For decades, we’ve approached insurance with two guiding principles that quietly undermine the entire system: find the cheapest policy possible, and then get every penny out of it however you can. We shop for insurance policies based almost exclusively on price and even strip coverage down if we can.
Then, once the policy is in force, we treat it like a prepaid expense account. Something breaks? File a claim. Something leaks? Call the carrier. After all, we paid for it. This mindset may feel rational at the individual level, but collectively it has pushed insurance markets to the brink.
Insurance was never designed to be the cheapest product on the shelf, nor was it intended to be used frequently. Historically, it existed to protect people from losses they could not survive financially. A house fire. A serious car accident. A liability claim that could wipe us out financially. Insurance was the safety net; quiet, boring and hopefully never needed, but essential when disaster struck.
Somewhere along the way, that understanding eroded. Consumers demanded more, and the free market responded with expanding coverage, vanishing deductibles, and frictionless claims filing. At the same time, consumers were trained by advertising, comparison sites, and the habit that shopping almost exclusively on price was a reasonable way to go.
The result is a destructive combination of stripped-down insurance policies paired with an expectation of frequent payouts. We’ve turned insurance into something resembling a subscription service: pay monthly, use often, complain loudly when it costs more.
The consequences are no longer theoretical. When insurers are inundated with claims for minor losses like leaking sinks, cosmetic water damage, parking-lot scratches, and the like, they do what any math-driven business must do. They raise premiums. They tighten underwriting. They add exclusions. And in markets where losses pile up fastest, they leave. Look at what we have been seeing here in California for the last decade.
Here in California, we have seen entire communities destroyed. Families displaced overnight. Homes, memories and financial stability wiped out in hours. That is the type of loss insurance was built to address.
A slow drip under the kitchen sink that damaged a cabinet is unfortunate, but it is not a financial apocalypse. A tiny scratch on a car door is irritating, not life-altering. Treating these events as insurance claims blurs the line between inconvenience and catastrophe and the system breaks under that weight.
A necessary part of this reset is rethinking deductibles. Meaningful deductibles. Not $500 or $1,000, but $10,000 on a home policy and $5,000 on an auto policy. That suggestion often triggers immediate pushback: “I can’t afford that out of pocket.” But here’s the uncomfortable truth: if you can’t afford the deductible, you’re already paying for it anyway. You’re just paying it slowly, monthly, invisibly, through higher premiums year after year.
Higher claim frequency costs insurers money. Either you pay higher premiums so the insurer absorbs small losses, or you pay lower premiums and cover the small stuff. One way or another, the cost shows up. The difference is behavior. High premiums and low deductibles encourage claims. Lower premiums and higher deductibles encourage prevention, caution, and restraint. One model rewards looking for ways to get your money back. The other rewards avoiding losses altogether.
This ties directly into a broader cultural shift we desperately need: moving away from cheapest insurance plus maximum extraction toward appropriate coverage at a price appropriate for individual circumstances. Cheap insurance is often expensive in the long run. It can mean inadequate limits, poor claims handling, limited options at renewal, or no coverage at all when you actually need it. The goal should not be to pay the least today and file claims tomorrow, but to secure adequate coverage, manage risk thoughtfully, and keep premiums stable over time by avoiding losses whenever possible.
I once asked a group of people whether they’d rather have a covered insurance claim or simply never have the loss. More than a few chose the claim. That answer says everything. Somewhere we decided that a payout is a win. We forgot that loss is bad, that it is a loss of something. In reality, a claim, even a covered one, comes with stress, disruption, potential non-renewal, and long-term premium consequences. The real win is never having a loss or needing to file the claim at all.
None of this is about denying legitimate claims or shaming people for using coverage when disaster strikes. Insurance should absolutely be there for the wildfire, the major accident, the lawsuit, the life-altering event. But if we want it to remain available, affordable, and functional, we have to stop treating it like a piggy bank and start respecting it as a safety net.
The healthiest insurance outcome is boring: a well-designed policy, priced fairly, rarely used, quietly standing by. If we can shift our mindset from how cheap can I get it and how much can I extract to how do I protect myself and avoid losses, we give ourselves the best chance of having real protection when it matters most.
Karl Susman owns a Los Angeles-based insurance agency and is a frequent guest speaker on radio and in other media about the California insurance industry.
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