Jewish rabbinical scholars have also expressed reservations about insurance as an escape from the will of God, but find it more acceptable in moderation.

Some Christians believe that insurance is a lack of faith and there is a long history of resistance to commercial insurance in communities Anabaptists (Mennonites, Amish, Hutterites, Brethren in Christ), but many involved in programs of self- community-based insurance risk is spread within their communities.

Insurance insulates too much

By creating a security blanket for its insured, an insurance company may inadvertently find that its insured’s may not be as risk averse, since otherwise there could be (since, by definition, the insured has transferred risk to the insurer), a concept known as moral hazard. To reduce its own financial exposure, insurance companies have contractual clauses that mitigate their obligation to provide coverage if the insured engages in behavior that grossly magnifies the risk of loss or responsibility.

For example, life insurance companies may require higher premiums or deny coverage to people working in hazardous occupations or engage in dangerous sports. Insurance providers do not offer liability coverage for liability for intentional torts committed by or under the direction of the insured. Even if a supplier were as irrational as to want to provide such coverage is against public policy of the safest countries to allow the existence of these, and therefore it is usually illegal.

The complexity of insurance contracts

Insurance policies can be complex and some policyholders may not understand all the fees and coverage’s included in a policy. As a result, people may buy policies on unfavorable terms. In response to these issues, many countries have enacted laws and regulatory regimes that govern all aspects of insurance business, including minimum standards for policies and forms that may be advertised and sold.

For example, most insurance policies in the English language today have been carefully drafted in plain English; the industry learned the hard courts to apply the policy against the insured, when the judges themselves can not understand what policies are saying. Generally, courts interpret ambiguities in insurance policies against the insurer and in favor of policy coverage.

Many institutional insurance purchasers buy insurance through an insurance broker. While on the surface it appears that the broker representing the buyer (not the insurance company), and usually advises the buyer adequate coverage and political constraints, it is noted that in most cases compensation a runner comes in the form of a commission as a percentage of the premium, creating a conflict of interest that the financial interests of the corridor is inclined to encourage a policyholder to purchase additional insurance which may be necessary at a higher price. A broker generally holds contracts with many insurers, thereby allowing the broker to “buy” the market for the best rates and coverage possible.

Insurance can also be purchased through an agent. Unlike a broker, who represents the policyholder, an agent represents the insurance company that the policyholder buys. An agent can represent more than one company.

An independent insurance agent advises policyholders on a retainer fee-for-service, similar to a lawyer, and therefore offers totally independent advice, free of financial conflict of interest of intermediaries and / or agents. However, as a consultant has yet to work through brokers and / or agents to ensure coverage for their clients.

Redlining

Redlining is the practice of denying insurance coverage in specific geographic areas, purportedly because of a high probability of losses, while the alleged motivation is unlawful discrimination. Racial profiling or redlining has a long history in the property insurance industry in the United States. From a review of industry underwriting and marketing materials, court documents, and research of government agencies, industry and community groups and academics, it is clear that race has always affected and continues to affect policies and practices of the insurance industry.

In July 2007, the Federal Trade Commission released a report outlining the results of a study on insurance scores based on credit and motor insurance. The study found that these results are effective predictors of the claims that consumers will file.


All states have provisions in their rate laws and regulations in their acts of fair trade practice prohibiting unfair discrimination, often called red line, setting rates and insurance available.

In determining premiums and premium rate structures, insurers consider quantifiable factors, including location, credit scores, gender, occupation, marital status and educational level. However, the use of these factors is often considered to be unfair or unlawfully discriminatory, and the reaction against this practice has sometimes led to political disputes about the way that insurers determine premiums and regulatory intervention to limit the factors used.

The job of an insurance underwriter is to evaluate a given risk as to the likelihood that a loss will occur. Any factor that causes an increased risk of loss should theoretically charge a higher rate. This basic principle of insurance must be followed if insurance companies are to remain solvent. [Citation needed] Thus, “discrimination” against (i.e. treatment, the negative differential of) potential uninsured risk assessment and the process of fixing the premium is a necessary by product of the fundamentals of insurance underwriting. For instance, insurers charge higher premiums charged significantly higher than young people for life insurance. The elderly are treated differently to younger people (i.e., a distinction is made, discrimination occurs). The justification for the difference in treatment is in the heart of the risk of a life insurer takes: Old people are likely to die sooner than young people, so the risk of loss (death of the insured) is greater in a period of time and therefore the risk premium should be higher to cover the increased risk. However, treatment of policyholders differently when there are no sound actuarial reasons for doing so is unlawful discrimination.

What is often missing in the debate is that prohibiting the use of legitimate factors, actuarially sound means that an insufficient amount is being charged for a given risk, and is not therefore a deficit in the system. [Citation needed] The failure to address the deficit may mean insolvency and hardship to all policyholders of the company. [Citation needed] The options for addressing the deficit seem to be: Charge the deficit to other policyholders or charge the government (i.e., externalize outside the enterprise to society in general).

Insurance patents
More information: Insurance patent
The new insurance products can now be protected against copying of a business method patent in the United States.

A recent example of a new insurance product that is patented is an insurance based on car use. Early versions were independently invented and patented by an insurance major U.S. automobile, Progressive Auto Insurance (U.S. Patent 5,797,134) and a Spanish independent inventor, Salvador Pérez Minguijon (patent EP 0,700,009).

Many independent inventors are in favor of patenting new insurance products, as it gives them protection from big companies when they bring their new insurance products to market. Independent inventors account for 70% of new U.S. patent applications in this area.

Many insurance executives are opposed to patenting insurance products because it creates a new risk for them. The Hartford insurance company, for example, recently had to pay $ 80 million for an independent inventor, Bancorp Services, in order to settle a patent infringement and theft of trade secrets claim of a type of corporate ownership of products life insurance invented and patented by Bancorp.

There are about 150 new patent applications on insurance inventions filed per year in the United States. The speed at which patents have been issued has increased steadily from 15 in 2002 to 44 in 2006.

Inventors can now have their insurance applications for U.S. patents reviewed by the public in the Patent Exchange program. The insurance application that was sent first patent was US2009005522 “risk Assessment Company.” It was published on March 6, 2009. This patent application describes a method for increasing the ease of changing insurance.

The insurance industry and rent seeking

Certain insurance products and practices have been described as rent seeking by critics. [Citation needed] That is, some insurance products or practices are useful primarily because of legal benefits, such as reducing taxes, rather than providing protection against the risk of adverse events. According to the tax laws of the United States, for example, most owners of variable annuities and variable life insurance can invest their premium payments in the stock market and defer or eliminate the payment of taxes on their investments that withdrawals are made. Sometimes this tax deferral is the only reason people use these products. [Citation needed] Another example is the legal infrastructure which allows life insurance to be held in an irrevocable trust used to pay estate tax, while revenues themselves are immune to estate tax.