Free Market Regulators: MIB

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We’ve all often heard that without government regulating everything in our lives that the greedy businessmen of the world would basically run roughshod over the public and screw everyone and everything in sight.  I don’t believe that would happen in laissez faire-land, basically because people do not want it to happen.  So Rollo and I decided to start a segment we’ll do every so often where we point out those private companies that regulate the markets on their own without government intervention.

The first company is MIB Group, Inc., formerly the Medical Information Bureau.  The MIB isn’t a large government agency fighting aliens, it’s an organization created to help prevent insurance fraud and keep premiums lower for everyone.  Most people probably have no idea this organization exists, but I’m familiar with what they do since I’ve worked in life insurance for the past 6 years.

The MIB is a member-owned, not-for-profit corporation.  Just about every reputable insurance company in the United States and Canada are MIB members.  I’m really not sure of any insurance carriers that are not members, but I’m sure there are a few.  Whenever anyone applies for individually underwritten life, disability income, health, long-term care, or critical illness insurance, a report is sent to the MIB.  The report contains a code that identifies anything over the past 7 years that might cause a decline or a higher rate class.  After 7 years, anything in your MIB report is permanently deleted.  There might be a number that identifies that you’re overweight, have high cholesterol, high blood pressure, or diabetes among others.  They don’t have your actual weight or blood pressure, just a code that says it is high.  Just because you have an MIB file, doesn’t mean you’re automatically a decline, it just makes insurance carriers aware of any discrepancies on future insurance applications.

This might sound intrusive at first, but there is a need for this service.  First of all, whenever you apply for insurance you sign a form authorizing the company to give information to the MIB. Secondly, you can request a free copy of your MIB report at any time.  But the need comes in for sound underwriting.  You might think that if Insurance Company X underwrites your application, finds out you’re diabetic, and declines or rates your application, that it would be in their interest to let you lie on a future application to Insurance Company Y so they might take on the underpriced risk.  But this doesn’t happen.  Insurance companies understand mistakes happen in underwriting, they all want to properly underwrite risk, so they all joined together to make sure information is consistent.  With accurate, consistent underwriting, the companies have the proper claims experience and actuaries are able to properly price the policies better so that the insureds are paying the lowest amount possible.  If you are able to lie on your application they would give you a lower rate than you should pay, their claims experience would be higher than expected and premiums would have to go up for everyone.

It is virtually impossible to get around the MIB.  Most insurance agents express the importance of being honest on the application to their clients because inconsistencies on the application can kill your chances at getting insurance.  The company serves its purpose and really does an excellent job.  I have worked for one of the big bad corporate insurance wholesalers, and there is absolutely no pull or influence over the MIB, in other words, it is extremely accurate.  There is no doubt we would see more organizations like this in a completely free market because it is in everyone’s best interest to have honest, accurate information.

God Bless Freedom, Liberty, and Personal Property,

Slappy Jones II