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HOW THE LAW OF UNINTENDED CONSEQUENCES COSTS THE INSURANCE INDUSTRY  

Neither the courts nor the governmental agencies seem to be aware that  in a modern, capitalistic society, insurance is a necessity. No prudent  person would take the risk of starting a business, buying a home, or  driving a car without insurance. The risk of losing everything would be  too great. By using insurance to spread the risk, taking the risk to  start a business, buy a home, or drive a car becomes possible.Insurance  has existed since a group of Sumerian farmers, more than 5,000 years  ago, scratched an agreement on a clay tablet that if one of their number  lost his crop to storms, the others would pay part of their earnings to  the one damaged. Over the eons, insurance has become more  sophisticated, but the deal is essentially the same. An insurer, whether  an individual or a corporate entity, takes contributions (premiums)  from many and holds the money to pay those few who lose their property  from some calamity, like fire. The agreement, a written contract to pay  indemnity to another in case a certain problem, calamity, or damage that  is fortuitous, that is that occurs by accident, is called insurance.In a  modern industrial society, almost everyone is involved in or with the  business of insurance. They insure against the risk of becoming ill,  losing a car in an accident, losing business due to fire, becoming  disabled, losing their life, losing a home due to flood or earthquake,  or being sued for accidentally causing injury to another. The insurers,  insureds, or people damaged by those insured are dependent on one  another.In a country where human interactions are governed solely by the  terms of written contracts, insurance would be a simple means of  spreading risk and providing indemnity based on the promises made by the  contract of insurance. But, in this the real world, insurance contracts  are controlled by statutes enacted to ostensibly protect the consumer  of insurance, regulations imposing obligations on the conduct of  insurers and the decisions of trial and appellate courts interpreting  insurance contracts.A simple insurance contract between two parties  might say: \\u201cI insure you against the risk of loss of your engagement  ring valued at $15,000 by all risks of direct physical loss except wear  and tear for a premium paid by you of $15.00.\\u201d Anyone who could read  would understand that contract. If something happens to damage, destroy  or lose the ring the insurer will pay you $15,000.00. However, insurers  cannot write such a simple contract because the state requires many  terms and conditions that complicate the policy wording and confuse the  common person. The states and courts that did so had nothing but good  intentions to protect the consumer against the insurer and control the  actions of the insurer.