We need to take this one step further. An honesty protection system of checks and balances. Also the money collected needs to be invested in something so that our money doesn't disapear if we don't use it. Somehow this needs to be different than individual asset protection and investment.

Yes Colin, agreed a system of checks and balances would need to be put in place but the main one that stands out will be regulation through self interest.

Secure investment of funds would be a definite requirement as would covering insurance exposure by way of underwriters for the extreme cycles of valid claims e.g. weather, terrorism etc.

I am neither an insurance or investment expert and would welcome expert opinions?

You're not talking about a business, you're talking about a cooperative. (A business aims to profit, so investors get a return. A cooperative aims to break perfectly even, so members get what they need without giving up any more than they have to.)

The reason there aren't many insurance cooperatives is that there's no incentive. Go look at what insurance companies report in returns to their investors. Now, consider that under your plan, instead of going to investors, these dividends would be paid back to purchasers (literally refunded). So, no profit.

Sure, insurance prices would be a bit lower, but I'd venture a guess that it'd be such a small difference, no one would be banging down your door to switch. And since there's no profit, there's no payment back to the members of CH who put the effort into building it. So why bother? So I can save 1% on my insurance? Bleh.

Thanks tbutzon but i respectfully think you are missing the point here .. i refer to Colins comment of July 18th and mine of July 19th.

The philosophy of insurance companies is too make their profits by investing the premiums of the policy holders and not as is more and more the case looking to increase their profits by rejecting or reducing valid claims of the poilcy holders on technicalities.

The model we are suggesting is the same as the basic philosophy of investing premiums to make profits but through a structure that does not punish the policy holders by rejecting or reducing valid claims in order to maintain profits at all costs.

A model where we look at reducing claims thru self regulation and personal incentive and a model where the profits are not eroded by huge overheads and executive and management salaries.

So this idea does have a profit focus therefore i don't think you can call it a co-operative.

But even at the basic level if no substantial profit was acheived in a year, if you, as a policy holder, received a substantial portion of your policy premiums back, refunded to you at the end of the year .. aren't you personally making a profit compared to the model where you only receive a very small portion of your premiums back?

Insurance companies can hardly be said to be making very little profit .. you only have to look around and see their plush infrastructures and review the high executive and management salaries being paid .. it doesn't take a genius to see that they do make very good profits.

However, what you are pointing out is that they are reporting and declaring low net profits and paying out very small dividends .. that is quite a different matter and indeed underlines the opportunity that this idea propounds!

With the right infrastructure (Crowdsource, Brain Bandwidth etc.), manageable costs, judicial premium investment, and policy holder incentives to be reasonable, i think their could be a very good profit base that would afford a reasonable and substantial management fee to Cambrian House without reverting to the greed model that is currently in place in the insurance industry.

I'd suggest looking at Prosper for a model of how this might be done.

In every state except New York, the insurance company has to put the amount of money of the maximum benefit into a trust before they can even issue an insurance policy. While I like the collective benefit of it, the idea is extremely unrealistic without a massive amount of capital built up before it can even be launched. I'm talking in the tens of millions in order to even start insuring people.

Thanks notmark for your input.

Let me ask you do you think these scenarios would assist the cause:

1. Doesn't underwriting reduce the amount required to deposit into the trust?

2. Wouldn't lending money on a commercial basis be viable to place in the trust to cover maximum liability? This would then be a calculated cost of working which interest would be offset against the interest accumulated for the investment of premiums?

3. I make mention of a policy not being issued for a minimum period as a "buy in" if you like to weed out opportunists and also to feed the liability trust. For example, if there were 1 million policy holders for a householders policy at a premium of 30 dollars a month and the policy entry lead time was 3 months, for example, that would generate 90 million just there in trust funding.

4. If we made all prospective policy holders purchase a redeemable debenture of, for example, a 1000 dollars to be able to join this special insurance club .. that could also be a very considerable financing instrument to leaverage borrowings not so?

5. I am not an expert here but don't you think a combination of some creative financing like this would allow this idea to fly?

Also, if i am not mistaken, i don't think for one minute that the Cambrian House model would preclude partnerships with other industry players in any of the projects they get invoved with, if it makes good sense .. which could be another way of solving this heady startup cost?

Sorry, i don't lay down easily:)

To answer your questions:

1. Underwriting is the process by which insurance agents get their fees from insurance companies. I figure you're probably talking about reinsurance, which is how insurance companies insure their insurance. But this costs money as well, a fair bit of it, which will all be taken out of the trust that would need to be set up.

2. What collateral do you have for getting the lending money? Since this is the "People's Insurance Company" who would be the one to sign for massive, hundred-thousand dollar loans?

3. You're asking people to pay 90 dollars over three months for absolutely nothing. They still have to pay the cost of other insurance, as their People's Insurance can't kick in until the trust is full. Even then, if you have to insure a million people, 90 million dollars in the trust won't be enough. That would calculate out to 90 dollars a person.

4. You've still only got 1000 dollars per person. The minimum policy for auto insurance covers up to 50,000 dollars in hospital costs, as well as 100,000 dollars in liability hospital costs. It would take 150 people giving 1000 dollars to equal one person.

5. While I'll admit that your financing ideas are creative, they just wouldn't get the job done. Even if the Cambrian House were able to come up with 10,000,000, that would only cover a few hundred people.

I just think that it would be hard to find someone to finance a company that is going to give its profits back to the patrons, so that there will end up being no profits at all.

I love the your idea, I just don't think that it would be practical or even possible to implement it without a serious display of capital. I'm talking in the billions.

Expert opinions are needed in such high level ideas..but there are plenty of firms out there whom the new idea needs to battle..is it worth doing stuff like this, bit doubful?

I like this idea, it needs some deatil but it has potential. Like torents for financial issues, if everybody pitches in we could cover everything? Medical, car and house for 1 price? just a thought, brainstorm you know:)

Yes, lets stop making the richest richer. notmark, I would would pay to join this club because of the dividends down the road, it is just an investment and even if all I got back was a good chunk of my premiums I would be happy and it would still be worth the entrance ticket.

Why are we so complacent when it comes to finding a way around the obstacles that the fat-cats have put in place by lobbying governments to legislate protective law to stop other people playing in their space. Lets find a way around the bureaucracy.

notmark, a definition in dictionary.com for 'underwriting' is 'To sign (an insurance policy) so as to assume liability in case of specified losses' - this is what happens in the insurance game all the time. It costs some money to have this reinsurance but that is a cost of working. The profits will come in this idea by not paying huge salaries, for fancy office blocks and executive perks and benefits and not to screw policy holders to satisfy greedy shareholders.

All the motor cars are not going to crash on the same day, same week, same month - this trust law is sold to us to protect us, where really it is there to stop other people playing in this lucrative space - to protect the moguls!

Lets find a way round the obstacles, perhaps other state incorporation or an International Insurance company based in Panama for example , lets try and find a way to go - I just think if this could fly then it has so many benefits to the greater community and it can still return a nice profit to the 'investors' - Hey Google, Bill what about putting some money back into the community that made you rich - even if it is just an interest bearing trust fund deposit?