AccountingInsurance

‘Assurance’ though a web app is not insurance

‘Assurance’ based on technology is nice but it does not include the financial risk shifting of insurance or the legal force of a contract.

I recall writing a blog post years ago about how health insurance was morphing into a web app. Consumers seemed unaware or unconcerned of the distinction between a legal contract that shifts financial risk and a modern convenience. We are seeing it happen more and more today.

Yesterday I purchased a Hum device from Verizon based on the salesperson’s statement that is had all the benefits of AAA roadside assistance and more. That turns out to be not true. An “app” is not the same as a contract to tow your vehicle for a specified cost if it breaks down, or bring gasoline if you run out.

If we look closely, we see that most health plans and most member benefit plans are actually a combination of some components of insurance, non-insured contracts and non-contractual assurance plans.  An insurance plan is a contract regulated by the state. Contractual non-insurance plans are the most common type of association benefit plan. AAA, On-Star and others rely on their brand image of offering assurance to members.. This blog post is simply meant to point out that few of us actually take notice of these differences. This issue and these distinctions will become increasingly important in coming years.

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