The Insurance Paradox

Would life in general be as expensive if no one had insurance? Would we better appreciate its risks if we were allowed to feel them more often?

By Joanna Makomaski

Risk is about making a decision in which you could reap rewards or suffer cruel consequences. Insurance is the ability to share the risk with someone to help diminish those painful losses. Risk is a necessity. Insurance is a luxury.

Individually or corporately, we see insurance is an extraordinary creation, with almost super natural powers. With it, we feel enabled to undertake programs, activities, deals, actions fearlessly. It is the big puffy pillow we tie to our backsides when we first strap on hockey skates to see how fast we can go on a frozen pond without getting too hurt. That is the perceived magic of insurance.

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Imagine a conversation between little Wayne (Gretzky) and his mother. Wayne, a nervous and novice skater is seen convincing his mother to give him the brand new feather pillow from her bed to protect him from damaging himself on the ice. All the while, he paints a picture of his stardom and future hockey glory. His mother, looking out for her son, gives up her pillow, a pillow she knows she can't really afford to ruin. But would Wayne have gone and tried even if he were denied the pillow? Does insurance enable confidence or can it disable it, too?

On a global level, very few of us can actually afford such mechanisms that help us to share and be saved from our failures. These are truly luxury items.

When I observe behaviors from other parts of the world, life is not always treated as "precious" as we do here in North America.

Is it that people care less, or is it that they can't afford to consider themselves as precious as we do? They still work, commute and live in houses. They do all this without insurance. Is it possible that their life experience is more fulfilling or thrilling as a result? By not always having a safety net from failure or disaster, are they seeing the true measure of their potential? By them getting out on the ice without a pillow, do they learn more about their abilities and talents?

LOOKING BACK, WAY BACK

It is amazing to look back to 2100 B.C. with the creation of insurance. What started as simple guarantee agreements for goods delivery has now become an empire where we can insure just about anything. We have become reliant on someone always being there to share our risk. But is this dependency taking us away from the human experience? Would our self-perception change in the absence of insurance?

Today we buy life, medical, disability, employment, auto and home insurance. Ironically, it is for the protection of our inflated lifestyle that became so high because of the very same insurance we bought to protect it. What a paradox.

Would we sue as much if no one had insurance? Would medical costs be high if no one had insurance? Would life in general be as expensive if no one had insurance? Quite a thought. Hard to imagine.

But more importantly though, getting back to little Wayne who laces up the blades his first time, doesn't he need to know that life is slippery and the ice is hard?

Indeed that pillow could break his fall but maybe he may gain more if he actually feels the sting of falling from time to time.

JOANNA MAKOMASKI, the former risk manager for an energy delivery company, is a specialist in innovative enterprise risk management methods and implementation techniques with V3 Advisory Group.

February 1, 2011

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