Insurance is a Scam

Do you realize that there are people out there living in the United States during the 21st Century that honestly believe insurance is some big conspiracy scam created to steal the average American’s money?

insurance is a scamThese people believe that insurance is a scam.

I’ve had people sit in my office and tell me, right to my face, insurance is a scam.  No joke…

It usually sounds something like this,

“Now…. I just want to be upfront with you… But I just think that, ummm, insurance is just a big scam.  Insurance is a waste of money…”

Be honest with yourself, there is a good chance you feel the same way.

You may not come out and tell your independent insurance agent that you think his/her livelihood is a big scam, but deep down you probably think you pay way too much for something that you never use (in this case insurance).  Its OK.

Its natural to think that way.  There is nothing wrong with you.

The problem, as I see it, is NOT in you, but rather in the perpetuation of Insurance as a Commodity constantly broadcast at you by direct writers. (Thanks a lot cough Lizard, cough, obnoxious frumpy woman, cough, former TV president on 24…).

You think that Insurance is a Scam because you don’t believe in the value proposition that insurance provides.

The Force Is Strong With This One…

I know it shows a lack of class to blast the competition, but to be completely honest, (My wife hates that phrase because it insinuates I was not telling the truth before, but I try to write these posts conversationally and well… sorry dear…), I don’t consider the before mentioned insurance carriers competition.

Not because their people are dumb, (Which they are not), and not because their product is bad, (Which it is not), but because these insurance carriers market insurance products as if they are all the same and price is the only thing that matters.

My hope upon hope is that over the course of the last 170+ posts on this blog I’ve enlightened you to the fact that insurance is not a commodity and the insurance carrier you do business with and coverage you purchase from that insurance carrier matter… a lot!

Insurance Jedi Mind Tricks

I know what you are saying to yourself right now,

“Ryan, I’m a great driver, I never get tickets and I never get into accidents.  I take care of my home and have never had a claim.  All the dollars I’ve spent on Insurance have been wasted.  Where the hell is the Value in that?”

Good question my young Padawan…

Let me tell you an insurance story:

I have a client who spun me a similar tale of paying too much and getting nothing in return during the process of reviewing his ny home insurance policy.

He was a stand-up guy who seemed to always do the right thing and was very proud of his family’s insurance history.  He also always bought the proper coverage, 100% replacement cost on his home, maxed out his liability insurance on every vehicle, etc.  He protected his family.  He was also very meticulous with his house.  When I went by to take pictures the place was immaculate.  He did everything himself or was involved first hand and felt very good about the condition of the house.

So every time I would meet with him about his insurance he gave me the Insurance is a Scam routine.  Because he had been paying $500 a year for the last 10 years for his NY home insurance and had never even come close to a claim.  That’s $5,000 with what was in his mind Zero return…

That does sound like a scam.

However, about a year ago the plot would thicken.  My client and his buddy were up on the roof of my client’s house fixing some shingles that were damaged after a really bad Ice Storm that rolled through Albany, NY in the middle of July.  Hail the size of golf balls, no joke.

Well, my client climbed off the roof to grab a new batch of shingles, in the moment of down time his buddy lit up a cigarette.  Just as the new batch of shingles hit the top of roof the cigarette was finished.  The cigarette was flicked off the roof and my client and his buddy went on to finish the roof repairs.

Unfortunately the cigarette did not make it off the roof.  It got caught on the edge of the roof between the gutter and sat there smoldering until some wind and the heat started the house on fire (Everyone got out safe, Thank goodness!).

The total loss figure between the fire and water damage from the Fire Department was ~$50,000 and because my client had secured proper and adequate NY home insurance coverage he was reimbursed his full need.

The Rub

Think about that for a second.

My client paid $5,000 over the course of 10 years as a Homeowner and in his time of need was given $50,000 to put his home and family back together.

How is that a Scam?

This is the VALUE of persistence and diligence to maintaining proper insurance coverage.  He could have gotten fed up and left our agency for a company offering a “Cheaper” price and less coverage…

Today he’s glad he didn’t.

This isn’t the 1700’s people, if you don’t have proper NY home insurance the village folk are not going to rally around you and have a house raising.  Insurance is what is going to put your house back together.

Needless to say I don’t get the Insurance is a Scam routine anymore…

If you would like to find out if your home has the proper insurance call us at (518) 456-6688 or click here to email us and speak to one of our NY home insurance specialists.

Insurance is a Scam by
Ryan Hanley

Ryan Hanley

Director of Marketing at The Murray Group
Ryan is the Director of Marketing for The Murray Group Insurance Services, Inc. Ryan is also the Founder of Content Warfare Podcast, one of the fastest growing podcasts on iTunes dedicated to digital marketing.
Ryan Hanley
  1. Jesse


  2. avl

    Insurance is a scam in the same way gambling at a casino is a scam. The house always wins. Individuals may benefit by having insurance when their house is broken into etc or by beating the house at blackjack but as an entire population people lose more money on insurance than they save by having it. The only time insurance is neccessary is when you absolutely cannot afford not to have it (i.e. on an object you cannot afford to replace). In the UK where i am the only thing i can think of your is house (and home insurance is pretty cheap). Plus motor insurance which is compulsory. Anything else is a waste of money statistically speaking, you can probably add health insurance onto this if you’re american but otherwise the same applies.

  3. avl

    Anyway my point is your story is pretty ridiculous, for each one of your clients who saved 40,000 by having insurance (they had paid 5,000 already and then you said it was several years later the fire occurred). But for each one of those there will be at least 9 clients who never claim. There has to be, if there weren’t then insurance companies would go bust, they have to by definition charge more for insurance than they pay out in claims. The only reason to have it is if you would be financially ruined by the loss of an uninsured asset, if you’re rich, don’t get insurance, if you’re middleclass get it on your house and nothing else

    • Avi,

      I definitely hear what you’re saying and have had many people make this same claim. But how do you know if you’re going to be the person whose home burns down or not?

      You’re right, here in the States the only thing that is compulsory is Auto Insurance on the personal side and Workers Compensation on the business side.

      You don’t have to buy it, so if you do… then it’s not really a scam, right? You made a conscious decision that peace of mind was more important than whatever premium you paid.

      I don’t like paying insurance either. But two years ago a tree fell hit our roof and insurance paid $15,000 to replace it. That is 18 years worth of insurance payments.

      For me, insurance was a pretty good deal…

      • Clint33

        Insurance is crap. They want your money and say “we will cover you in all these situations rest assure” bull shot. They want your money until you make a claim they think is to high then they drop you. What a bunch of crap. False advertisement.

  4. someone

    Homeowners insurance isn’t a choice for most Americans today. In most cases, you need to purchase Homeowners insurance in order to secure a loan to even purchase a house in the US. The same goes for automobile purchases. The reason auto insurance is compulsory in the US is most like due to insurance lobbyists who helped sponsor bills to make it that way, Along with bank lobbyists who were looking for ways to secure their investments. In many places in the US renters insurance is required by the apartment management just to be considered for a lease, not to mention extensive credit and background checks are performed. Our society in the US is brainwashed into believing we deserve a nice car, a big house, and expensive things. We are lured into a state of entitlement and convinced we cant live without these things. We are taught to live outside our means in order to create a debtor state. Insurance is a tool used to guarantee the investments of large financial institutions from loss, not to save the consumer from loss. If i didn’t insure my brand new car, I probably would have qualified for a predatory loan in which I was paying 30% interest. I would rather pay my insurance premium which is much more cost effective. The end result being this. I could not afford all the things I have if not for the fact that insurance lowers the risk on the investing bank, in turn making credit more readily available. However, if credit were not just given out like candy 20 years ago, the risks involved in today’s financial world wouldn’t warrant such high premiums. The difference being, 20 years ago people took personal responsibility and paid their debts. Today’s generations feel entitled, and take no responsibility for themselves. They live outside their means and generate a risk profile that is driving up insurance premiums, which in turn makes insurance seem like an unattractive prospect, especially to those of us who are responsible.

  5. Nate Morey

    Wow, so what you said in a nutshell is, insurance is not a scam because he got the money he paid back? How is that not a scam??? he could have just saved it himself, and just had it! The bottom line is this, are insurance companies profitable? if yes, they make more then they give out, if that is true, someone is getting screwed over, could it be, everyone? just save your money yourself, don’t count on anyone else, don’t get charged money to have your money used in your favor, don’t deal with the hassle! sure, it is a gamble, but so is paying for something you may never get a return on. place your bets. only one could result in 0 loss though. being of course, no insurance.

  6. nan

    The problem with this story is that it doesn’t end with the homeowner receiving their claims check. You forgot the part where the insurance company jacks up the guys rate for years to come and gets the money back. You must include the subsequent rate increase in your calculations.

    Insurance is considered a scam because we buy into a risk “pool” yet are penalized as an individual when we claim. These penalties (in the form of raised rates and dropped coverage) are often greater than the initial claim. Don’t even get me started on the legalese, the loopholes, and the hard up-selling of unnecessary coverage and the like.

    People think that insurance is a scam because that’s often exactly what it is.


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