"The Landmine that Just Got Laid for Elizabeth Warren"

From PoliticoMagazine:

The moment came when the 10 participants were asked, by a show of hands, who would dispense entirely with private health insurance. Only New York Mayor Bill de Blasio and Warren signaled “yes.”

That's when former Rep. John Delaney, one of the least visible of the 24 announced candidates, weighed in. After pushing back on the idea of taking something away from Americans that most are reasonably happy with, Delaney said this:

“Also it’s bad policy. If you go to every hospital in this country and you ask them one question, which is how would it have been for you last year if every one of your bills were paid at the Medicare rate? Every single hospital administrator said they would close. And the Medicare for All bill requires payments to stay at current Medicare rates. So to some extent we’re basically supporting a bill that will have every hospital closed.”

The writer reckons that the Republican candidate (i.e. Donald Trump) will repeat this endlessly during the next campaign - "Even Democrats admit that their plan will have every hospital closed."

The problem is that the claim is nonsense to start with.  Delaney is presumably in the pay of the US healthcare lobby, a massive rent-seeking enterprise, which charges about three or four times as much for treatment as the nationalised/regulated systems in Europe, and 'hospital administrators' are hardly going to admit they have been price gouging for decades, are they?

European healthcare works fine and there are plenty of hospitals, so assuming Medicare payments are at European levels, nothing terrible will happen. They'll just make normal profits and earn normal salaries instead of making super-profits and earning inflated salaries. Coverage will improve and the US economy will grow by ten or fifteen percent; the US healthcare lobby is currently soaking up about ten or fifteen per cent of US GDP in super-profits.

That said, trying to ban private health insurance is a daft idea and entirely unnecessary, as the European example shows. If you have private insurance, you get much the same treatment as under the default system, just at double or treble the cost. Which is why most people don't bother.

Nobody move or your car insurance gets hurt!

From the BBC:

Car insurance costs are climbing for the first time since 2017, partly because of Brexit uncertainty, according to the AA.

Over the last three months, the cost of a fully comprehensive policy climbed 2.7% to £609.93 on average...

MoneySupermarket's... editor-in-chief Tom Flack said: "It is often more expensive to buy insurance in December as they are more cars needing it so insurers don't have to compete as hard for business.

"That means it's harder to tell if the rise in the final quarter of 2018 signals a long-term rise or is just a blip."

Let's hear it for the donkey!

Says Graeme, who spotted this story:

A peckish donkey caused thousands of euros worth of damage and landed his owner in court after confusing an orange-coloured supercar for a carrot, a German court has heard...

Despite not holding a grudge against the donkey, the businessman is seeking compensation from the donkey owner’s insurer to cover the cost. However, the insurance company have refused to pay out, arguing he should have chosen a better parking spot.

Reminding us that life copies satire. From Newsthump (July 2017):

Local resident Simon Williams told us,”First of all the car is orange. Orange.

“What sort of attention-seeking prick drives around in an orange sports car. I’ll tell you the sort, the sort that is crying out to have the piss taken out of him when he inevitably destroys the thing because he’s a shit driver.

“So we have a prick driving too fast in a bright orange car that costs more than a first home and we’re surprised that public sympathy for his predicament is non-existent. Yeah, I’ve got to be honest, I’m not all that sympathetic.

Fun Online Polls: Central heating; Crash for cash

The results to last week's Fun Online Poll were as follows:

Have you turned on the central heating yet?

Yes - 46%
Not yet - 45%
We don't have central heating - 9%

Thanks to all 87 who took part. Looks like we are exactly on the cusp of than half of us having turned it on (to the extent that we have central heating).

JQ: Can't vote because there is no "no" or "other please specify". I do have central heating but "Not yet" implies that I will turn it on. I probably won't unless the winter is exceptionally cold. I didn't turn it on last year at all.

I'd count that as a "not yet" myself. But well done for making it through last winter unaided!
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Mr Yan: Next poll should be on this - http://www.bbc.co.uk/news/uk-england-41360891

"We don't know the exact reason Birmingham features so heavily in these surveys,"

I think a poll on what factor causes this in Birmingham, Bradford, London and Oldham would be illuminating.

The same question occurred to me when I saw the article. Full list from here.

So that's this week's Fun Online Poll:

Certain parts of Birmingham, Bradford, Manchester and Oldham topped the league for Crash for Cash. Do these areas have anything else in common?

Vote here or use the widget in the sidebar.

Social care costs: The Homeys are muddling up two entirely separate topics.

From The Guardian:

Dilnot, a former director of the Institute for Fiscal Studies, said that by refusing to implement a cap, the Conservatives would be leaving people without any protection against care costs.

“So people will be left helpless, knowing that what will happen is that if they are unlucky enough to suffer the need for care costs they will be entirely on their own until they are down to the last £100,000 of all of their wealth including their house,” he said.

“I do feel very disappointed for all of us, the millions of people who are very, very anxious about this, and I’m a bit surprised, because what social care is a classic example of a market failure where the private sector cannot do what’s needed...

“The changes just fail to tackle the central problem that scares most people. You are not tackling the big issue that people can’t pool their risks. There is nothing that anybody can do to pool their risk with the rest of the population, you just have to hope that you are not unlucky.

“It is not providing insurance. You could easily have care costs of £300,000 each if you are a couple; you are not able to cover that extreme risk which is what we all want to do faced with anything else which we can insure. That’s the market failure and these changes do nothing to address that.”

Classic bit of Home-Owner-Ism there, the bit that stings is that your wealth includes the value of your house, well duh.

Amazingly, Mr J Hunt takes the non-Homey/free-market position:

The health secretary, Jeremy Hunt, confirmed the Conservatives were planning to abandon a previous manifesto pledge to cap care costs.

Speaking from West Yorkshire, where the Tories will launch their manifesto, he told Today: “We’re dropping it because we don’t think it is fair because you could have a situation where someone who owns a house worth £1m or £2m, and has expensive care costs of perhaps £100,000 or £200,000, ends up not having to pay those care costs because they are capped. And those costs get borne by taxpayers and we don’t think that’s fair on different generations..."

When it was suggested the plans amounted to a death tax delayed, Hunt said: “It is not a tax. We are saying that the assets that you build up over your lifetime should be used to pay for your own care costs.”

Dilnot's ramblings about "market failure" and "people losing the family home" miss the point, probably deliberately, that there are two completely separate issues here:

1. Taking out insurance against the risk of ending up with expensive long term care costs.

2. Taking out insurance against falls in value of your home/estate.

Re 1, another Guardian article says that the average cost of care is £20,000, i.e. £nil for the vast majority that never need it,  up to £100,000s of £1 million for the few who do.

I'm sure that insurers can cope with that basic idea. You pay in £1,000 a year from the age of 50 onwards (or whatever) and hope for the best. The problem will be who decides whether somebody requires long term care; how much they need etc, and there will be a veritable punch up between the insurance company's assessor and the GP who makes the call. I can't see that GPs are going to appreciate wasting hours defending and justifying each and every claim.

That's not "market failure", it is just too many unknowns. Insurance companies don't want to put themselves at the whim of government employees (yes I know GPs are technically self-employed). So the only agency who can sort this out is the government itself by providing low-cost, compulsory  mass insurance i.e. taxpayer-funded 'public' services. And as we know, the best source of revenue to fund this is LVT, which completely goes against Homey principles, they want it to be funded with more taxes on workers and businesses.

Re 2, clearly, the taxpayer should not be called on to subsidise the value of other people's assets, in particular their homes. In an ideal world, land values would be taxed away with LVT, so homes would largely fall out of the "wealth" equation. That leaves other assets (which in an ideal world would not be subject to Inheritance Tax), if people could get insurance against long term care costs, they wouldn't need to worry about those assets being sold to pay for care, be definition.

"New flood insurance scheme to increase household bills"

From the BBC:

Homeowners living in high flood-risk areas of the UK should now be able to save hundreds of pounds on their insurance premiums.

A new scheme called Flood Re has been designed to cut bills for those whose homes are in danger of flooding. Up to now, thousands of householders have been paying large additional premiums to make sure their homes and possessions are protected. About 350,000 homes could benefit - although thousands will be excluded.

The cost will ultimately fall on ordinary policy-holders, who will pay an extra £10.50 on their premiums on average.

So, just how inefficient is local authority housing administration?

I can't find national statistics, so I will use the figures provided by my local council, which I guess is a reasonably good guide to the average.

The accounts include two different profit and loss accounts for their council housing, on pages vi and 38; total income is around £34 million and real cash expenses are around £18 million, including employee costs of £3.7 million. So unless more than half their income is from Housing Benefit, that's a nice little profit for the taxpayer.

It doesn't say how many people work in their housing department, but let's guess each employee costs £30,000 a year, so that's 125 employees. Neither does it say how many units of housing they look after, but let's call it 7,000 (£34 million divided by £100 a week rent).

So that means it one council employee looks after fifty-six homes. That includes managing the waiting list and allocating vacant ones; sorting out the repairs; collecting the rent and council tax; and administering housing-related benefits etc.

Ho hum.
------------------------------
How does that compare with the 'private' sector?

According to the ONS there are 422,000 estate and letting agents (construction is a quite separate category) and [as Mombers points out in the comments] around 1.5 million private landlords.

There are 1,285,000 people working in finance and insurance, let's assume that half of those working in finance and insurance are involved with mortgages and home insurance, this means that there are 3 million people making a living from/looking after 22 million or so privately owned homes.

That means on average, in the private sector, one worker looks after about seven homes.

Going by that simple measure, local authorities are eight times as efficient as the private sector.

Leeches on the back of leeches on the back of leeches...

A couple of years ago there was a marked increase in the number of doormen outside pubs etc. in central London, all of whom have a fancy little licence thingy displayed on their arm.

I got chatting to one yesterday (who does it part time while doing a BA in management) and between us we pieced together the sequence of events…

1. After the riots of 2011, a lot of insurance companies found a brilliant excuse for not paying out claims, which was that the shop involved did not have sufficient security guards, and this was written into later insurance policies. (As an aside, the guard reckoned that far too many shopkeepers were robbing their own shops and then claiming for missing goods, not sure what difference it would make).

2. So all the shops and pubs had to hire security guards, and the 'industry' boomed.

3. The government got in on the act and set up the Security Industry Authority to regulate things.

4. To be able to work as a security guard, you have to go and do the accreditation course, which takes a week or two and which costs you £300 to £400. Most employers don't reimburse this.

5. So then we get a load of private businesses providing these courses e.g. here, the guard I was talking to couldn't actually remember learning very much, but you need to do it to be able to get the job to keep the government and the insurance companies happy.

The fact that while paying a couple of security guards to hover at the doors of your shop or pub during opening hours might deter normal shoplifting or general rowdiness, it wouldn't make the blindest bit of difference if masses of people raid the premises after closing time when they are not on duty and would be completely overwhelmed anyway was not lost on either of us.

Seems fair enough to me.

From The Telegraph:

Take two drivers: both have spotless records and the same car, which they park on their respective drives. But the motorist who lives in London will pay three times [as much] insurance than a comparable driver in the Isle of Man.

Car insurance costs are determined by a driver's postcode, with those living in locations deemed more of a theft risk paying inflated premiums - regardless of whether or not they are responsible drivers.

What on earth are they complaining about? I don't think there's any "deeming" going on here, the insurance companies know perfectly well where cars are more or less likely to be stolen, and assuming insurance companies to be competitive inter se, the premiums cannot be inflated. And does being a "responsible driver" make it less likely that your car will be stolen? Methinks not.

(I must admit I'm a bit disappointed to see that I live in a "high risk" postcode, but hey).

Car insurance - it really is that simple.

Hitherto, I have let Her Indoors deal with this because she enjoys paperwork and I don't.

This year we got our renewal quote slightly earlier than normal, about three weeks before renewal time, but otherwise it was as expected, a couple of hundred quid more than when we started with them two or three years ago, so Mrs W dutifully wasted several hours on moneysupermarket and so on, but was not able to commit herself to going somewhere else and saving a couple of hundred quid.

Plenty of people have told me that all this changing-your-insurance-each-year is a mugs' game, all you need to do is ring your current insurer, tell them you've got a much cheaper quote elsewhere and then they drop their premiums to just above whatever you say the competitor's quote was.

Her Indoors told me if it's that simple, then why don't I sort it out?

Which I did. The lady in the call centre was as nice as pie, and clearly had a script prepared for the occasion. She assumed incorrectly that I was low-balling but correctly that I didn't like paperwork so would not bother insuring elsewhere if her quote was only a bit higher than the competitor's quote.

So she dutifully hummed and hah'ed and waffled something about "Let me see if I can get that down a bit for you."

The upshot was, she knocked off exactly £150 from the original quote to a price slightly above what she believed the competitor's quote to be, we shook hands (metaphorically) on the deal and that was the end of that, it took all of five minutes.

"Insurers urged to process flood insurance misselling claims quickly"

From the BBC:

The prime minister is urging the insurance industry to deal with future claims arising from misselling of flood insurance as quickly as possible.

Mr Cameron's official spokesman said the insurance industry should do its best to maximise help to flood-hit victims by rejecting all claims under the original policies on the basis of some obscure small print or other as quickly as possible, followed by a "speedy" processing of all the misselling claims which will be submitted after the resulting shit storm.

He declined to say whether the sector should be offering "premium holidays" to those whose claims for flood damage will initially be rejected.

"I've heard Cornwall's nice," added the Prime Minister.

It is hoped that flood victims will have received their compensation payments for missold insurance by 2018 at the latest.

Multi-car insurance

This is something else where I am amazed that they get away with it.

Assuming you are a two-adult household with two cars, it is usually cheaper to insure both cars with the same insurance company, and if you are a many-car household, much the same applies, you get discounts for each additional car.

However, it strikes me that the discounts are nowhere near big enough, because the marginal extra risk associated with one extra car is negligible, it is only the number of drivers which really matters.

Taking a two-car family (like mine), a lot of the time we are both in her car or both in my car, while the other car is safely parked up at home. In other words, a lot of the time the total risk is much the same as if we only had one car.

And there are some journeys which one or the other of us has to make, like picking up the kids or going to the supermarket, so the fact that I am using my car at any moment means it is less likely that she will be using hers. The total number of miles we drive between us is barely higher for us having two cars than if we only had one.

It's the same with a single, unmarried car enthusiast who has half a dozen useable cars on his driveway, he can only be using one of them at a time.
-------------------------------------------------
Ultimately, I'm not sure that compulsory private third-party insurance makes sense anyway.

a) There are three basic principles to insurance:

i. Risk spreading, where one specific party cannot bear the full cost if his project goes wrong, so he invites lots of other people to take a small part of the risk, and

ii. Risk pooling, where large numbers of people are running a very small risk of incurring what is for them a very large loss (like your house burning down). But from the insurance companies' point of view, that is not really a risk at all, they know that every year x,000 houses will burn down and that they will have to pay out £y million, so they divide that £y million by z million people with a house and everybody chips in a couple of hundred quid a year to a common fund.

iii. Self insurance. If you only own one home, you have to have fire insurance. However poor value it is, you wouldn't be able to sleep at night if you didn't have it. But what if you are Prince Charles and own thousands of homes? You know perfectly well that every few years one of them will burn down. It's cheaper paying for one to be rebuilt every few years than is to pay for insuring each one.

(Of course, we have to have some sort of criminal sanctions for unduly reckless drivers who kill or hurt somebody, or even if they don't, separate topic.)

b) But as most households own a car or two and nearly everybody is at risk of being hit by somebody else's car, whether as driver, passenger, pedestrian or owner of physical property, and the amount of damage you suffer as a result of a collision bears little relation to anything apart from sheer blind bad luck. This brings us safely into the realm of self-insurance - not for each individual but for the UK population as a whole.

(It's not like fire insurance where each owner has some influence over the risks, i.e. if you own a big house the total potential damage is much greater than if you own a small one; if you install loads of fire alarms, your risk is lower than if you don't etc.)

c) And the total amount of damage caused by thirty million vehicle owners to the rest of the population is a fairly stable figure (and tiny as a % of GDP). For some reason, the cost is recovered only from car owners, even though non-car owners are also at risk (of them or their front wall being hit).

d) So if you ask me, it would be cheaper and more efficient to bypass the insurance companies and just fund the third-party element out of general taxation (or out of fuel duty, or whatever seems appropriate), that way absolutely every risk is pooled in the same place, administration costs are minimal because you don't need dozens of separate companies collecting hundreds of millions of payments a year, you don't need expensive advertising.

e) This logic does not extend to fire and theft insurance, those are specific risks over which the owner has some control, the same as with fire insurance for your home (see above). There are plenty of people (like me) who simply don't bother with fire and theft insurance for their cars because worst-case having to spend a couple of grand on a replacement is well within my means, meaning that people like me wouldn't need this faff with insurance every year. Her Indoors is a bit more car-proud than me, so she probably would insure hers for fire and theft (even though I wouldn't bother with hers either), fair enough.

f) The only downside I can see is that insurance companies would lose a huge source of easy revenue… oh, right.

Car Insurance Premiums

From the BBC

The Commission has been studying the £11bn private motor insurance market for more than a year, following a referral from the Office of Fair Trading (OFT).

It agreed with the OFT that the system was not working well for motorists.

It found that premiums were pushed up because the insurer of a driver who was not at fault in an accident arranges for a replacement car or repair, but the at-fault driver's insurer foots the bill.

"This separation of control and liability creates a chain of interactions which result in higher costs for replacement cars and for repairs being passed on to at-fault insurers," it said.

"The Commission estimates the extra premium costs to be between £150m and £200m a year.

"There is insufficient incentive for insurers to keep costs down even though they are themselves on the receiving end of the problem."

Uh, what? The people picking up the tab have no incentive to reduce the cost? Really? Shareholders and managers of insurance companies would rather throw money at someone than have a bigger house? OK, you might say, the insurers will ultimately pass that onto their customers, but then, we have companies competing with each other to win customers. If they want their customers they have to be competitive with premiums, and that means making sure that their competitors don't take the piss.

The Commission believes that premiums could be reduced by £6 to £8 per policy if changes were made to the claims process.

So what we're dealing with here is the sort of amounts on a claim that no-one can be bothered wasting staff time and costs actually arguing about.

Insurers (in my experience) are pretty good at knowing the approximate cost of things. They often even insist on dealing with certain suppliers, e.g. one of the big hire car companies. And some of this includes setting the price at the higher end so that people aren't wasting their time arguing about the cost. So, maybe you get a car that costs £10/day more than it should, because it isn't worth people arguing the toss over a claim amount less than £50. And if you try to push the prices down, you'll just create more people arguing over cost which will frequently cost you as much as that.

If anyone really wanted to lower insurance costs, they'd be trying to get the government to drop their 6% insurance premium tax on car insurance.

Handing taxpayers' finest to the financial services sector, just for the heck of it.

Exhibit One:

£482 million a year, almost a fifth of the £2.6 billion NHS budget for maternity services and an estimated £700 for every birth, is being spent on medical negligence cover. The most common reasons for compensation claims are management mistakes, problems after a caesarean section and errors resulting in cerebral palsy.

There is no point in the NHS paying medical insurance premiums to anybody, as they can self-insure. There's is some marginal point in paying for insurance against unusual but catastrophic losses, but there is no point insuring against frequent, small-scale losses.

The NHS knows that out of 700,000 births a year, they are going to mess up a few hundred and will have to pay out few hundred thousand each time, but the total amount is probably fairly stable and only a tiny percentage of the NHS' overall budget, so they might as well just pay the compensation directly. The premiums the NHS pays to the insurance companies will of necessity include the insurance companies' guaranteed profit element, and that is money which could easily be saved.

Exhibit Two:

The government will further support Right to Buy by introducing Right to Buy Agents to help buyers complete their home purchase, and provide £100 million to establish a fund to increase Right to Buy sales, by improving applicants’ access to mortgage finance.

There is absolutely no need for "access to mortgage finance" when somebody does Right To Buy.

Let us assume that at present, Council Tenant A is paying £5,000 a year rent.

The council now decides that he can buy his house at a massive discount for (say) £60,000. If that proud new Homey took out a mortgage for £100,000, the repayments would cost him (say) £3,000 (at current interest rates).

The council can act as the bank and "lend" him the £100,000 out of thin air. They just have to right it down at the top of a sheet of paper, then every year they add on the interest charge and deduct the amount he has paid until he has paid off the loan.

Bonus points to the first idiot who says: "The local council needs to get that money in so that it can build another council house." Firstly that is not true, the amount of council housing to be built (or indeed sold off) is purely a political decision, there are no financial constraints on the amount that can be built and it needs very little in the way of finance.

And even if they did need the cash up-front, the council can easily sell its loan book.

(Why it is considered better for the local council to have fixed income of £3,000 for a limited period rather than £5,000 a year, rising with inflation, in perpetuity is a mystery to me, bearing in mind it is the taxpayer generally who will have to make up the shortfall, but that's a separate topic.)

Well, obviously not.

From City AM:

HOW THE [HELP TO BUY] SCHEME WORKS

Banks pay the government for a guarantee. If the customer defaults on their mortgage, the government covers almost all of the guaranteed portion.

This guaranteed portion will be up to 15 per cent of the mortgage. In the event of a default, the Treasury will refund the banks for almost all of portion.

The scheme is split into three tranches: 90 to 95 per cent mortgages; 85 to 90 per cent; and 80 to 85 per cent. The fee varies for each, at 0.9 per cent of the loan at the top end, 0.46 per cent in the middle and 0.28 per cent at the bottom end.

It is expected that the fees cover the cost of the scheme and defaults exactly, leaving the Treasury with no profit or loss. If it looks like that break-even point will be missed, the Treasury can raise or cut the fee to match.

OK, that 0.9% is one-off fee for seven years' worth of insurance cover = 0.13% of the loan amount per year, and the sum insured (maximum payout) is 15% of the mortgage (other sources say 15% of the price paid for the home).

They say that the Treasury will break even on this, in other words they do the risk pooling and will have to pay out that 15% on about 1 mortgage in 116 each year (15% sum insured divided by 0.13% average annual charge). We also happen to vaguely remember than on average, only about 1 in 300 mortgaged homes end up being repossessed, not 1 in 116.

This is a risk pooling, not a risk spreading exercise.

Seeing as banks create tens of thousands of mortgages each year and will possibly lose a bit of money on 1 in 116, they can self-insure. All they have to do is charge high loan-to-value borrowers an extra 0.13% interest put take a small part of the total interest (call it 5%) paid by good borrowers and use it to cover their own losses.

But they weren't doing that themselves and the interest rate charged on high loan-to-value mortgages was much higher than for low loan-to-value mortgages (One per cent higher? Two per cent?).

Therefore we must assume that the risk is considerably higher than the 0.9% fee suggests.

Or possibly the explanation is as simple as this:

The banks do get some cost relief when they make these loans. Instead of facing a hefty capital requirement charge for issuing risky, high loan-to-value mortgages, the government guarantee means they are treated as relatively safe and so cost less.

In other words, the government is simply disapplying the relatively sensible capital requirement rules (which would lead to less leverage and less gearing up) and telling the banks to get on with Business As Usual.

Or as @notayesmanecon puts it:

Borrow at 0.75 per cent (FLS), lend at 5 (Help to Buy), get taxpayer backing. What can go wrong for banks?

It all seems a bit mad until you know who paid for it

From The Independent (h/t Bob E):

Patients who exercise regularly and avoid fatty foods should go to the front of the queue for NHS operations, a think tank urges today.

People should be able to use supermarket bills and gym membership forms to prove they lead healthy lives and access priority non-emergency treatment, according to the centre-Left think-tank Demos. It also suggests that welfare claimants who exercise regularly should be given larger payments in recognition that they are behaving responsibly.

That all seems like the usual bansturbation, but the fun thing about Demos is that a lot of their more off the wall "research" is "generously supported by...". So let's look up the report, rather bizarrely titled Control Shift (yes we know you want to shift control, to yourselves, and it isn't funny):

Acknowledgements

I would like to thank Marius Ostrowski and Katherine Stevenson for their contributions to this work – both were invaluable and I am very grateful. Also at Demos the advice, support and wisdom of David Goodhart, Claudia Wood, Duncan O’Leary, Ralph Scott, Sophie Duder, Josephine Brady and Rob Macpherson have been vital to this project. Thank you all.

This report is the final output of a long-running collaboration with Zurich [a large insurance company] – whose in-house experts have been generous with their time and insights.

And in case that wasn't clear, the foreword is co-written (or co-signed, at least) by the CEOs of Zurich UK General and Zurich UK Life.

"Obama and Romney remain silent on the biggest issue of all"

From The Guardian:

Despite hurricane Sandy, neither Obama nor Romney will speak about the soaring cost of pet insurance. The danger this poses is huge.

Here's a remarkable thing. Neither Mitt Romney nor Barack Obama – with the exception of one throwaway line each – have mentioned the soaring cost of pet insurance in the wake of Hurricane Sandy.

They are struck dumb. During a Romney rally in Virginia on Thursday, a protester held up a banner and shouted "What about Fido's medical premiums?". The candidate stood grinning and nodding as the crowd drowned out the heckler by chanting "USA! USA!". Romney paused, then resumed his speech as if nothing had happened. The poster the man held up? It said "End the silence!"

He then hastily scribbled another placard saying "No, ignore that last one, what I meant was 'Please remain silent while I heckle!'"

While other Democrats expound the urgent need to act to slash the cost of medical treatment for household pets, the man they support will not take up the call. Barack Obama, responding to his endorsement by the mayor of New York, mentioned "the threat to our children's four-legged friends" last week, threatening to introduce a government-sponsored insurance scheme to undercut them.

Mitt Romney was quick to promise that if elected he would abolish Obamanimalcare along with Obamacare. Otherwise, I have been able to find nothing; nor have the many people I have asked on Twitter. Something has gone horribly wrong.

There are several ways in which recent sharp increases in pet medical insurance are likely to have been exacerbated by Hurricane Sandy. Large insurance claims for reconstruction costs mean that insurance companies need to increase premiums across the board...

This might sound like the wisdom of hindsight. But in February the journal Actuaries' Monthly Digest published an article warning that hurricanes are likely to "increase insurance premiums". As storms intensify and the sea level rises, it predicted that hikes to pet medical premiums previously described as 100-year events would become between five and 30 times as frequent.

They own soggy land! Give them money!

Spotted by Mombers in The Telegraph:

Some new victims of flooding have seen premiums soar by up five times, while others have been told they must pay the first £5,000 of any future claim.

Following talks in 2008 between the Association of British Insurers and the government, insurers agreed to continue to provide cover to almost all homes provided improvements to flood defences were implemented, yet it was made clear that contracts would not be renewed beyond June 2013...

However, speaking in the House of Commons last week, Caroline Spelman, the Environment Secretary, reassured the flood victims that she was confident that a resolution was soon to be reached.

She said: "We are at an advanced stage in intensive and constructive negotiations with the insurance industry on alternative arrangements for when the statement of principles expires this time next year."

Hey, here's a cunning plan - seeing as having proper flood defences* often works out much cheaper than repairing individual buildings (which in turn works out cheaper than paying for insurance), why doesn't whoever it is in charge of flood defences work out what the cost of maintaining those flood defences is going to be and ask the owners of the affected land to chip into a common fund, pro rata to the value of the land and buildings which they own, to finance it? Sort of like Land Value Tax?

* Which is all mundane stuff like making sure rivers are dredged, drains are cleared etc, with the occasional spectacular sea wall or something.

Fun with JP Morgan

There are plenty of stories about JP Morgan bank losing £2 billion on some stupid bet, but the interesing question is, who took the other side? That money doesn't just disappear into thin air.

According to CNBC:

... as a trader for JPMorgan in London was selling piles of insurance on corporate debt, figuring that the economy was on the upswing, a mutual fund elsewhere at the bank was taking the other side of the bet.

The trade contributed to more than $2 billion in losses for JPMorgan, which disclosed the loss last week. The hedge funds, including Blue Mountain Capital and Blue Crest, have profited handsomely thus far as the markets move against JPMorgan.

But perhaps one of the most surprising takers of the JPMorgan trade was a mutual fund run out of a completely different part of the bank. The bank’s Strategic Income Opportunities Fund, which holds about $13 billion in client money, owns about $380 million worth of insurance identical to the kind the “London whale” was selling, according to regulatory filings and people with knowledge of the trade. It is unclear how much the fund made.

The good news is, whoever takes the winning side of the bet gets a big bonus and whoever takes the losing side gets a smaller bonus, or none at all. So it's in the interest of bank employees and hedge fund managers, taken collectively, to make as many stupendously large bets with other people's money as possible on anything that looks even vaguely plausible; whatever happens, their overall wealth increases and everybody else's overall wealth goes down. But I am sure that all these traders and experts are far too honourable (or too stupid) to ever cook up such a scheme.

Insurer's trade association: Your house has not burned down

From Sky News:

That smouldering wreck standing in your garden was not the result of a fire, an official trading body has ruled.

The Insurers Scams and Dissemblement Association said that towering flames and billowing smoke which neighbours report having seen emanating from the building, did not equate to a 'conflagration event' - essentially a fire. It means payments of fire insurance - an insurance mechanism to protect you in case your house burns down - totalling about £100,000 has not been triggered.

ISDA, which oversees complex forms of insurance, was asked by you to determine whether your house had burned down earlier in the week. A second question relating to the ruined contents was asked on Thursday morning, stepping up the pressure on ISDA's Determinations committee which made the ruling.

In response to both your questions, the 15 members voted unanimously that a "conflagration event" had not happened.Your house not on fire earlier in the week, source.

The news will delight other insurance companies who are desperate to avoid any mention of a fire. But ISDA noted that your garage was still smouldering and further questions relating to the presence of two fire engines in the middle of the road could be submitted. The body said that "a conflagration event could occur at a later date as further glowing embers come to light."

ISDA's review of your house followed the fire brigade's decision to hose several thousand gallons of water at it - based on their initial assessment that your house was indeed 'burning'. It was, the fire brigade said, a reaction to the sparks landing in your neighbour's garden and the pall of smoke spreading over the neighbourhood. ISDA's spokesman however suggested that most of the damage was actually caused by the fire brigade's over-application of water to the problem.

Your bank also moved to temporarily suspend the eligibility of your house as collateral for bank loans. It will start accepting it again once you have borrowed the money elsewhere to pay for it to be rebuilt, when measures to insure yourself against losses come into effect.