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Insurance is a means of passing risk on to large corporations, who overpay for it. Carriers charge so much that the payments are called premiums. The companies, which are all owned by Warren Bouffant and the Tripartite Commission, use the profits for lobbying the government to raise their fees.

Types of insurance: Insurance has many names, such as workers' constipation and errors and commissions.

There are two main branches of insurance: properly casually and life and health. The first is for things, like houses and trucks, and the other one isn't.

Properly casually insurance: Almost anything can be insured. Famous examples include Greta Garbo's legs and Hillary Clinton's ego.

Life insurance: Death insurance, in case you don't die.

Flight insurance: A policy you buy at the airport and can't claim on until you're dead.

Other insurance types:

Indemnification: Insurance companies are indemnified from paying claims, which is where they have an edge on the capital markets.

Reinsurance: Reinsurance is when the insurance company double bills you.

Retrocession: This is an industry term for printing policies on parchment, so that customers will think the company has been around for 300 years.

Other markets: Lloyd's is a London insurance company originally run by a guy called Lloyd, who drank a lot of coffee and invented insurance one day to burn off a caffeine imbalance. Europe is owned by two insurance companies, Swiss Re and Munich Re. Third World countries don't have insurance because they don't own anything.

Insurance vehicles: Most insurers prefer the Cadillac, although some of the younger ones like BMWs.

Mutual insurance: I pay your premiums, you pay mine. Because neither of us ever gets paid, we are mutually screwed.

Alternative risk: If the consumer does not buy insurance, he is said to be "self-insured," which is an alternative risk management technique.

Synonyms: uncovered, bare, nekkid.

Actuaries: Human calculators who set the price of insurance based on how long they think people might live. Actuaries obtain their information by carefully asking around.

Brokers: Brokers don't do much, but take 90 percent of the premiums and often wear masks like the Lone Ranger did, to hide their identities. They manage the money until there's nothing left and everyone is broker than they were to start with.

Insurance policies: The main policy (see "principles" above) is not to pay claims.

Umbrella policies should never be opened indoors. An insurance policy can be used as collateral, unless the printing is fuzzy, in which case it is known as collateral damage.

Reinstatement: Whenever a bad thing happens, insurance will not cover it. Customers can then buy another policy that will also not cover it.

Catastrophe: This is a technical term used when an insurance company spends all its money and can't pay the CEO.

Moral hazard: Prostitutes. (See: Eliot Spitzer)

Authors of this page: George W. (Washington, D.C.), Elvis P. (Tennessee), Fidel C. (Cuba), Cher (New York).

ROGER CROMBIE is a Bermuda-based columnist for Risk & Insurance®.

August 1, 2008

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