Saturday, October 11, 2008

To insure or not to insure?

One of the biggest responses I get when I ask the question "Why insure?" is for peace of mind. I personally don't get peace of mind from insurance. Firstly, you can't be sure that the insurer will be solvent at the very time you might need them for a big payout. Secondly, if your cash flow is poor, the very money you spend on insurance can be a drain that could harm your financial security. The returns on investment as far as insurance goes are poor, especially if you have morals and are a lower than average risk of claims. I always get the feeling that the greater part of my premium goes to those with clever but fraudulent or weasel claims, and for the rest of us it is a false peace of mind.

With this in mind, I am happy that Australia is one of the only developed countries in the world that doesn't explicitly insure deposits. Deposit insurance, like other insurance is definitely a false peace of mind. The only insurance for investments like deposits, shares, bonds, property, employee training, love, children the list goes on... is to have a balanced portfolio of investments as well as some cash under the bed etc. Remember the balance!


Dr. Clam said...

Hear, hear! Here are some of my main quarrels with insurance as it is currently operated:

(1) If it is run as a 'for profit' enterprise, there will always be strong incentives to find excuses not to pay people, drum up baseless fear, and target the weakest and most easily exploited groups in the community.

(2) The presumption of guilt by the insurance companies, and their overall pricing policies, act to normalise and encourage criminality. "They didn't recognise my perfectly valid claim last time, so it's fair for me to rip them off this time." Or: "I will lose my no-claim bonus, so I may as well claim for all this unrelated damage."

(3) The presumption that everyone is insured and the insurance company will take care of property damage reduces the 'guilt barrier' louts need to overcome to break stuff.

(4) Insurance allows ratbags with no friends to survive calamities without changing their behaviour. This makes them more likely to pass on their memes and less likely to undergo life-changing conversion experiences from their sudden reversal of fortunes.

Dr. Clam said...

To change the subject, I think we will see your 40$US barrels of oil next year. Shall we take bets on the minimum price and the day it is quoted?

Marco said...

OK :) October 29th 2010 - $25 US per barrell.

Dr. Clam said...

Gaack! You are gamer than me. $37.90 US, August 17th 2009. (West Texas Crude)