Tilting at Liberals 2: The Rebuttaling

Back in July, I posted about the exchange I had on Facebook with the liberal lamenting how minimum wage will not support a two bedroom apartment. There was more to the exchange. Unfortunately, I never got around to finishing posting the response to my response. So, now that I have all this glorious time on my hands, I figured it was time to get back into the swing of things and wrap up some loose ends.

First, her response:

I understand your point and agree with it as well, but I was thinking more about the people who DO have skills but are down on their luck and can't FIND work that suits their abilities. Yes, those jobs that pay minimum wage are GREAT for unskilled teens who don't need to necessarily support themselves and a family. There are a lot of elderly however who are barely existing because they can't make a decent wage, and they have no one to help them make ends meet. Even $10 an hour is hardly enough to live on and support a family with these days and there are PLENTY of jobs for SKILLED workers that only pay $9 or $10. I was referring to those companies that DON'T pay what a worker is worth, but the workers don't really have much of a choice but to work for a low wage OR starve, and many of them are barely eating as it is. I definitely didn't mean to offend you, or anyone else, [Daddy Hawk], with my post. ;)

I, myself, have skills, but am not able, at this point, with my health issues, to work enough hours to support myself. I'm hoping that the improvements I'm trying to make will allow me to begin to work soon. I'm working on a disability case until I can get my health back to that point, but I will NOT be able to exist on just disability, even.

My girls are sharing living expenses, and I hope that they do work hard to improve their skills and that they WON'T start families until they either themselves are able to support one, or until their future husbands are able to do so! Unfortunately, with my health the way it has been for so long, and with me being the ONLY parent around, and no one else really playing a role as mentor, they haven't seen the examples that many kids in the church have been exposed to, of hardworking parents with skills that help them make a good wage, usually of a Father who supports the family with HIS skills and a mother who is able to stay home and be there full time for the kids. We definitely haven't had the ideal life, but God has provided for us in spite of that. I pray He will help my girls to learn on their own what they need to know and that they will work hard and keep their health unlike myself. ;)

Now, I had originally intended to do a thorough fisking of her response. As I started drafting my response though, I discovered that there was a lot I wanted to say that didn’t fit well with a good old fashioned, beat down because her response didn’t contain enough to work with for a launching point. So, instead, I decided to just go with a detailed counter response and let fly.

[Facebook Liberal], first off, you have nothing to apologize for, and you did not offend me. I took issue with the political agenda behind the image you shared by a Washington DC based, liberal, lobbying group and expressed my opinion countering that agenda. The image is rhetoric, pure and simple, and misrepresents the issue to garner sympathy and support from people who have neither the time or interest to really understand the issue. Which is exactly how we wind up with social programs that cost more than the country can afford and don't work to boot.

Let's take a close look at the smoke and mirrors behind the image for a moment. As Mark Twain said, "There are lies, damned lies and statistics." The image says that nowhere in the US can you afford a 2 bedroom apartment working 40 hours a week earning minimum wage. 40 hours a week at $7.25 per hour for 52 weeks is $15,080 a year ($1256.66 per month). They expect you to assume that a person earning minimum wage will receive no other forms of assistance so that they have to rely solely on that meager (you know that's what they are thinking) amount of money.

No discussion of earnings would be complete without taking federal and state income tax withholding, social security or the now federally mandated health insurance requirement into account. Medicare and SSDI taxes hit your paycheck for 7.65% combined. Federal income tax withholding claiming 9 deductions is 8% according to my last paycheck. So, let’s call total withholding something between 15% and 20% for most people. One week of wages at $7.25 per hour is $290. Net take home without considering insurance is between $232.00 and $246.50. It's not a ton of money, but it will go farther than you think if you make wise choices. 

Insurance is expensive no matter how you slice it, and it has only gotten worse since Congress bent us all over a barrel with the “Affordable” Care Act. But, let’s consider reality for a moment. If you are between 16 and 25 (or 26…I forget the cut off) [which is also the demographic most likely to be earning minimum wage], you still qualify for mommy and daddy’s insurance plan. So, you reject the healthcare coverage offered by your employer (assuming you are lucky enough to have employer provided healthcare) and continue believing you are invincible because you are young and employed. The other end of the demographic scale that earns minimum wage is retirees (those 62 and older). They qualify for Medicare which is a whole other can of worms that I’m not well versed enough to open.

Next, they want you to assume that a 2 bedroom apartment is the bare minimum that someone needs to survive. Perhaps. Perhaps not. The unspoken assumption here is that they want you to visualize ONE person earning minimum wage HAS to afford a 2 bedroom apartment to house a family instead of just themselves. Otherwise, why mention a 2 bedroom at all? I think you and I can agree that a single person can get by just fine with an efficiency or even a small one bedroom apartment. That's cuts your rent needs by 30 to 50% easily. So, they obviously expect you to add kids to the mix so that you feel more sympathetic to the cause. How many? 1? 2? 10? I won't try to argue that parent(s) + 10 will fit in a one bedroom apartment, but I will say that you can make mom, dad and 2 or 3 work in a one bedroom.

Now, they expect you to believe that NOWHERE in the US can you find a 2 bedroom apartment within the budgetary means of one person earning minimum wage. How exhaustive has their study been? How many people are really affected by the problem to begin with? Many a young (or elderly) married couple quite happily share small apartments without fuss or bother. Before we sold Castle Erickson, there was a nice young couple (she was an artist and he was an engineering major) who rented a garage apartment from a neighbor for the low, low price of performing maintenance around the property as needed. I personally rented a two bedroom apartment for $425 a month that I shared with a friend. Granted that was 20 years ago, but that dump hasn't gone up that much in rent even ignoring Section 8 assistance. And that completely ignores the movement of people living in 100-200 square foot tiny houses partially or completely off the grid and mostly debt free (Google "Tiny House Movement" or Tiny Houses...fascinating concept).

Based on my own recent research, NICE 2 bedrooms are starting at about $900 a month (roughly $10,800 a year in rent) in the Collin County suburbs. No minimum wage earner in their right mind is going to rent a $900/month apartment in the 'burbs, but I bet they would rent a subsidized apartment for $500/month in the inner city where there is some public transportation.

To quote someone else smarter than me whose name I forget, "You can have your own opinions, but you cannot have you own facts". In my humble opinion, I think we can safely state that their argument is a factually unsupported opinion covered in bovine excrement.

Now that I’ve gotten that out of my system, I can go to town fisking the comments the liberal did make. Liberal in italics. Me in Bold.

I understand your point and agree with it as well,

No, not really. If you understood and agreed, I wouldn’t have to fisk the rest of your comments.

but I was thinking more about the people who DO have skills but are down on their luck

Luck has nothing to do with staying employed. Making wise choices and working hard are the keys to success. Getting a degree in medieval French poetry is not likely to lead to a successful, well paying career. Sitting on your ass checking Facebook every five minutes won’t do it for you either no matter how wisely you chose your career path. Being valuable to an employer by having education, skills and experience that benefit an employer’s bottom line will result in an employer looking for ways to keep you.

and can't FIND work that suits their abilities.

What exactly is this? The only job that matters to me is the one that earns a paycheck to put food on the table. If that means sweeping floors or designing airplanes, so be it. Refer back to making wise choices, if your abilities consist solely of medieval French poetry, it’s time to work on collecting some other abilities.

Yes, those jobs that pay minimum wage are GREAT for unskilled teens who don't need to necessarily support themselves and a family.

Minimum wage serves no other purpose than to be an arbitrary value for unskilled labor.

There are a lot of elderly however who are barely existing because they can't make a decent wage, and they have no one to help them make ends meet.

What choices did they make to put them in that position? I know people just like this; and, as harsh as it sounds, they did it to themselves. It is not my responsibility (unless they are family) to be the backstop for their poor retirement planning.

Even $10 an hour is hardly enough to live on and support a family with these days and there are PLENTY of jobs for SKILLED workers that only pay $9 or $10.

Choices, choices, choices. You are responsible for the choices you make. If you are making only $10 an hour, why are you starting a family? As for the jobs for skilled workers paying $9 or $10 an hour, you need to back that up with examples. I’ve been in the job market for a month now, and the only jobs I have seen earning $10 an hour or less are entry level and unskilled positions. Don’t like the pay, change industries. Entry level insurance claims adjusting positions pay significantly better than $10 an hour, and they will train you.

I was referring to those companies that DON'T pay what a worker is worth,

A worker’s worth is measured by the value he or she brings to the company. Having said that, every position in any company (from CEO down to the janitor) has an economic tipping point at which it is more cost effective to automate, outsource, downsize or otherwise replace an employee who no longer brings a positive value to the company. Fast food workers are in danger of pricing themselves out of a market right now. You can go into a fast food restaurant now, step up to a kiosk, select your own meal, and pay for your meal without interacting with a human until the food preparer hands it to you. I have experienced that myself at a couple of different chains so far, and more will follow suit. Food prep can be automated as well.

but the workers don't really have much of a choice but to work for a low wage OR starve, and many of them are barely eating as it is.

There’s that choices thing again. Everyone has a choice. The number of options you have to choose from depend entirely on your prior choices. Choose wisely.

I definitely didn't mean to offend you, or anyone else, [Daddy Hawk], with my post. ;)

Probably not…you just didn’t think before you blindly posted something ridiculous.

I, myself, have skills, but am not able, at this point, with my health issues, to work enough hours to support myself.

I understand having health issues after taking care of The Queen for the last 8 years or so. I also understand that health issues are often the result of poor choices. It’s not my place to judge your choices, but I can say it might be worthwhile to examine the choices that got you to this point.

I'm hoping that the improvements I'm trying to make will allow me to begin to work soon.

Improvement is good.

I'm working on a disability case until I can get my health back to that point, but I will NOT be able to exist on just disability, even.

It would seem you are existing just fine since you just got married.

My girls are sharing living expenses, and I hope that they do work hard to improve their skills and that they WON'T start families until they either themselves are able to support one, or until their future husbands are able to do so!

Hope doesn’t pay the bills. Teaching your kids the value of hard work and wise choices both through example and daily interaction will reinforce the values you want to instill better than anything else.

Unfortunately, with my health the way it has been for so long, and with me being the ONLY parent around, and no one else really playing a role as mentor, they haven't seen the examples that many kids in the church have been exposed to, of hardworking parents with skills that help them make a good wage, usually of a Father who supports the family with HIS skills and a mother who is able to stay home and be there full time for the kids.

This sounds like an excuse instead of taking responsibility for poor choices. So, where is their father? Whose choice was it to have kids with a deadbeat dad? You have mentors aplenty in the church to steer your kids towards if you will take the time to build those relationships.

We definitely haven't had the ideal life, but God has provided for us in spite of that.

God is merciful that way, but He also likes to see a little initiative and effort on our part.

I pray He will help my girls to learn on their own what they need to know and that they will work hard and keep their health unlike myself. ;)

For them to learn on their own???? Are you blind? How did that work out for you? God put YOU here to teach them and be their example not to let them learn everything the hard way.

Insider's Guide for Outsiders: Evil Insurance Companies

A co-worker forwarded the link to this news article. For those who can't be bothered to click a link, here's the short version:

76 year old man gets into an argument with his insurance agent over why his auto insurance was canceled. Man gets physically thrown out of agent's office. Man sues agent. Man wins judgment. Agent's representatives attempt to partially satisfy the judgment with 17 buckets of loose coins.

As my current boss commented, there's got to be more to this story.

Now, I will admit that I have been sorely tempted to do something like this more than once in my insurance career. The one thing stopping me has been that the hassle of getting that much coinage together and delivering same far outweighed any pleasure I might have received at making a difficult attorney's life more difficult. I'm sure others in my profession will agree.

I bring this up because of a (probable spam) comment I received on my relatively recent post on litigation. The commenter stated: "Great information! Insurance companies don't like to pay claims and some inspectors or adjusters are invented to deny claims. With this said, if you have a legitimate claim, you should expect to be treated fairly and expect the insurance company to honor the claim."

My response to the commenter was: "I'm not sure what you mean by "some inspectors or adjusters are invented to deny claims", but I will say that claims people tend to be a jaded and suspicious lot by nature (it comes from too many dealings with sleazy lawyers and angry claimants). Insurance companies are in business to make money like every other business. As such, saying they don't like to pay claims is almost akin to saying the Pope is Catholic. Having said that, some companies have a well deserved reputation for being difficult and reluctant to pay claims while others are less difficult. Perhaps my next articles in the series will be on insurance companies and adjusters."

I thought I would take a moment and give a brief overview of the insurance business from the company perspective. 

First, let's get one thing perfectly clear from the start: with very few exceptions, insurance companies are in business to make money. Any insurance company failing to make money for very long does not tend to stay in business for very long. 

The primary vehicle for measuring the profitability of an insurance company is the loss ratio. In its purest form, the loss ratio is the total of all written premium collected divided by claims paid including expenses. There are two types of expenses: allocated loss adjustment expenses (A.L.A.E. for short though I've heard some people pronounce it as a word: "A-lay") and unallocated loss adjustment expenses (ULAE). ALAE is any expense that can be allocated to a specific claim file. The legal bill that pays for the attorney defending a specific lawsuit is ALAE as is private investigator, inspector, expert witness and other expenses when they arise out of a specific claim investigation. Adjuster salaries, office rent, electricity, phones, etc. are ULAE. 

A loss ratio of 1.0 is break even. Loss ratios of greater than 1.0 mean a company is hemmorrhaging money, and loss ratios of less than 1.0 mean that the company should be profitable. It is theoretically possible for a company to have a 1.1 loss ratio and still turn a profit, but that feat requires successful return on investment of premium dollars which I may or may not discuss further. In my experience, it is rare to see a reported loss ratio below 0.50. The most profitable companies typically run a loss ratio in the .55 to .75 range. The majority of okay but financially profitable companies run ratios between .75 and .95. Companies having issues typically run loss ratios very close to or above 1.0. A recent example would be Fireman's Fund's dismal performance the last two years running with combined ratios (a combined ratio is the pure loss ratio including investment performance) of 1.294 (2012) and 1.036 (2013).  

That's all so very nice and esoteric, but what does it mean? 

To be honest, lots of things and nothing at all. 

Underwriter and actuaries control one half of the equation (written premium) while the claims department controls most of the other half (losses paid and ALAE). Premium rates are set based on a variety of factors that are well beyond my limited math education and experience. Actuaries perform all sorts of calculations and review statistics (and goat entrails I'm sure) and analyze navels until they come up with a set of rates they think represents the rates that a given category of risk should pay. That's why teenage boys pay the highest rates for car insurance. Underwriters then stick their thumb in that pie and develop a set of underwriting guidelines that define the "appetite" for risk that the company wants to pursue. For instance, the last company I worked for prior to the one I am with now had a solid personal lines (auto and homeowner's insurance) and "middle market" appetite. They were content to pursue small to medium sized companies in a variety of industries, but they would steer away from anything too big or unique. Unique in the underwriting world = risky and hard to price. 

Another driver of insurance premium rates is policyholder retention (or whatever the term de jour is). Basically, there is a finite number of people and/or companies out there. Most of them already have policies which forces the insurance industry to compete on price and service. Service is almost exclusively (but not completely) owned by the claims department. Underwriting sells a promise. Claims delivers on the promise. That leaves price. A company losing market share might choose to lower rates or increase its underwriting appetite or both in order to bring in more premium dollars, at the risk of increasing the loss ratio. A company seeing its loss ratio rise might choose to do the opposite, at the risk of losing market share.  It's a very delicate balancing act. 

That brings us to the loss/claims side of the equation. As mentioned a moment ago, service belongs to claims. There is a distinction here that needs to be mentioned (one I've mentioned before). When you see an ad for an insurance company on TV talking about fast claims service, they are talking about first party claims. A first party claim is one in which you the policyholder are making a claim for benefits to be paid to you under your policy. An example would be making a comprehensive or collision claim on your auto policy. A liability claim where someone else makes a claim on your policy for benefits to be paid to them arising from an accident caused by your negligence is a third party claim. 

What difference does it make? Most states, if not all states, have some form of statutory or regulatory guidelines for how first party claims can/should be handled under pain of fine or penalty for failure to comply. As a result, the claims process for first party claims is pretty streamlined and efficient. Some companies still have field adjusters who will come to you; and, in some cases, they will even cut a check for the damages on the spot. Additionally, there is usually no requirement on a first party claim to prove legal liability as is required by the insuring agreement on a liability policy since a first party claim arises from contractual language as opposed to tort negligence theory. Prove that the contract was in effect and that the damages incurred are covered by said contract (which is usually self evident), and the check is in the mail. 

Most of the time, when someone is griping about an insurance company, they are griping about the handling of a third party claim. As mentioned in a prior post, the time frames on a third party liability claim can go on for years. Most people anymore lose their patience and tempers after a few seconds. So, you can imagine how much fun third party claimants are to deal with when you deny their claims. 

Now, as for the prevailing thought that adjusters look for reasons to deny a claim or that insurance companies don't like to pay claims, the short answer is that it depends. 

Most individual insurance adjusters are hard working people trying to earn a living and do a good job. They have neither the authority nor do they receive the level of reward necessary to incentivise denying valid claims for no reason. The average adjuster, in my experience, is handling between 75 and 175 claims at any given time depending on the complexity of the mix. Most adjusters have very limited personal authority requiring management approval for settlements/reserves above certain amounts, coverage issues, etc. Most adjusters also know that denying a claim does not mean it goes away. In this litigious society, they know that it just means a lawsuit will be coming in soon and that file will be around a lot longer. If anything, there is a human nature tendency to find ways to PAY claims because settled files very rarely reopen, and adjusters have better things to do with their time than reopen files. As such, a permanently closed file is a happy file. Yes, there are individual adjusters that are jerks who are difficult to deal with. Pick any industry...you will find your share of jerks there too. The bottom line is that adjusters are people too subject to the same pressures and feelings as anyone else.

At the company level, there is not an insurance company in business today that has an official "smoking gun" document from senior management that says "look for ways to deny claims" or something to that effect. No one I am aware of is that stupid given the lengths to which bad faith lawyers will go to find such information. Now, will middle management do or say something stupid like that? Yes. I had an assistant VP of claims at a large, international insurance company tell me personally "I don't care if it's right. I just want it done." I explained to him that I had no intention of doing what he told me as I had no intention of explaining why such an unethical thing was done when my deposition would be taken in the inevitable bad faith lawsuit. His boss agreed with me after the fact. I still left that company pretty quickly thereafter though. 

Will a company institute policies or procedures that make the claims process more difficult for everyone involved (adjuster and claimant alike)? Yep. Been there. Done that. Google "allstate colossus" for one such example. I've never worked for Allstate, but I did work for one company that also used Colossus for certain types of claims. I can attest that it is just like every other computer program in existence: garbage in, garbage out. 

One consequence of the whole loss ratio analysis discussed above is the cyclical nature of claims settlements. When the loss ratio is high, the claims department gets pressure to "lower the loss ratio" or "reduce expenses". This can take the form of taking more cases in litigation to trial (which is counter intuitive since it involves incurring more expense) or settling more cases (which is also counter intuitive for obvious reasons). Taking more cases to trial is problematic for a variety of reasons not the least of which is the almost Byzantine nature of our legal process. Most adjusters hate to lose cases at trial. As such, they tend to recommend very few cases for trial and then only those that have legitimate, unresolvable disputes or those that they believe are "slam dunk" cases. I have sat in more than a few roundtables where I've told upper management in no uncertain terms that trying a particular case would be an epic mistake. Usually, they are smart enough to listen and the case eventually settles. 

It should be noted that insurance companies don't just take premium dollars and dump them in an interest bearing checking account hoping everything balances at the end of the month. There is a whole side of the business controlled by accounting and the CFO that takes the money, invests it and hopefully scores a boatload of return on investment earnings in the process. Sometimes, that can blow up in their faces. AIG most notably went to the brink of oblivion just after the housing bubble burst in 2008 through over reliance on mortgage backed derivative investments. Hartford got splashed by that same bubble bursting for the same reasons but fared much better through a more diverse investment portfolio.

This is a pretty big topic that I am only scratching the surface of here, but I need to get back to work. If you are really that interested, you can dig into the mechanics of reserving and prior year development charges to present earnings, etc. That's homework for you CPA types. 

In closing, your attorney is no better or worse a person than the adjuster for the insurance company. Treat them with the Golden Rule, and things will usually work out the way they are supposed to.

 

A Polite Request

I received a comment and follow up email on my recent post about the open carry brouhaha at Chipotle from a new blogger soliciting feedback on her take of those same events. Julie at "Julie on Politics" asked that I consider sharing her post here. She asked nicely, and I am happy to help a new blogger out since we were all new bloggers at one time or another. So, if you are interested in giving her a look, you can find Julie's thoughts on the Chipotle incident here.

Bob S., I think you will find my comment to Julie more cogent and less half baked than my original post. I've had my caffeine today.

Baked Beans and Spam*

*If you don't get the joke in the title, Google "monty python spam", watch the YouTube video, laugh, and be content that you now are "in" on the joke.

Just a quick FYI. I have changed the comments settings so that anonymous comments are no longer allowed.

Looking back, I may have had one, legitimate anonymous comment since I began blogging. In that same time period, I have received 87 spam comments. Granted, Blogger has managed to dump the vast majority of those into the spam toilet preventing you all from being bothered with links to virus and fraud infested websites.

The reason for the change is that I appear to have landed on someone's radar as the spam comment traffic appears to have kicked into high gear in the last month or two.

To those few who read here who do not have Open ID accounts (Blogger, Word Press, etc.) feel free to send me your comments via email at krerick via Google's email service. I'll publish them, but be sure to let me know if you want your name (or a pseudonym) included.

"I DON'T LIKE SPAM!!!!"