h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

Having gone and had a chat with the insurance blokey from work today, what is really more risky I ask you.
Rock Climbing
White Water Kayaking
Scuba Diving
Travelling to work every morning.

I object to having the activities I participate in discriminated against. I donn't see any objections if I played football or rugby each weekend and many more people get injured doing those sports.

For my activites, I assume that there is risk inherent in the sport and minimise that risk of injury by practice and training.

Many more people get injured in those other sports because many more people take part in them. You can minimize the risk by whatever means you wish, but the fact remains that your chosen sports are massively more dangerous than either playing rugby or travelling to work.

My favourite pastime is climbing the easier rock faces of Snowdonia and Cumbria; Scotland, when I can afford it. I feel more at risk being driven along the M6 motorway, than I ever do when I'm on the climbs. I rather die clutching at air in my belovéd mountains, than I ever would married, 'til death do we part, to a crushed tin box, with shattered glass for confetti.

Insurance, however, is not based on how you perceive your risk or even on how your agent perceives your risk. It's based on statistics.

Yes, driving a car is risk business. That's why (in America at least) we pay car insurance. However, rock climbing is another, separate risk. Someone who rock climbs and drives a car is at higher risk of injury than someone who just drives a car -- this isn't prejudice, it's statistics.

If you don't like the idea of paying a fee based on your statistically estimated risk, then don't buy insurance -- this is the underlying concept behind insurance, there's really no getting around it. You spread a financial risk across across a group of people who have roughly similar chances of injury/death/illness/accidents, whatever the insurance is against. If people who lived healthy lives and participated in no high-risk activities, there would be no point in them paying for insurance unless they received a lower rate in return -- without such a discount, they are much less likely to receive their money's worth from such insurance than someone who engages in more risky behavior. Eliminating gradations of risk in insurance would result in those who choose to lead "safer" lives subsidizing the risks taken by others, effectively defeating the point of insurance.


Mikey

I have my own theories on insurance (like everything else :-p).

Insurance is basically a form of gambling, with the odds on the insurer's side right? It's a sort of lottery, only instead of winning a sum of money, the prize is being bailed out should you suddenly lose (or need) a sum of money.

Therefore it's much better to try and cheat the odds by not taking out insurance for small claims, which you can instead pay yourself. Things like your house burning down are not so easily dealt with as you probably wouldn't have the money to repair it. You could however, set up a collective insurance fund, and be more likely to come out better off.

You can use a similar idea to reverse the odds on the lottery. Every week, write down your seven numbers, but instead of giving your pound to the shop, put it in a jar. If your numbers come up, you lose a potential £7 million (or whatever), if they don't come up, you save a pound! The odds are on your side!

There are collective insurance schemes going around - they are called "Mutual Assurance Companies".

However, the thing to bear in mind with insurance is that it is not only for your benefit. Insurance on your house allows your mortgage lender to lend you a big sum of money to buy the house without having to charge a wopping premium as would be the case if there was the risk of them losing it. You having employment protection insurance allows credit agencies to lend you money at a lower rate and so on and so forth.

The cheapest way to insure yourself however, is with your own savings. If you put £1m in a safe deposit then no matter what happens you'll have money right?

As far as the sport / hobby / travel thing is concerned, the difference is between risks you have to take and risks you choose to take. You *have to* travel to work. You *choose to* play sport or do dangerous pursuits. The insurance industry takes this into account when working out premiums. Also, the number of people killed or injured travelling to work will be high because of the number of people doing it, whereas the number of people killed or injured during a particular pastime will be low. However, look at the number in terms of 'x killed / injured per 1000 participants' and the positions are reversed. This also affects premiums.

If you put £1m in a safety deposit box then you're liable to lose out if Sterling devalues or the box is robbed: you can't insure against it .

It`s an easy equation JY - if you don`t pay the additional premium then the rest of us in the general insuring population would have to do it for you ..... and that is more unfair than you paying for it yourself.

You should look at insurance in exactly the same way as paying for your equipment - skimp on it and you have to bear the consequences when things don`t work out the way you thought they would.

Red

I used to live next door to a senior underwriter for one of the large general insurance companies. He said that drivers came basically into one of two categories: those that had accidents and those that didn't. This is clearly over-simplistic, but I did find it interesting.

I am in my late 30s and the only insurance claims I have ever made were 3 claims on my pet insurance. In the end, though, it became cheaper and simpler to take the risk and pay the bills myself than to insure 4 cats.

These days I only insure risks I cannot afford to take. I can afford to replace household appliances, so I don't insure them. I cannot afford to replace the house itself - so I do insure it.

Finally, while I am on a roll, I have a theory that you should never insure individual items by name. I spent years temping, and I was continually astonished by the access to information given to un-vetted and unsupervised temps. Things may be better now that more is computerised... but on the other hand I am now an IT contractor, so I feel entitled to doubt it.

***B