Why life and health insurance are ponzi schemes.

A Ponzi scheme is best summed up in the phrase “rob Peter to pay Paul,” meaning: use one investor’s money to pay the returns of another investor. The money in a Ponzi scheme flows through a central agent who moves it around creating the illusion of earnings. Ponzi schemes are successful because investors typically continue to reinvest their earnings into the scam. This constant reinvestment of securities causes a financial bubble to grow. Inevitably, the bubble reaches critical mass and implodes.

Life and Health Insurance is truly a Ponzi scheme in the classic sense, where the first policy holders are paid unusually high benefits mainly out of the funds received from the contributions of later policy holders. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going. It is for this reason that Life and Health Insurance policies need you to commit to the scheme with monthly payments, payments that they expect you to make for life.

A Ponzi scheme is closely related to a pyramid because it revolves around continuous recruiting, but in a Ponzi scheme the promoter (insurance broker) has no product to sell and pays no commission to investors (policy holders) who recruit new “policy holding members”. Instead, the promoter (insurer) collects payments from an individual, promising them a very high rate of return (life and health benefits) on a very small investment.

In the typical Ponzi scheme, there is no real investment opportunity, and the promoter (insurer) just uses the money from new recruits (new life and health insurance policy holders) to pay obligations owed to existing longer-standing members of the program. In English, there is an expression that nicely summarizes this scheme: It’s called “stealing from Peter to pay Paul.” In fact they take monthly life and health insurance policy premiums from you to pay benefits to any number of other existing and new life and health insurance policy holders.

Ponzi schemes are quite seductive because they offer to deliver a high rate of return to a few early investors for a short period of time. Yet, Ponzi schemes are illegal because they inevitably must fall apart. No program can recruit new members forever. Every Ponzi scheme collapses because it cannot expand beyond the size of the earth’s population. When the scheme collapses, most investors (policy holders) find themselves at the bottom, unable to recoup their losses.

A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors. Life and Health Insurance Policies are exactly the same type of fraudulent investment because it too pays benefits to separate investors (the insured) from their own money and from money contributed by subsequent policy holders. Ask any group life or disability insurance recipients how many of them feel secure based on the minuscule benefits they are receiving.

This type of insurance Ponzi Scheme targets the middle class. This type of fraud is a Communistic spreading of wealth from the middle class to the poor, not from the wealthy to the poor. Policy contributions have always been cut off at a level of income associated with the middle class, leaving the wealthy free of liability on most of their income because life and disability insurance benefits are capped, presumably making life and disability insurance deductions, above the designated maximum level of income, unfair. In the end, the poor are still poor, the middle class has now joined the ranks of the poor, and the wealthy are now fabulously wealthy, which results are characteristic of any Communistic or Fascistic form of governance. The Life and Disability Insurance Communistic, Fascistic mantra has been: Give us your money and we will take care of you from the cradle to the grave.

Very few people come to their senses and see insurance brokers for what they truly are – criminals. Seriously, how can you personally benefit from a life insurance policy, a policy that you’ve been duped into paying into for decades, when you are dead? You will never know if your beneficiary will even receive the money owed you from your policy. You will never know if the people you were looking out for will actually be taken care of, as stipulated by your insurance broker.

The majority of policy claims never get the full stated value for the paid into policy. The insurance companies always decides in favor of their own survival and will use any and all excuses to not pay what is owed. Hurricane Katrina is the perfect example of insurance fraud by the insurance companies. Insurance companies like Allstate Insurance simply refused to pay their policy holders’ claims – both life and property claims. To this day, many insurance policy holders have still not been paid a dime.

Ponzi schemes continue to plague us and challenges the law enforcement community. In the U.S., the Federal Trade Commission is just one among many agencies that have the authority to file suit to stop this type of fraud. The Securities and Exchange Commission also pursues these schemes, obtaining injunctions against so-called “financial distribution networks” which in fact sell unregistered “securities.” The U.S. Department of Justice, in collaboration with investigative agencies like the FBI and the U.S. Postal Inspection Service, prosecutes ponzi schemes criminally for mail fraud, securities fraud, tax fraud, and money laundering.

Sen. Lindsey Graham (R-S.C.) forcefully criticized Obama’s health care reform bill in an appearance on NBC’s “Meet the Press”. Graham compared it to a “Ponzi scheme”: “You– you take $570 billion out of Medicare to pay for the health care bill. Then you’re using that same $570 to say it lowers the growth of Medicare over time,” Graham said. He added: “So, it is a house of cards. It is a Ponzi scheme of the first order. It’s gonna blow up the deficit. It’s gonna affect every business, every family in this country…”

Calling the Senate health care bill a package that Ponzi schemer “Bernie Madoff would really envy,” Republican Sen. Jon Kyl stated that the legislation is long on promises but short on accounting. “Any private or any publicly traded business that claimed it was making a profit because it booked revenue over 10 years but only booked expenses over six years would wind up in jail. That’s what this bill does, that’s just many of the frauds and hat tricks in this bill,” Kyl said on “Fox News Sunday.”

Don’t want to be a victim of insurer fraud. If you really want to be prepared for a health emergency or if you want to leave some money behind for your love ones when you pass on, doesn’t it make more sense to put money aside every week than to simply give your hard earned money away to the insurance broker crooks?  Put a little bit of your money away in a cookie jar or a home safe or a suitcase every week instead of giving it to an insurance ponzi schemer.  A senior citizen who is required to pay $100 a month for a very small life insurance policy benefit would be a lot better off putting that $100 away in a home safe.  After 1 year that senior citizen will have saved $1200.  In five year it will be $6000.  In 10 years it will be $12,000.  In 20 years it will be $24,000.  Money that is 100% yours.  Money that is there exactly when you need it.  Money that you know your children will get immediately upon you death.

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