Helping to manage difficult financial times
I bought a disability insurance in my mid-20s. I was healthy and had no immediate reason to buy this coverage. But the agent showed me how premiums increased with age. I wanted the lower premiums in my middle age.
I faithfully paid premiums for 12 years. Then I was in middle age. Then I got sick.
“No problem,” I thought, “My disability insurance will fund some of my life expenses for me.”
Unfortunately, my illness did not have a concrete medical explanation. Without that explanation, the disability insurance company denied my claim.
While I could not work a regular job, I could spend an hour or two a day on the internet to help me figure out what was happening, for both illness and insurance.
From the insurance side, I found out that the disability insurance industry routinely denied claims that do not have an iron-clad medical explanation of why the disabled person is disabled. While many anti-insurance activists blamed profit was the motive, I believed that financial solvency of the industry was at stake: the industry could not afford to honor all reasonable claims. So the industry “played hardball” with the difficult-to-prove claims, knowing that many claims would give up before reaching a judge’s verdict. If an insurance company loses one civil court case but deflects five or more claims to purgatory, playing hardball is a good business decision.
If the insurance companies charged premiums to reflect the cost of all reasonable claims, fewer people would be buying disability insurance.
In essence, I concluded that the business matrix for the disability industry was dysfunctional. Capitalism has failed the people here.
Then I started thinking about how to build a better model. I thought about how to take the financial risk away from the insurance company.
PAUG
I had heard about pay-as-you-go (PAUG) pension plans. This means the contributions going into the plan are paid almost immediately the benefits coming out. In this way, the plan would always be solvent. An equilibrium would be reached with individuals making decisions on how much to contribute and when to retire.
Most national pension plans are not a PAUG. It seems most economists do not like this arrangement.
In my Canadian Pension Plan (CPP), there is a mathematical process that determines how much a retiree will receive when he or she is retired. It keeps an account of each citizen’s contributions and adds an assumed return on investment from those contributions. While the math is too complex for most Canadians, we can monitor our pension account as we age. We see our monthly retirement benefits grow. When we retire, we get that amount as stated in the account.
Nonetheless, the CPP calculation is based on that assumed rate of return. If the world economy takes a nosedive, this return will not be there. So this plan too can possibly default at some future time.
One interesting feature of the PAUG is that a low retirement payment may entice some workers to delay retirement — and continue contributing, which helps keep the PAUG solvent. And as well, PAUG recipients would have a higher death rate than the contributors, so this would also help keep the PAUG solvent.
But my intuition said that these “self-correcting” features would not be large enough to offset a significant loss of PAUG benefits, which would then lead to enough contributors to stop contributing, which would then lead to even lower PAUG payments. The cascade of lower pensions is maybe why economists do not like PAUG plans.
I could not see a PAUG working unless all citizens are forced into mandatory contributions.
And the CPP is also mandatory. Maybe this helps keep this national plan solvent.
PAUG & Disability
My disability insurance was not mandatory. I could have stopped paying premiums at any time. But I would have lost my coverage. All the money I had put into the plan would be lost.
I took the PAUG concept to disability insurance. The premiums paid by contributors would go directly to the disabled people.
But, again, the solvency issue comes up. If too many contributors became disabled, then disability payments would have to decrease for the plan to remain solvent. But if the disability payments became too low, the plan would not be attractive to current and new contributors. In other words, PAUG for disability could eventually collapse.
So I had to do some thinking on how to keep this plan solvent, especially if contributions are to be voluntary.
Coupling Income Protections
I then thought that solvency could be improved if disability insurance is coupled with pension benefits and unemployment insurance. Three insurances in one!
At this point, I will just introduce DVIP (Dave Volek’s Income Protection). Here is how this preliminary three-plan plan should work.
Contributors would have different life and finance situations. For example, some contributors may be working seasonally, and they would like some income stability in the off-season. Other contributors are nearing retirement age, and they would like to see higher pensions later. Other workers would like the disability insurance feature of DVIP.
DVIP would allow each contributor to put most of the premium toward the plan that he/she feels most suitable for them. But they must also put a small amount to the other plans. For example, the seasonal worker would put 80% of his/her premiums toward unemployment insurance and 10% to disability insurance and 10% to pension. While that worker would be buying “shares” in all three plans, yet the focus for that seasonal worker is maximizing the income during the off season.
When seasonal workers are buying into the other two plans, those funds are helping to keep those two plans solvent. With incoming cash into all three plans, the risks of any plan becoming insolvent are lower.
And some day, that seasonal worker may have a need for disability payment and/or a pension. He/she would get benefits in proportion to the shares purchased earlier.
In a like manner, an older worker looking to maximize pension would be forced to contribute to the unemployment and disability funds. Same for a worker looking for disability coverage, who would be helping the unemployment and pension plans remain solvent.
Expanding Disability Insurance
My next step was to divide disability into three parts: short-term disability, immediate-term disability, and long-term disability.
If a contributor becomes disabled, he/she would draw from the unemployment insurance for the next six months. No medical questions need answers at this point. The contributor is seeing income from his/her unemployment plan.
At the end of this time, the medical evidence should be there. So the now disabled person can move into the intermediate term disability payments. When this transition is made, financial pressure is taken off the unemployment plan.
If the disability extends past 24 months, the disabled person would move into the long-term disability fund. This would take financial pressure of the intermediate-term disability plan.
By increasing the number of plans from three to four, DVIP actually becomes more solvent.
Other DVIP Plans
With that increased stability, I thought more plans should be created to build more stability. I envisioned these plans that would cover different kinds of disruption in income:
1) life insurance,
2) survivor insurance,
3) education stipend,
4) care-giver benefit, like a stay-at-home parent or disability care
5) and a few other plans.
DVIP contributors would put most contributions to the plan(s) most relevant to them but be forced to contribute a little to the less relevant plans. Each contributor has different needs, so they would mostly invest in their own self-interest. But by investing a smaller amount in the less needed insurance keeps all the insurance plans solvent.
DVIP Shares are for Life
The best part of DVIP is that if a contributor is unable to make contributions, he or she does not lose their investment in the plan. They keep the “shares” for as long as they live. If they get a disability five years after not paying into DVIP, they get a disability payment based on the value of those shares.
In essence, the DVIP becomes mostly a broker for money going in and money coming out. It will charge a small commission for handling this money, plus for re-investing any excess to keep more money coming into the plans. The insurance broker will never be forced to deny claims to stay solvent.
The Dave Volek’s Income Protection webpage gives more details of this plan, including many of its self-correcting features to keep the per-share payment fairly consistent.
DVIP & UBI
Ever since I heard about Universal Basic Income (called “negative welfare” in those days), I’ve been an advocate for UBI. While most advocates see UBI as a basic human right, I see it as giving low-income people more life options. With more options, low-income people can make better decisions to advance themselves. When they can advance, society also advances.
DVIP & UBI should be two complementary social programs.
The Writing of DVIP
For many years, I had these ideas churning between my ears. Then, in 2015, I had an opportunity to do some serious writing. I spent about three months putting the text and math together to show how this system would work.
My plan was to let this document sit for a year, then get back to work on it. With the year break, I would likely think of better ways to explain DVIP and provide new additional insights.
After 10 years, I never returned to this project. And I don’t think I ever will. My limited time and energy need to go to building a new democracy (Tiered Democratic Governance), which I consider more important for the world.
So the DVIP paper is available for the world to inspect. While incomplete by my standards, the main ideas are still well laid out.
If this idea stayed as a file on my computer, it would not move the world forward.
Some day, this paper might entice someone else to build this new way of helping people manage financial disruptions.
DVIP & the Spolu
I have also invented an advanced co-operative. Briefly explained, the “spolu” distributes post-tax profits between investors, employees, customers, suppliers, and philanthropy.
A fuller explanation of the spolu is here.https://davevolekinventions.org/spolu/
DVIP (or whatever name this income protection plan is given) would make an excellent spolu. Under the spolu direction, DVIP’s main reason for existing would be more for helping people through difficult financial times rather than profit for investors.
And if you do read the DVIP paper, you will find that all the DVIP insurance plans should have an asset reserve to manage the fluctuations of cash moving in and out of the plan. This reserve should be invested to earn more money for the DVIP shareholders. Some of that investment can go into other spolus, which will put some of their profits back in the DVIP.
Conclusion
Even if my TDG is eventually adopted as the model for governance, many individual citizens will still have income disruptions in their lives. DVIP will be a mechanism to reduce the stresses of income losses — without much government intervention.
Then the government can focus on other issues to make society and world a little better.
Published on Medium 2026
