Some thoughts about the insurance industry

I plan on going into the insurance industry - I'll be taking my first actuarial exam at the end of September. So, I've been studying intensely. Audio courses, online notes, practice tests, everything. In one of the materials, I ran across the concept of reinsurance.

What is reinsurance? It's when the insurer gets insurance from the reinsurer to transfer risk that a catastrophic event or large loss to someone else.

So... what's the point of this? I suppose, theoretically, it makes some amount of sense. Policy holders buy insurance to transfer the risk onto another entity - so, you pay a flat fee that is roughly the average of what everyone's losses amount to, and in return your risk is absorbed and, if you obtain a loss, it is covered by the insurer. The insurers have risk, too - like large natural disasters, or some other unforeseeable amount of loss. But, still, insurance for insurers? It still sounds a little silly.

Another thought about insurance: why are checkups covered under some policies? Now, many have a deductible which I suppose puts them out of this category, but if everyone had complete coverage, annual checkups being covered would make no sense. Insurance is meant to absorb risk - it utilizes things like the expected loss (total loss divided by the number of individuals) to balance out risk. So, if EVERYONE goes in for an annual check up, then EVERYONE's premiums should rise dollar for dollar directly with that annual check up's cost. It's not a risk, it's a choice. A very good choice to make, yes, but not something that really requires insurance. I suppose there's the chance that having the insurers handle it makes it easier for the hospital to regulate policies,, have a more stable income, and encourages more people to go in (which is a good thing), but it has its negatives. It removes the individual from the money spending process, and allows the insurer to be in control, acting as an unnecessary middleman trying to keep as much money as possible, while the hospital and individual have to follow its rules.

A scenario where this would probably work most ideally: insurance provided directly by the hospital. This is like in Chinese medicine, where people pay the doctor when they're healthy because that means he's doing his job! Likewise, individuals could pay the hospital a flat fee that accounts for a certain measure of annual check ups and policies, plus insurance for necessary risks that arise. This would allow the hospital to run smoothly with a steady amount of funds, optimizing check-up cost in order to most easily absorb the cost of risks while providing the best care possible in order to keep the customers. This makes it more capitalist, but does not put the individual in an "uninsured" heavy risk situation.

I suppose, though, with insurance, you pay for the ability to use different doctors and such. Being a military dependent, it's almost as if we're paying the hospital directly because the insurance covers pretty much everything as long as it's at a military hospital. I don't see why it also wouldn't be feasible for someone who lives in the same place, sees the same doctor for a certain amount of time. I mean, the hospital could act as the insurer and pay emergency room fees if things happen elsewhere. Why do we need so many middlemen?