Ucodegen: Back in the day, I used to be a CFO for an insurance brokerage. During one of my many bouts of attempting to contain costs, I did a study for the five major California offices (SD, OC, LA, SF and Sacto) on warranty programs for office automation equipment (printers, faxes, copiers, etc).

We were spending over a hundred thousand per year on warranty programs for the various machines and I wanted to see what would happen if, rather than paying the warranty amount, I opted only to pay on a per call service basis.

The difference was shocking. In the offices I was directly responsible for (San Diego and Orange County), we went from spending over $20,000 per year on warranties to spending less than a $1,000 per year on a per call service basis.

Even when I added in the cost of servicing aging machines, it was still far cheaper and by an order of magnitude. The warranty programs were obviously a form of insurance, but, up until that point, I had never sat down and considered the true “cost” of maintaining that insurance. I would wager that health insurance, philosophically speaking, is exactly the same.