Sadly, Snowbird, your views on insurance are a tad simplistic, but certainly do reflect days gone by…
The concept of not insuring high risk health insurance pools is in most cases against state law, and more recently, against federal law. Now of course, left unregulated, markets will seek to be most profitable and not leave themselves exposed to such risks, but the government has said that is Not A Good Thing, and insurance needs to be available to all who can afford it (of course that concept is a good for a giggle).
Now if we want to talk about profits and the high cost of health insurance premiums, this is where we enter the vicious circle. Given that health insurance premiums are high, the people who are most likely to opt out and pay rent instead are those that most likely will not need it. We call these people the “good risk”. Funny thing about rating pools, if you take all the “good risk” out, you are left with the “bad risk” (older populations, populations with chronic conditions, smokers, drinkers, those with poor dietary habits). Add to this the Insurance Axiom that the older the insured population is, the sicker they get. Voila, upward spiral your premiums, because the American population is on a bell curve to “old” and the bulk of the uninsured are much more likely to be the good risk that reduces the average cost.
As for the quandary of life insurance payouts, that is going to be a interesting indeed. Most insurance (health and life) have an exclusion against “Acts of War”. Now to think that a insurer is NOT going to pay the life insurance policy on someone who died on that horrible day is to not have a good grasp of the situation. Yes, they will pay. They will pay because the people who make these decisions are the same as us - people who experienced a horrific event and will do anything in their power to make it better, even something as small as paying out the policy.
On a more practical level, they will do it, because if they did not pay out on policies, and the government didn’t actually order them to (unlikely), they would be run out of business by people refusing to continue to do business with them.
The real battle (for those who follow these things) will between the original insurer and their reinsurers. Yes Virginia, there is a Santa Claus and insurance companies have insurance… This battle will hinge on - of all things - whether we are in a “war” or not…
As for premiums going up - life and health, it is likely. Health insurance costs were spiraling out of control starting about 4 years ago, and since health insurers run a 12-18 month lag on this kind of data, they were really caught in a hole starting in 1999. They’ve been catching up ever since. Life has always been a very stable, competative business so that will probably not suffer as much. In either case, most states require that a certain percentage of every dollar be spent on claims (called a loss ratio), and some states are very stict in that regard. In any event, and ASA/FSA has to certify the past and expected loss ratio for the insurer before any rate increases can be approved.