on frequency and cost of service, the population needs are less a factor in establishing premiums that are Exclusions and Limitations of the policy.  Dental insurance did not exist prior to the labor shortage following WWII.  In an effort to control inflation, the federal government allowed employers to offer benefits, such as health (including dental) as incentives to work for their company.  Gradually, the benefit packages have morphed until dental is now greatly funded by the individual, and limitations have expanded to keep the premiums affordable.

For instance, it is estimated that more than ¾ of the adult population has active periodontal disease, but limitations limit this risk by more than half, either by frequency (no more than two cleanings a year) or by cost of the patient’s share.  There is no medical counterpart to these limitations and exclusions.  If you have coverage for a broken bone, you have coverage for a broken bone.

We are beginning to see complications from the Affordable Care Act, where on the Essential Health Benefit of Children’s Dental Health we have an annual maximum allowable cost to the patient and no allowable exclusions.  The actuaries are finding it difficult to transition from traditional coverage to the new format and keep premiums affordable.  There are huge differences from state to state on what are the covered benefits.  The differences can be explained as each state dealing with what should be allowed as Co-related coverage exclusions.  If the patient wants m ore coverage, they should pay more premium.

This is unlikely to happen.

My next Post will continue with health.  I’ll explain why you should be familiar with the words EPIC and Axiom, and what effect they may have on you in the near future.  I hope to see you then.

Sunday, March 15, 2015


My usual pattern for writing a Post on my Blog is to find something that catches my interest; an article or a news story, and spend a few days researching the topic before setting it down in print.  I then will decide what to next write about, and will mention that to keep me on track for Post frequency of almost every week.

My topic for this Post went awry, with several ongoing stories causing my research to jump track.  My interest started with the Sony hacking, and research began with how the term Hacker had morphed from one of respect to one of derision.  But before I could develop that, the first jump from the tracks was concern about the Target leak, quickly followed by my old company Anthem, which faces possible penalties for compromising 78 million of its members.  Then, almost before I could adjust the article, President Obama called a summit with a proposed agenda to get some international agreement of data control.
I was getting distracted.  So I changed tack.

What was the conclusion I thought, to all this concern?  Was there some system, such as a vault for your passwords, that would make your data secure?  Were there sites that were verboten from visiting if you wanted to keep your data from being compromised?  Would camouflage suffice?  Hillary might have thought so, avoiding the “secure” Government server for her personal email server.

I began to look at what data I had that might be compromised to my financial or personal disadvantage.

Very little of a medical nature, with the single exception that I have a Living Trust that has a DNR clause, which I carefully hide on my medical record before I have any surgery that will be done without me being conscious.  Although I have some medical conditions, one for which I am being currently treated, I am not private about the conditions nor the possible outcomes of treatment.

I have more financial ones that I can enumerate, including checking and savings at several banks and credit unions.  My investments are, for the most part, in the hands of activities like Ameritrade or e-trade.  Similarly, are the stocks and bonds of my portfolio.  Rightly or wrongly, I rely on the security these entities provide, and probably am not as concerned about changing my passwords as I should be.
I have friends who have suffered the emotional and financial loss from identity theft, but I have been spared that tragedy.

The truth is, I am hardly suspicious about giving my credit card to an unshaved restaurant server, or ordering from Amazon.  I carry few credit cards, but those I carry are in my wallet, which on occasion I have left somewhere.  I have received half a dozen calls from card companies alerting me to suspicious purchases, almost all of which were legitimate.  I have replaced cards which were lost.  Mary had a card stolen from a restaurant and before we could stop it, there were $2,000 in charges, almost all of which were gift cards.  These charges were all forgiven.  I left a phone in a hotel and before I could stop activity there were several hundred dollars in calls, mostly to Columbia. Again, all were removed from my bill.

But none of those occurrences were financially catastrophic, and almost all of the major loss was absorbed by someone else.

Not to say there isn’t a cost.  The companies that pay for those thefts pass the cost on to us consumers as charges, premiums, or additions to their profit margins on goods and services.

But isn’t that what we have come to accept for shoplifting?  Few if any of us pause to breakout what portions of the sales price include goods that were stolen, damaged in shipment or returned in an unsalable state.

I think this will be the mindset of the Millennials regarding data.  Access to data has already reached a point where mobile phones now price service by data accessibility rather than minutes.  The Cloud has made storage and retrieval of data ubiquitous.  Movies on my iPad are longer stored on my iPad.  And, if someone figures out how to watch the movie I paid for, it is less my problem than iTunes.

So, my conclusion is that data security will be less a problem than it was.  Public demand will move even government security more to the field of public access, as we saw with GPS satellites, most of which were owned by the government at that time.

The Libertarian streaks in my personality think that is not all bad.

My next Post, which I hope will come in about a week, will explain an insurance term that is seldom of concern: Co-related Exclusions and how that fits into Dental Insurance.  I hope you will join me.