Protection Racket

For those of you unfamiliar with the term, it usually refers to a local gang or wise guy offering protection from harm in return for money. Extortion, in other words, because this same individual will cause the harm should one be reluctant to pay. Unfortunately, we are all involved in another kind of protection racket where we provide funds to institutions expecting them to be there should we need protection from costly events in our lives. Specifically, banks and insurance companies.

While the banking industry has borne the glare of the spotlight in the past several years, the insurance companies were ever-present, lurking in the background, collecting premiums while devising methods to avoid the paying of claims. More than ready to take our funds, but when it comes time to ask for something in return we find that they are not nearly as interested. 

Do you know that many major auto insurers will summarily drop a policy holder for a DUI conviction? The driver may have a spotless record yet this one blemish exiles them to lesser known companies with, of course, higher rates. The higher rates can be understood in light of the gravity of the offense, but to toss a client to the curb is cruel (though not unusual) punishment.

If your home lies in what is classified as a fire zone you may find your long term insurance provider unable to provide any future coverage. After all, you may one day have a claim and they’d rather just collect your premiums without entertaining such a payout. California, by and large, is considered a fire zone. Florida? Well, that’s a hurricane zone and we’ve seen how many were unable to obtain insurance for their homes in the past several years. Having enjoyed years of premiums, some companies now find it more profitable to cut and run before claims start rolling in.

As you can see, these examples paint a pretty good likeness to the gangster on the corner asking for money while guaranteeing little in return. It is a racket, albeit a legal one, that creates a façade of “good hands” or “good neighbor” while plotting to deny as many claims as possible. And we all know that should a claim be paid it will be at the last possible moment after all other machinations have failed.

The worst part lies in the fact that we have little choice in the matter. True, we can take our insurance needs from one provider to the next, but if they’re all cut from the same bolt of cloth we have accomplished little in trying to move the ball more to the center of the field. Sadly, as we take our business out the door, someone else is bringing theirs in.

Saddest of all, perhaps, is that the various and sundry financial and insurance conglomerates know of our quandary, know that their is little to be done about it, and continue on their present course of legit racketeering. Our only hope lies in an outsider who can rein in these practices. We know these folks as regulators and they normally represent a government agency. This should give one pause the next time a conversation turns to wanting less government in thinking about the latest effort to deal with a bank or insurance company.

And for those that feel banks and insurance providers are, indeed, conducting business in a responsible manner, I ask that you locate as many as possible when in a major metropolitan area. It shouldn’t be too hard: they’re usually the tallest buildings.