Insurance as a Mechanism of Tyranny

Let’s begin with something you might not expect looking at the title: insurance is a very good thing.  It’s a very necessary thing. 

Insurance, in the most basic terms, is nothing more than the voluntary collectivization of resources to offset catastrophic risk.  In many ways, one could argue that the very concept is such a fundamental necessity of life that it was recognized even by the earliest of our ancestors, and so they sought to form tribes and communities, voluntarily pooling human capital and resources for defense so as to hedge the risk of being conquered by neighboring humans. 

The fact that insurance has become highly commoditized is a natural market reaction to consumer demand.  Insurance becomes a property-sapping evil, however, when it is applied as a functioning apparatus of the state, such that it is no longer voluntary, and no longer limited to offsetting catastrophic risk.  In such circumstances, insurance ceases to be insurance; it becomes a mechanism of coerced redistribution to provide a social “safety net” securing the most basic needs in life. 

The government’s capitalizing on the necessity of insurance is likewise the natural tendency of government – to take what it can on the premise of what is deemed “right” or “fair” for a perceived greater good.  What is disturbingly interesting about all of this is how nothing more than the longstanding existence of government programs makes misappropriation of the concept of insurance normal or acceptable – so much so that even intelligent Americans tend to miss the fundamental tyranny exacted by government. 

Jonah Goldberg, for example, suggests that FDR’s New Deal legislation was aimed to make Americans “clients of the state.”  That is not entirely accurate, at the very least in terms of Social Security.  Social Security is undeniably, by virtue of its function, a flexible premium deferred annuity – and annuities have for centuries been clearly recognized as insurance vehicles.   It is true that FDR pitched Social Security to Americans as “old age insurance.”  But “clients” investing in such insurance products would traditionally engage in business relationships with insurers by choice.  Quite inversely, I, much like any 16-year old who looks at FICA deductions on his first pay stub, invest in the Social Security risk pool because it is entirely coerced, not voluntary.  That single distinction fundamentally corrupts the precepts insurance is predicated upon, if only because voluntary participation requires that the cost be relative to the benefit, and therefore worthy of investment in the first place. 

What will hopefully make that distinction apparent is that that government holds private insurers to standards that it now invariably violates as a matter of its primary function. 

Imagine a private insurance agent trying to convince a 16-year-old that a fixed, deferred income annuity that pays a full benefit in his late '60s – of which he can’t even access a portion before 62 absent very specific waivers – is a sound investment for 6.2% of his income in his coming years.  That unattractive proposal is made even less suitable by myriad considerations.  For example, a variable deferred income annuity might see significantly more growth to its market value and would be far more suitable for an investor with such a long time horizon for accumulation.  Beyond that, most private insurance companies would pay a guaranteed death benefit to his beneficiaries if the contract holder dies prior to annuitizing (i.e., initiating an income stream) the investment.  Yet if this agent were out pitching and successfully sold a deferred income annuity to a 16-year-old, a product with little prospect of lump-sum payment prior to straight annuitization 46 years hence, federal regulators would probably (and rightfully) deem the recommendation unsuitable for such an investor.

But when any American earns his first gainful employment in this country, that same government that might scrutinize or even criminalize the recommendation of a fixed, deferred income annuity for a 16-year-old as wrongful manipulation by an unscrupulous insurance agent demands that every working 16-year-old must invest in a fixed, deferred income annuity called Social Security, and that he must continue investing in that annuity for the rest of his working life in hopes that he might one day secure an eventual income stream. 

Have we chosen to invest, or have we been forced to “invest” in Social Security?  It’s more often the latter.  We are not “clients” in doing so, and neither was the “investor” thirty or fifty years ago.  We are subjects, obeying our government’s edicts.

Full disclosure to say I have no misapprehensions – Social Security is not going anywhere.  It’s become a staple of the American landscape, however born in the manipulative ambition of benevolent tyrants, and there is no argument that can reasonably be made to suggest that those who’ve invested in the program do not deserve the return on their coerced investment. 

And I won’t belabor the point by expounding upon the similar violations in the enactment of Medicare and Medicaid legislation (both more disastrous than Social Security in regard to outlook, if you consider future solvency), but suffice it to say that our best solution, given our current predicament, is to apply reasonable amendments to these programs to make them more sustainable in terms of the amount of contributions versus the terms of collection, and – most importantly – to cauterize the bleeding caused by politicians who have more recently pitched insurance as benevolence.

America is now suffering due to the current misunderstanding of the purpose of insurance, which, again, is fundamentally the voluntary participation in a risk pool to offset catastrophic risk.  Your participation is truly no longer voluntary in terms of your physical person and your family, as the Supreme Court has deemed your mandatory purchase of health insurance (or the punishment if you don’t purchase it) an enforceable requirement commanded by your government.  And it’s certainly not to hedge catastrophic risk.  Tell me: why must I provide my insurance carrier’s information when I take my children to the doctor if they have the sniffles?  It’s hardly a catastrophic event, so why must my insurance company be involved?  Shouldn’t that be a basic, service-related transaction?  Furthermore, why must the actual transfer of value between insurer and doctor be facilitated behind a curtain and overseen by a government broker? Furthermore beyond that, why are records and evidence of ObamaCare’s outcome and effectiveness being relentlessly hidden from journalists and even our elected representatives, if the wheelings and dealings are so incredibly integral and sound?

We all know why, don’t we?  Support for the Patient Protection and Affordable Care Act, aka Obamacare, is reeling.  The majority of Americans oppose it.  Main Street reality has met government fantasy, and the lies have become only too apparent.  “You can keep your health care plan” has become “No, you can’t keep your health care plan, and you can’t know what we’re doing with your increased premiums.  But it’s for the greater good.  Trust us.”  Nothing about that is insurance.  Insurance has once again been used as the front for the tyrannical seizure of wealth for another’s benefit – be that other an insurance company, the politician orchestrating the transaction, or the non-contributing Americans whose votes oil the political machine which brokers their free health care service transactions with your money.

We may not have the ability to rectify the government-instituted mistakes of the past.  But we can still correct this one.  We’ve got the means, and we still have enough of the power to make bold statements at the polls, as Americans did in 2010.  Reality is upon us, and for many, it’s pressing.

Will health insurance be something that you negotiate and choose to purchase for you and your family on your own terms, or something your children and grandchildren will purchase with the government’s figurative gun to their head and absent their consent?  There is nothing less at stake with ObamaCare.

It’s not about insurance or benevolence.  It’s about expanding government, just as every other new infringement by government is, and always has been.

William Sullivan blogs at and can be followed on Twitter.