9/23/2005

Insurance: Playing The Odds

One of the greatest forms of gambling available to all citizens is insurance. You pay out money to insure that in the event of some misfortune happening to either you or your loved ones that you will receive some sort of pay off. Of course as in any game of chance the rules are stacked in favour of the house. As any patron of a casino could tell you percentages are such that the house is bound to win. They don't even have to resort to trickery to ensure their victory. All they have to do is count on the gullibility of the player; their eternal belief they are only one more hand away from the big pay off has earned casinos many a million.. Insurance companies only have to count on people not reading the fine print of their contracts to reap the benefits of years of premium payments without ever having to pay out. Take for example the instance cited by Heather Mallick in her column last Saturday. Homeowners in New Orleans who thought they would be getting payouts after the devastation of Katrina are in for a rude awakening if they didn't have flood insurance. You may have had hurricane insurance but since your house was damaged by the post hurricane floodwaters, oh well, the house wins try again latter. Even if you were one of the lucky ones who had flood insurance, you're not going to be seeing any money soon. Before any Insurance company is going to release any money they're has to be a decision reached on what caused the flood? In other words can someone be held to blame thus letting the companies off the hook, or at least letting them find someone to sue so as they can recoup any losses due to payouts. I've always loved the commercials that insurance companies run on television. Talk about playing on people's fears. The sincere concerned voice with its earnest entreaties to protect your family in the event of some horrendous catastrophe. "Are you protected?" "What will become of them?" Heaping on the motivational guilt still further by showing you pictures of wife and 2.5 children huddled together with blank, grief stricken faces. You notice how many insurance companies run ads during football games? They know that men are usually spending that time alone separate from their families and have had a couple drinks. What a perfect time to play on sentimentality and guilt. There's nothing more susceptible than a half in the bag guilt ridden man. I wonder how many insurance policies are sold at half time between trips to the fridge for more beer and the can for a piss? Why else would you be placing bets on your own survival? It's really sort of twisted when you think about it. The insurance companies try to make you believe that all sorts of horrendous things could happen to you, thus encouraging you to fork out a chunk of money each month. However the more likely it is of you actually suffering an accident, the less likely they are to insure you, or the more money they are going to charge you. Like the most sophisticated bookies they have their odds makers, but they call them actuaries. It's the actuary's job to figure out the percentages and give the over and under for each game, sorry I mean case. For example: a homeowner in New York City takes out fire/theft/damage insurance on their residence. Somewhere there will be written down the odds of that house being hit by a hurricane or a tornado, being robbed or being burnt down. Those odds will also factor in the neighbourhood the house is located in, its age, and what amenities the house contains. If you have an alarm system, do you have a wood stove, is the heating gas, electric or oil. These are all factors that are considered to arrive at your final premium. Of course the more insurance you purchase the higher the premium. Other variables would include whether on not you chose to go for market value of your item or replacement value. The one being what a similar item would cost the other being what it would cost to replace that exact item. With the latter being usually more expensive, replacement value premiums are invariably higher. My own experiences with insurance companies have born out my suspicions that they are extremely reluctant to pay up. It was the one time I had a job that came with employee benefits, including sick leave. I was forced to take some time off work, about a month, to recover from knee surgery. I was misguided enough to believe that the insurance was supposed to be for the period when I was off sick. I received the benefits two months after returning to work. People wonder why I'm a supporter of social programs like health care and welfare. Well it's because of instances like this. Those who most desperately need the insurance supplied by private insurers are also those who cannot afford to wait the two to three months that it takes those same companies to process your claim. What good is it for someone with no financial resources to be faced with months of no income based on the vague promise that they will receive 60% of their salary in the near future? What are they supposed to do in the interim? I know what I had to do. The same thing that I would have done without a benefit program: applied for temporary welfare to carry me through until I was able to get back to work. Aside from the problems with even receiving the payouts there is also the matter of the fine print:
" We all suffer from insurance, one of the so-called "picky" industries, which matured, as humorist Alan Coren once wrote, in 1623 when Josiah Smallprint invented the phrase, to be inserted in all policies, "always provided that a pig flew past at the time the accident occurred." Heather Mallick. "Toronto Globe and Mail" Sat. September 17th 2005
Instances that are cited by Ms. Mallick in her article of items that would void one accidental death insurance policy that was offered to her include some of the following: ingestion of poison purposely or otherwise (what does otherwise mean), taking any non – prescription medication including vitamins and dietary supplements, and receiving dental care or having surgery. I can only guess that some actuary somewhere figured out that people who get their teeth cleaned at the dentists office on a regular basis are a high risk group for dropping dead at the spur of the moment. Perhaps it’s the stress involved with going to the dentist every six months, or the fact that you have to leave the house and your chances of being killed in a traffic accident are increased proportionately. Who knows? In any event those restrictions, and any others companies are liable to throw up as impediments to pay outs, make insurance companies wealthy and the majority of us look like suckers. They scare you into thinking the worst, you could die, your home and property could be destroyed, and you and your family could be left bereft; convince us that they will provide peace of mind in the event of such a calamity, than do their best to resist a payout when you most need it. It sometimes seems that the odds are so long on getting a return on your bets with insurance companies that you might as well save up your premiums and a make a yearly trip to Las Vegas and lay them all on black at the roulette table. At least than you'll be betting on yourself to win, not lose, and your odds of getting a pay out are fifty-fifty. Sounds better than anything I've seen offered by the insurance companies.

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