INSURANCE SCHEME: Don't think of profits alone

THERE are three government proposals to help the sick, aged and unemployed, and all of them seem unsound.

The schemes call for private insurance for medical care, private insurance for retirement and, the latest, private insurance for unemployment.

Do civil servants believe the insurance industry is qualified to be the people's caregiver, protector and sustainer?

Whatever the reasons and motivations, the government should not abdicate its responsibility to provide social welfare services.

Globally, the financial services industry is in turmoil as it comes under the scrutiny of regulators. In the United States, banks and their agents are accused of cheating sub-prime mortgage holders. Insurance firms experience volatile earnings despite investing in exotic derivatives.

Unfortunately, Malaysians may have nudged the government into the arms of private insurers because of their tendency to adopt Western values and mimic their practices.

When ministers are asked to explain the rationale behind any new policy proposal, their response is that this is done in the US, the United Kingdom and Australia.

Schemes similar to those proposed for Malaysia are entrenched in Western societies.

Americans are shackled by insurance and tycoon Warren Buffet has declared that his investments in the insurance industry is his biggest money-spinner.

Insurer AIG was the most prominent too-big-to-fail American financial services monster that was helped out by Washington.

There are two points here. Firstly, insurance companies are run for profit. They make tonnes of money for executives and investors and some have grown into behemoths.

Since insurance is all about money, insurers gain from the insured's loss.

Secondly, in the drive for profits, insurance companies are driven into deep holes, from where public money rescues them even as those insured suffer lower payouts.

There is ample statistical and anecdotal evidence supporting both these contentions, if only the above-mentioned civil servants and politicians who make decisions will go beyond relying on the advice of consultants and do their homework.

The cycle of corporate profiteering and collapse occurs in tandem with the boom-bust cycles of capitalist societies.

At the bust-end of the cycle, public money goes to bail out failed businesses and to stimulate the economy.

The lessons from the mistakes of American and European societies are there to be learnt, if local policymakers are humble and hardworking enough to seek knowledge themselves and not rely on commission agents masquerading as consultants.

There is another reason for this blinkered outlook among senior government servants with regard to social welfare services.

It is the assumption that government does not have the resources to provide long-term care for the sick, aged and unemployed among the people.

What, then, is the purpose of government? Is is just to facilitate the operations of businesses?

But the insurance industry cannot be the answer because it will not be accountable to its paymaster: the public.

It will give excuses later for the lack of payout or lack of cover. Private insurance option is not the answer because it creates a whole new bureaucracy that will eat up half of the profit made.

Private insurance is not the answer because it corrupts doctors and is the happy hunting ground of pharmaceutical companies.

Many of these weaknesses also exist in the public sector, but at least it is accountable to the people.

The government runs or oversees the running of huge financial operations for social welfare, including the Employees Provident Fund and Social Security Organisation.

There have been management weaknesses, but public pressure and government oversight have forced corrective measures.

The civil service has well-educated, innovative and capable people. It has the infrastructure to reach the masses.

Undertaking massive long-term social welfare programmes will be a challenge it can meet. It can hire talent, like actuaries, from outside.

Political leaders should not be easily seduced by businesses proffering ideas or services. We expect the government to look after our interests.