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Capitalism 101

Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.—John Maynard Keynes

You may recall my recent encounter with black ice and solid objects. I've written a bit more about it here.

What I didn't write about was dealing with my insurance company. Don't get me wrong they were helpful throughout and paid the claim promptly, and I consider the settlement fair.

But, oh yes there is always a but isn't there? When I called a towing company, I asked how much it would cost for the tow. They quoted $75.00 a reasonable price; they didn't know it would be covered by insurance. When they discovered they would be reimbursed by insurance they increased the amount to $115.00. I only became aware of it when they failed to charge my credit card the $75.00 I'd agreed to.

I stopped by the lot where my car had been towed to inquire and asked for a copy of the bill. They gave me the copy and informed me that the Insurance company had already paid it when they had it towed to the salvage yard. When I looked at the bill, I discovered the higher amount.

Later when I arrived at the insurance company for my settlement check I informed them of the increased charge for the towing. The fellow, not my agent didn't seem concerned. I told him I understood that it wasn't much but that unnecessary payments such as that resulted in higher premiums for everyone. He made sympathetic sounds, but it was clear he didn't care.

He did have my agent call, and he was just as much an apologist for the way they did things as his fellow employee. "It's not an unreasonable charge," he said. "It's standard in the industry ," he said. "It's only $40.00," he said. Perhaps I should have pushed harder, asked to speak with his boss, but would it have made a difference? It was only $40.00, right?



First off, let me say sorry to hear about what happened to you. If I was in your shoes I would raise hell and push harder. True it's not a lot of money, but it's about principal. Secondly, I am a libertarian free market capitalist and what happened to you shouldn't all be blamed on capitalism. Your case has more to do with fraud and a company taking advantage of you (from what I can gather from your story). Capitalism, at least to me, isn't perfect but I think it's the best way to have a healthy economy and for people to be prosperous. Maybe if you raise enough hell your insurance company may try to correct itself so things like this won't happen in the future. They may lose some business, but hey it's their own damn fault.

"Taking advantage" isn't part of capitalism?

You must have been educated at a school that taught the "free market" version of reality.


Norm only found out about it only by accident, and one shouldn't have to raise hell for companies to behave.

Right, I found out about it by accident.


Let me elaborate more: when I say "taking advantage" of in this particular case I mean the company provided him with a fair service, but they went beyond that and charged him more for what seems like an unfair extra charge. I don't know all the details, but it seems as if they were thinking, "Well, since we did this for him we could charge him for that. It's not much money so hopefully he won't make a big fuss." Since he didn't make a big fuss they got what they wanted out of him, which was an extra $40.

If I ran a business I would do it with as much honesty and integrity as I could so I would keep my customers. If I fuck it up whether it's on purpose or not and I do nothing to resolve the issue, then I should suffer the repercussions. I would understand why people wouldn't want my business. As I said before, capitalism isn't perfect, but it's the best way for people to have prosperity and freedom of choice in my opinion. Also, don't confuse capitalism with corporatism like Michael Moore does.

I think we now know why you don't own a business.

Very few businesses operate in the main street Icecream shop way that you describe. Most only deal with other businesses and profit by gaming the system as best they can.

Most towing companies only really serve the landlords, governments, and insurance companies that empower them to tow cars. Car owners aren't really thier concern.

"Well, since we did this for him we could charge him for that. It's not much money so hopefully he won't make a big fuss."

I think the company felt more that since Norm wouldn't be paying, but his insurance company would cover it, Norm wouldn't make a fuss. Norm's point was that this price gouging hurts the industry, and by extension those who pay into the industry. From the libertarian point of view, there would have been a more fair deal without the middle men/company.

After dealing with business to business transactions, I might be able to shed some light on the reason for the price increase. I'm not necessarily defending a $40 increase, but then again I don't know what they deal with.

When an end-customer pays you, the money is in the bank immediately (or well, the next day). They may or may not want a receipt.

When dealing with another business, you don't always know when you will get paid. Or sometimes if - the number of businesses run by less than scrupulous folk makes up a larger than normal fraction of the population.

It was fraud on the part of the towing company and the complicity of the insurance company. The towing company could have billed my credit card even before they picked up the car. They chose not to, I assume since they knew that if the insurance company would pay they could up the price. The insurance company was complicit in the fraud by allowing them to charge a higher price than they'd quoted me, though they probably didn't know I'd negotiated a deal for $75.00. But they knew once I told them and chose to do nothing. Capitalism often brings out the worst in people. It's a lot more common than most people realize. I once double paid a company I was doing business with. I discovered the over payment six months later reviewing my expenses. The company had never called never sent me a statement showing the overpayment. I'm certain If I hadn't discovered the error they would still have my money. This wasn't just a few dollars, It was over $600.00. I wish it was just the one bad apple, but believe such behavior is rampant in this country.

norm, you wrote this yourself! takes me back...

nice piece. as usual i agree with your sentiments but not your understanding of human realpolitik. (whether capitalist, socialist, nationalist, fascist, whatever.)

looks to me like you were dealing (as per, uh, life as a human in any system) with a couple of gangster outfits. they are involved with hardnosed business dealings with each other and your little issue meant almost literally nothing to them. they worked it out between themselves without your input and saved you 75 bucks, so they figured you wouldn't complain. when you did, they treated you decently (and bemusedly, i'm sure) and let you go home to write a nice piece for your blog. you should be thrilled.

I think you're wrong on this one. It is the mindset that is worrisome. Most people's actions differ depending on the entity they are dealing with. It is bothersome that this should be the case, but people's actions are not independent of the parties involved, and I think one of the points is society might be just a little better if this weren't true. Health care costs in this country are out of control, and it is due to behavior such as Norm describes. The invisible hand of the free market is supposed to be at work, but everyone is blind to the fact that people are more willing to exploit others if that interaction goes beyond a personal level. Put another way, too many are indifferent about overcharging in health care, or the government paying hundreds for a hammer.

Maybe my insurance company is the exception, but when I get the statements from health care providers, the charges are always adjusted downward in a very significant way - presumably because of negotiated contracts between the insurance company and the health care provider.

I think this is totally unfair to the uninsured - who, if they were charged the same as my insurance company, might not mind paying out of pocket for services.

like i said, i agree with norm's and your sentiments about the "mindset". i just don't think it's exclusive to capitalism and norm, in fact, got off pretty lightly (made out like a bandit) considering what i consider to be the possibilities of getting in the middle of gang business- in any political/economic system. he's basically saying " i am healthy and happy and free and 75 bucks richer than i thought i would be upon throwing my case on the mercy of the local gangsters. but i'm very worried about how this kind of "mindset" could affect all of us, somewhere down the road, in the big picture."

i just wanted to point out that that is a very privelaged position to be in vis-a-vis political/economic systems worldwide and he should be grateful. this doesn't make his sentimentally-based point any less valid, of course. i just hope he's counting his blessings. :)

I'm not $75.00 dollars richer. The insurance company was under contract to reimburse me for the towing cost. They would have paid me the $75.00 and not the $115.00 they paid the towing company. In a capitalist system they should want to save the $40.00 it would have increased their profits by that amount. The story simply illustrates the weakness of the system, and that it doesn't work as advertised.

right, of course, sorry, i get carried away with the rhetoric.

I'm not naïve, I deal with "the suits" every day. I know how the system works and what to expect. I told the story to help dispel the belief that capitalism is a self-correcting marvel. Unregulated capitalism is a nightmare.

The problem I recounted was about the greed and fraudulent behavior of the towing company and the laziness of the insurance company employees in not giving a damn about saving their company and indirectly their customers money.

Your nice comments about how much more you enjoy posts in which I actually write a bit is noted, though whether it will encourage me to get off my ass and do more of the same is problematic. In my own way I'm as lazy as the insurance company employees, though I don't have stockholders and you'd hardly be justified in asking for refund for the time you spend here. Is this where I put the smiley face?

yup, that's where you put it. :) i'd be very happy if you wrote more, but running the blog, even with your new delegation of authority probably takes up enough of your time, i don't know. probably a lot of what you would write, i wouldn't have much to say about, in spite of my enjoyment in reading it, because we have such different lives. i'd still like to see more of it- i've certainly given you a pretty good picture of how i live over the years. (insert smiley face)

I thought writing less here would give me time to write more at the other place, but it hasn't worked out that way. My lazy genes must be dominant. I have read a lot more since I cut back. I've read over thirty books already this year, and enjoyed every one. I'm human and like positive feedback as much as the next fellow. Who knows I may consume an energy drink one day and go on a writing binge both here and there.

You should really do a book of the month club or something

It certainly gets more comments than simple links to interesting articles.

I don't blame the tow company for charging extra $$. They must spend time filling out forms and waiting for compensation. If there's a typo on their claim form, or an incorrect line item they may have to wait months for reimbursement for services. Insurance companies can be a nightmare and they can require several hours of work to get a single claim paid. The insurance companies created the system and the problem, not the tow truck company.

You're missing the point. They could have had their money even before they towed the car. They agreed to $75.00 for towing, don't you think they should keep their word and accept that amount. If they wanted more than $75.00 they could have quoted me a higher rate and I could have decided whether to accept it or not. They were dishonest and you condone it. Shame on you.


I'm not condoning dishonesty, and why would you accuse me of that? Shame on me? Lighten up.

I don't blame the tow company for charging extra $$. The insurance companies created the system and the problem, not the tow truck company.

It sounds like you're condoning the overcharge. You excuse their behavior. Furthermore it seems to me that the towing company is more culpable than the insurance company. They could have told the insurance company they'd agreed to a price of $75.00 I suppose condone is too strong we could just say you are apologizing for their bad behavior, and revise the shame on you to tsk, tsk.


Fair enough.

I'm curious if you'd be equally upset if the towing company charged your insurance company $40 less than they originally quoted you?

Good point.

Really? Why would anyone care if they reduced the price. Unless it was evidence that they had a deal to charge less with the big company, but upcharged the individual.

Would that upset you? Why or why not?

I suppose I might email the better business bureau if I found out their advertized price was different for some people. Probably not though.

No one is ever really going to get upset about a deal.

The objection here is just the upcharge after services were performed.

I am sure the Insuarance companies have negotiated the extortionists down from the random charges they used to get.

I am curious if there is any extra paperwork/waits when they deal with insurance.

I don't see how that has to do with anything though. The point was that ultimately all that nickel-and-diming has to be accounted for, and insurance customers might end up paying for unnecessary stuff. In your case you know exactly where the money is coming from, and know no one else will pay for your being scammed. It's very clear to you, and you'll make a much more informed choice next time you'll consider dealing with that company.

Love the JM Keynes quote. With respect, I see an alternative interpretation of the insurance / towing thing.

One price was provided in a specific transaction between YOU and the TOW company. A second price was provided in a specific transaction between the INSURANCE company and the TOW company.

Since it was, in fact, the Insurance company that executed the transaction (by paying the tow guy), what you or the tow company might or might not have actualized had they taken the transaction to completion by charging your card, is essentially irrelevant.

That transaction never happened. It was at most, naught but potential.

You seem to assume that what YOU thought a "Fair Price" was the ONLY 'fair price" for the given service. But there's no rule that everyone should get the same price for a service! The guy got a better price for the towing service from someone else.

You don't know how he runs his business. Maybe he gave you a better price because he wanted the 'word of mouth' good words so wrote down some of his actual costs as 'good will' or 'advertising'.

Everyone takes a transaction fee. That's how a service economy works. You negotiate transactions you're a party to, not transactions you are not. A "Fair Price" is anything above cost that the market will bear.

Maybe that guy at the towing service makes his payroll on a regular price from Insurance company. Maybe he was tryin' to give ya a break, saw in your common humanity, another guy just survived a scary accident. The local Physical Therapist gave me a 25% discount off what he would charge if Insurance covered it. I know that he sees this as "giving a break to folks without insurance".

I'm pretty sure that if he just reduced all his fees by that amount, he'd be having trouble paying the rent.

I don't see this as fraudulent, for no rules determine how a product or service is priced unless that service is regulated.

And, one might add, the genius of THE PHONE COMPANY was not that cool invention in Bell's lab. It was in recognizing that REGULATION was their FRIEND. No Representative nor Senator would long refuse the sweet blandishments of 'assistance' in drafting these complex and tedious rules for a 'technically very complex' system. Heck, back in the days, they didn't even have to pay the congressmen much in campaign contributions, they just offered help with the scut work of writing the fine print. For years MCI was known as the communications company with one tower and 3 dozen lawyers as most all obstacles to doing business were in Washington regulations drafted by ATT.

That's the true bummer of the whole deal. The only thing people have at their disposal to put controls on the more rapcious aspects of unfettered capitalists, are regulation. BUT, who amongst us can read the fine print anymore, much less stand against those who would, with sleight of hand, slip by one loophole after another to the advantage of their industry or company. And, of course, every regulatory step takes it's own transaction fees.

Damn. Now you've made me ticked off too. I'm goin' out to feed the cows.

The towing company will get some word of mouth promotion, but it won't be positive.

I don't see the transaction between the towing company and my insurance company as a separate transaction. The insurance company was making the payment in my behalf. They have no legal obligation to pay the towing company in any capacity other than through their contractual obligation with me.

I was discussing the issue with a friend who has relatives that work for another automobile insurance company, and found out that this sort of thing goes on all the time. Did you know that if you go to one of those places to get your windshield fixed, that the price they quote you only applies if you have no insurance. If it's covered by insurance the price goes up. They don't disclose that as far as I know. It should be made clear to the consumer.

I'd love the job as consumer czar with unlimited powers. I'd need full time bodyguards, but the people would love me.

You're right too many regulations particularly if they're detailed sometimes cost more than they save.

Hey, met with some of the B clan the other day, D and J, neither had heard Grandad's black ice story. They loved it. Thanks so much for sharing it.

I wouldn't complain if they weren't violating some law or involved in some unethical practice. If you're asking if I've ever been a greedy fuck, the answer is yes though it is not something I'm proud of, nor do I excuse it in myself with something about just being human. I work hard at living up to my principles.

Okay - how about this? I had to go to the doctor four times in a month. Before they would do anything, of course, they wanted to know what insurance I had. I gave them my work insurance. They said that's great, then you will only owe 20%. (For these purposes, let's say each visit cost $100 so the math is easy.) I said I also have a second insurance that I pay for myself, could I bill them the remaining 20%? They said they would do it directly so I said fine. Then, when I started getting statements back from the second insurance, I saw that they also were paying 80% directly to the doctor so the doctor was getting $160 per visit instead of $100. I asked around and found out this was not uncommon (two insurances both paying 80% per their contracts) and that I could have the extra money but would have to report it as income. I called up the doctor for the $60 over per visit. They said, since each visit was being paid separately and they were several weeks behind on the payment, first they would get the full $400 (4 visits @ $100) and then I would get the remainder so, I kind of forgot for a while. Then, when I saw they had been completely paid up $640 (4 X 160), I called to get the overage. The accountant (wife of the doctor) told me, actually, I was not entitled to any money. What they did was discount their rates so that people wouldn't have to pay as much for their 20% deductible but, since I had two insurances (one that I paid a lot for out of pocket BTW) they were charging me their real rate of $160 a visit.
What do you think of that?

I say they're greedy crooked bastards, but then that's just me, a predictable critic of the capitalist swine.

i told them it seemed illegal and that the insurance company should kno about it. I didn't do anything though - I just stopped going there. Now I feel better because it seems like no one would've cared even if I'd taken the time to report them....

How about my case. I go to the doctor 4 times a month. I am prescribed medication for diabetes, hypertension and high cholesterol. I am also given an annual retinal screening (because of diabetes) and am asked to attend a specialist eye clinic because of potential problems. Because I am over 60 and living in a reasonably civilised state I pay nothing for the services, having paid a contribution for National Health costs from my salary up to the age of 60. I can, if I wish, pay for private medical insurance or simply buy the services for cash, but I am happy with the system I have. No insurance middle men creaming off their profits, no cash incentive for the doctor to advise more and expensive treatments and no bankruptcies in the country because of medical bills.

Four times a month!?!? That's terrible!

I think they rely on the fact that we are unlikely to take any action since it doesn't affect us directly.

oh you are SO clever. well done. :) kinda makes evolutionary sense, dunnit? unless...we've evolved beyond self-interest. going to get my abacus.

That's not to say it isn't in our self interest, just that we're so fucking dumb or lazy that we can't be bothered unless the effect is immediate.

We overeat, we smoke, we don't exercise because the effects aren't immediate.

Perhaps I should have said that if we aren't affected immediately we don't do anything.

But knowing what a clever young man you are I didn't think it necessary, and now that I learn you have an abacus I'm even more flummoxed.

We overeat, we smoke, we don't exercise because the effects aren't immediate.

i beg to clarify. the effects certainly ARE immediate. just not the negative ones.

It did affect me directly - I would've gotten the money (and it was somewhere around $700 if I remember right) but, I had so much going on at the time - getting ready to move, finishing up one job for another...sometimes, you just don't have the time to put into it. I thought I would deal with it later and just never did but it bugged me....

As other people have mentioned, no it's not uncommon for businesses to charge more to an insurance company than to a patient/customer. I worked in medical offices during college, and was exposed to the billing process.

I always assumed this was because the income made from charging insurance companies was more secure than that coming from patients or customers themselves. In turn, this would cost the insurance customer more because of the increased coverage rates.

Even though hospitals charge bulk prices to insurance companies, it also has been more or less known that doctors will requests more tests and procedures (the more expensive the better) so they can charge more. I would have sided with the argument that these businesses are charging more for added paperwork, etc. Kinda how the banks say they need to charge different fees if overdraft fees were to be taken off. I can see the services offered from a bank in this case, but I don't know if I can say the same for the smaller towing business or doctor. They're not available 24/7, have online websites and atms to maintain, or have to pay rent for hundreds of facilities and employees. I do suspect that they indirectly cheat and harm the consumer, as well as make a complicated mess out of the system. My guess is that they do it because they know they can get away with it legally. Unless I'm missing something from this picture, I think this insidious practice should be regulated.

I find it hard to believe that an insurance company would take the time to negotiate the individual cost of your tow. It seems much more consistent with my experience that prices for insured services are negotiated on regular intervals, not as each event takes place. Maybe none of the players mentioned in you story would care about the price they quoted you because the time and place for negotiating the cost is not based on your event.

And the insurance company is not working on your behalf, they are working on their behalf. As soon as you pass the ball to the insurance company, I don't see any ethical or legal reason why you are still in the driving seat for negotiating costs.

There are too many reasonable explanations for why the price charged to the insurance company could be considered legitimate and ethical. Without knowing the details of how pricing is negotiated between your towing company and your insurance company for a tow of your type (distance, difficulty, etc...), I find it hard to get upset with anything in the story.

And the insurance company is not working on your behalf, they are working on their behalf.

I disagree, they have a contract with me not with the towing company. It seems I should expect that they get me the best deal possible, and since in this case I've done their work for them they should have thanked me. There may not be a legal responsibility but at the least an ethical one.

If your insurance contract called for them to pay say $75.00 for local towing and you had negotiated a $75.00 price with a towing company and then the insurance company paid them $115.00 and billed you for the difference would that be okay.

The contract with you is not a contract for you to make business decisions for the insurance company. It's a contract that when you need them, they will provide a service. You told the insurance company you needed them... they said that your contract with them will cover the cost of towing - that's the end of your contract with the insurance company. If you wanted to be involved in the price negotiations for that service, then you should have paid the bill and gone through the process of reimbursement that your contract with the insurance company details. As soon as you gave the OK for the insurance company to deal with the cost of towing, the negotiations were then solely between those two parties because you are not directly involved in paying that cost at that point. Your hypothetical question to me is one that involves me directly paying the bill in some way, and then you would have a point. But given the situation, the only gripe I can see is that you are a better negotiator that the person(s) the insurance company hired to make the deal with the towing company. For that I would call into question the ability of an insurance company that would hire someone not as good as you to negotiate their deals.

IF you were involved with a co-pay or other direct impact from the cost of the towing bill, I would think you have a good point, but otherwise, I think you are making a mountain out of a mole hill. You did the right thing in bringing up the discrepancy, but conclusions about the ethical nature of the actions of the other parties seem premature given the number of unknown variables.

Just so happens I've been watching some online classes on ethics and morals lately, so I'm feeling overly combative. :)

billed you for the difference would that be okay.

are you crazy? that's the one outcome that WOULDN'T be ok with me, other than you being treated badly by the pawns (which didn't happen).


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