How does private health insurance violate the standard principles of insurance?
What will be an ideal response?
The following demonstrate how private health insurance violates the standard principles of insurance:
• The loss is supposed to be something out of the ordinary and also something to be avoided. However, ill health is a commonplace event for most people, and the loss being insured against may not necessarily be a dreaded event.
• Losses are supposed to be independent events. In contrast, the very nature of infectious disease implies a great degree of dependency among insured losses.
• The loss should be of such financial magnitude that it is unrealistic to budget for it. However, first dollar medical plans violate this tenet.
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