BREAKING NEWS: ‘A car has been hit in Shropshire by a train on a level crossing. Our thoughts go out to those hurt and their families. We are trying to ascertain who’s to blame.’
This typical news feature demonstrates that, in today’s crazed world of a stampede of avaricious solicitors ready to sue anyone where a payment is possible, the balance between a caring society and individual responsibility is blurring.
Perhaps the best known is the situation concerning Payment Protection Insurance (PPI). This has been sold by intermediaries to customers purchasing goods and being offered insurance against non-repayment in the event of sickness and unemployment. British banks are paying out billions for mis-selling once the financial regulator ruled against them.
What do you think?
FOR: Quite right. Those nasty avaricious bankers screwing the poor public so they can pay themselves huge bonuses.
AGAINST: Nonsense. If the consumer can’t be bothered to check what they have agreed to, they deserve to be financially penalised.
Do you know who actually pays out the compensation? You do. The majority of individual wealth is held in vast investment houses and, in particular, pension funds. The managers of these funds invest in ‘safe’ companies which pay out a dividend. The most popular are the banks. The dividend paid each year is what pays your pension. Bank profits have been hit hard by PPI pay-outs and, as a result, you may have received a smaller pension.
So, when that nice chap from Gladstone Brookes, comes on your TV screen urging you to make a claim, what he doesn’t say (because he’s a small-time solicitor and doesn’t understand it) is that it may be your pension fund that, indirectly, makes the pay-out.
This is where Mr Moan becomes even more boring. It’s all about ‘moral hazard’.
This concept originated in the last century in the insurance industry. It was discovered that individuals increased their exposure to risk when insured because someone else would bear the cost. The obvious example is house insurance. The industry discovered home-owners were more relaxed about security because they were covered by their insurance. The irony was that the consequence was higher pay-outs and thus higher premiums.
These days economists make intellectual efforts to relate the concept of ‘moral hazard’ to modern society. In its present day form it tends to try to address the issue of fraudulent claims. The recent high-profile cases of people making false claims against their holiday travel company because of alleged (and fraudulent) sickness abroad, is one example.
Do you know why vets are so reluctant to put your poorly dog or cat to sleep? It’s because there has been a growing number of incidences where an owner, after a loss, will search the internet for animal treatments and sue the vet for not trying a particular remedy that could have extended their pet’s life.
Of course, the irony is that at the end of the day, we all pay more for our insurances or pet cover because of the actions of a small number of unscrupulous solicitors and avaricious and extremely duplicitous claimants. And that’s the blame culture to blame!
‘Moral hazard’ or modern society?
Last week’s ‘Moan’ suggested that the NHS is in crisis. New statistics just published show that 4.3 million people are waiting for treatment. 200,000 patients have been waiting for at least six months for routine surgery, the highest for ten years. More than 3,000 have been waiting for over a year for routine surgery (hip replacements and so on.)
The Health Secretary, Jeremy Hunt, is promoted to Foreign Secretary. We can only hope that it does not interfere with his building up of a property empire worth millions.