I have been wondering of late to just what extent the insurance industry can claim to be the ultimate risk manager. Or of any use at all, really. There is no doubt that catastrophe insurance, say, protects companies from the worst depredations of earthquakes and storms. And, equally, motor insurance is a useful product, whatever its deductibles and no-claims bonuses and other tricks of the trade.
But both products, as well as every other insurance product ever devised, protect buyers from a percentage of peak risks, and nothing more.
By that I mean that the everyday risks of life are hard to define and harder to cover against. Staying at home is desperately risky: Thousands die or are injured every year from accidents in the home.
According to statistics, a bathtub is such a dangerous place that, probably, we should stop bathing immediately. On that basis, gadgets such as electric irons and toasters are really death machines. TV sets explode; laptop computers catch fire. Believe it or not, plastic combs kill two or three people annually.
Leaving the home is an even bigger risk. Things fall on your head; walls collapse; drunks drive into you. Driving is little more than a suicide attempt that often fails. People are unutterably rude. Satellites crash to earth. Mosquitoes carry plague. Children bite.
Insurance barely addresses any of these risks. "All risks" is exactly not that. It covers specific, named risks only. "Life insurance" is, of course, death insurance. Motor insurance mostly covers other people and the vehicle, and only includes the driver if he is willing to pay extra.
Deductibles make a mockery of the whole thing. How much good is an insurance policy that doesn't make you whole? Contents insurance, ditto. You have a couch; it is stolen; your insurer pays you what a used couch is worth; then you can't afford a new couch; so you have no couch. Very helpful.
And then there is the wonder of exclusions. An act of God blows your house down? War breaks out? Terrorists blow up your granny? Sorry, insurance usually can't help. When an act of God or a war happens to you, that is exactly when you need insurance most.
As I have mentioned before, no coverage is available for heartbreak, missed appointments, lunch with your mother-in-law, going bald, burning the Thanksgiving turkey, having to listen to Madonna on the radio, not being able to afford a vacation in Tahiti and having to settle for Atlantic City, becoming permanently embittered by the unutterable stupidity of those around you?the entire relentless wave of bad news that breaks daily in our lives, the real losses that we all suffer, are uninsurable.
Health insurance is driven not by our desire to stay well--in a world containing McDonald's and alcohol, how could it be?--it is driven by the high cost of medical insurance. Life insurance is not driven by our own needs, but by those who will remain after we are gone. Banks drive catastrophe coverage.
So the answer is simple enough. Stop believing in a Supreme Being, and there would be no more acts of God. Stop coveting thy neighbor's ass, and there would be no more war. Stop going to fast"food outlets. Stop drunks from driving. In fact, ban alcohol altogether. Find a cure for stupidity and baldness. Accept responsibility for your actions. Acknowledge that into each life a little rain must fall. Suck it up and get on with it.
In that case, we would no longer need insurance. Problem solved. Piece of cake.
ROGER CROMBIE,the alternative risk columnist for Risk & Insurance®, lives in Bermuda.
December 1, 2006
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