# INSURANCE-Why are we buying this shit? **URL:** \ **Category:** The BBQ Pit\ **Created:** [February 28, 2003, 8:58am UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089 "2003-02-28T08:58:30Z")\ **Posts on this page:** 18\ **Page:** 4
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [February 28, 2003, 5:10pm UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/61 "2003-02-28T17:10:42Z")
Curiously, the above **is** actually how things started. At least in the colonies. Got a fire? Sign up and we’ll save you. Don’t sign up? We’ll save_that_ guys house because he signed up last month. You can burn. ---
**Author:** ![Weirddave](https://avatars.discourse-cdn.com/v4/letter/w/919ad9/32.png) [@Weirddave](https://boards.straightdope.com/u/Weirddave)\ **Post date:** [February 28, 2003, 5:18pm UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/62 "2003-02-28T17:18:26Z")
> [@](#): > > \*Originally posted by Jonathan Chance \* > \*\*This post sponsored by the WD Insurance Network. Don’t get him started! \*\* I purposefully did NOT mention anything about who I work for. The post was about information, not advertising. ---
**Author:** ![Gangster\_Octopus](https://avatars.discourse-cdn.com/v4/letter/g/a8b319/32.png) [@Gangster\_Octopus](https://boards.straightdope.com/u/Gangster_Octopus)\ **Post date:** [February 28, 2003, 5:36pm UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/63 "2003-02-28T17:36:53Z")
Considering that people buy insurance to mitigate risk and that gambling enhances a person’s risk they are pretty much opposite. ---
**Author:** ![kabbes](https://avatars.discourse-cdn.com/v4/letter/k/e99b99/32.png) [@kabbes](https://boards.straightdope.com/u/kabbes)\ **Post date:** [February 28, 2003, 5:59pm UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/64 "2003-02-28T17:59:43Z")
Opposite but related. Just one of those oddities of utility theory. pan ---
**Author:** ![Robb](https://avatars.discourse-cdn.com/v4/letter/r/a183cd/32.png) [@Robb](https://boards.straightdope.com/u/Robb)\ **Post date:** [February 28, 2003, 6:22pm UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/65 "2003-02-28T18:22:40Z")
> [@](#): > > Dude, you were CCed on the hyperencrypted Cabbal memo. So, **Gary** is in the Clique[symbol]ä[/symbol], and I keep getting, “Sorry, your application must be lost in the mail”? Damn the Clique[symbol]ä[/symbol]! ---
**Author:** ![Crusoe](https://avatars.discourse-cdn.com/v4/letter/c/49beb7/32.png) [@Crusoe](https://boards.straightdope.com/u/Crusoe)\ **Post date:** [February 28, 2003, 7:53pm UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/66 "2003-02-28T19:53:42Z")
On the subject of reinsurance, a subject about which I know almost nothing, the author Julian Barnes wrote a superbly accessible article explaining the near-collapse of Lloyd’s for the _New Yorker_. It’s still in print as the chapter **The Deficit Millionaires** in his book _Letters from London_ [… [link]](http://www.julianbarnes.com/bib/articles.html). ---
**Author:** ![Gary\_Kumquat](https://avatars.discourse-cdn.com/v4/letter/g/4491bb/32.png) [@Gary\_Kumquat](https://boards.straightdope.com/u/Gary_Kumquat)\ **Post date:** [March 1, 2003, 8:52am UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/67 "2003-03-01T08:52:01Z")
> [@](#): > > \*Originally posted by Robb \* > \*\*So, **Gary** is in the Clique[symbol]ä[/symbol], and I keep getting, “Sorry, your application must be lost in the mail”? > > Damn the Clique[symbol]ä[/symbol]! \*\* Need to work on your baking my man. I’d never have got in if it hadn’t been for my muffins. ---
**Author:** ![kabbes](https://avatars.discourse-cdn.com/v4/letter/k/e99b99/32.png) [@kabbes](https://boards.straightdope.com/u/kabbes)\ **Post date:** [March 4, 2003, 5:15pm UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/68 "2003-03-04T17:15:40Z")
Without wishing to overly throttle the poor dead thread, I came across this little gem in an actuarial paper ([_When the Wind Blows: An Introduction to Catastrophe Excess of Loss Reinsurance_ by D.E.A. Sanders](http://casact.org/pubs/forum/95fforum/95ff157.pdf) - a document strictly for those interested in Cat XL!). It illustrates nicely the horrors of the LMX and other spirals: > [@](#): > > On 25th January 1990 a tile blew off my house - luckily I managed to get a handyman in who replaced it - for £75.00 This may be exorbitant but they were busy and, in any case, insurers were paying claims up to f 1,000 without question. > > I put in an insurance claim, and received £75.00. By this time the insurer - my own company - had breached their deductible. They themselves put in a claim totalling £67.50 (10% of the risk was retained). This cover was placed with over 100 reinsurance companies, including Munich Re. M 8 G Re and Syndicates with Lloyd’s. By this time these reinsurers had breached their limits and were passing their excess (£60.75) to their reinsurers. The trail is now more difficult to follow. This £60.75 was passed from Reinsurer to Reinsurer (including Eagle Star’s own reinsurance operation) time and time again. > > For convenience I will assume it went 10 times round the system, and generated some £500 in transaction. It then ended up at a Whole Account protection programme and went into the Marine market as an “incidental non-marine loss”. This went round the system yet again - and is still moving. My tile has been involved in over 20 financial transactions, with total amounts in excess of £l ,000. Pretty bad-ass, huh? Lest you get too despondent, however (and I do know how this must prey on your minds), he does note: > [@](#): > > If that storm happened today, the situation would be different - there would possibly be only two transactions since the secondary market has completely disappeared. So that’s OK then. pan ---
**Author:** ![Siege](https://avatars.discourse-cdn.com/v4/letter/s/dbc845/32.png) [@Siege](https://boards.straightdope.com/u/Siege)\ **Post date:** [March 4, 2003, 6:10pm UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/69 "2003-03-04T18:10:43Z")
Sitting on the desk in front of me, there’s a piece of paper with a rather large number on it. It’s what it’s going to cost to repair my car after an accident last week. It’s also about equal to my cash on hand. Then there’s the cost of a rental car which I need to get to job interviews, and medical treatment to pay for the curing the effects of getting knocked about. Instead of stressing myself into a tizzy, I’m sitting here downright relieved because my insurance and the other party’s insurance companies are taking care of things. I don’t have to worry about who’s fault it is or if she has enough money. I’m not even going to see a bill from the chiropractor. I’m lucky. I’ve got relatively low premiums, and, even without the doctor’s bill, this accident will cover the cost of a few years of auto insurance for me, not to mention them taking on a certain amount of shere raw hassle. Right now, the only pain in the neck I’ve got from this accident is a literal one. They were equally good a few years ago when I hit a deer on my way to work. Why do I buy this stuff? For the same reason I bought a car: because the alternative would be a lot worse. CJ (Yes, I told my agent I’d write something like this;)) ---
**Author:** ![december](https://avatars.discourse-cdn.com/v4/letter/d/838e76/32.png) [@december](https://boards.straightdope.com/u/december)\ **Post date:** [March 4, 2003, 6:22pm UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/70 "2003-03-04T18:22:42Z")
> [@](#): > > \*Originally posted by kabbes \* > \*\*Without wishing to overly throttle the poor dead thread, I came across this little gem in an actuarial paper ([_When the Wind Blows: An Introduction to Catastrophe Excess of Loss Reinsurance_ by D.E.A. Sanders](http://casact.org/pubs/forum/95fforum/95ff157.pdf) \*\* **kabbes** , that link doesn’t work. I was at the meeting where actuary Dave Sanders presented that paper in 1995. BTW it was my impression that a secondary market for cat reinsuracne might be creeping back in. Do you know whether that’s the case? ---
**Author:** ![Deadly\_Nightlight](https://avatars.discourse-cdn.com/v4/letter/d/6a8cbe/32.png) [@Deadly\_Nightlight](https://boards.straightdope.com/u/Deadly_Nightlight)\ **Post date:** [March 4, 2003, 6:55pm UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/71 "2003-03-04T18:55:42Z")
As someone who’s fairly new car was totalled by a drunk not insured driver- yes you need to have insurance! Now I am tangled in lawsuits and a whole buncha other crap. If someone hits my next car without insurance I am afraid i might kick some hiney. ---
**Author:** ![kaylasdad99](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kaylasdad99/32/3398_2.png) [@kaylasdad99](https://boards.straightdope.com/u/kaylasdad99)\ **Post date:** [March 4, 2003, 7:06pm UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/72 "2003-03-04T19:06:42Z")
> [@](#): > > \*Originally posted by december \* > \*\ ***kabbes** , that link doesn’t work. I was at the meeting where actuary Dave Sanders presented that paper in 1995. > > BTW it was my impression that a secondary market for cat reinsuracne might be creeping back in. Do you know whether that’s the case? \*\* I remember reading about that several weeks ago, but it was in a dead tree-type document, so I can’t find a cite. But I understand you can only reinsure your cat against fire and earthquakes. 😃 ---
**Author:** ![BioHazard](https://avatars.discourse-cdn.com/v4/letter/b/3bc359/32.png) [@BioHazard](https://boards.straightdope.com/u/BioHazard)\ **Post date:** [March 4, 2003, 8:31pm UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/73 "2003-03-04T20:31:14Z")
I Disagree with the OP and agree with everyone else. I don’t know of anyof you ever noticed but the Insurance companies have way too much power. 2 examples. A friend’s car dies, cancels his insurance on it, and pretty much permenently borrows one of his parents cars. About a month later he gets a letter in the mail that says he has to provide proof of insurance for his dead car, he doesn’t have it, and gets his license suspended. He eventually beats the charges, but it took time and money. A former co-worker of mine got a DUI and lost his license. He sold his car to pay for all his legal fees, reinstatment fees, fines, etc. When he tries to get his license back, he found out that he has to get a special type of auto insurance EVEN THOUGH HE DOESN"T HAVE A CAR! All I can say is WTF?!?!?!?! ---
**Author:** ![kabbes](https://avatars.discourse-cdn.com/v4/letter/k/e99b99/32.png) [@kabbes](https://boards.straightdope.com/u/kabbes)\ **Post date:** [March 5, 2003, 9:15am UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/74 "2003-03-05T09:15:22Z")
> [@](#): > > \*Originally posted by december \* > \*\ ***kabbes** , that link doesn’t work. \*\* Oh buggeration. Try [this](http://casact.org/pubs/forum/95fforum/95ff157.pdf). Though, as you note, it is an old paper. The true cat connoisseur is much better served by “The Management of Losses Arising From Extreme Events”, which was presented at this year’s GIRO. Actuaries who want it should find someone who has a suitable password (or e-mail the UK Institute to get one), go to [www.actuaries.org.uk](http://www.actuaries.org.uk) , do a search for “GIRO” and follow the links to the papers. People without a password or alternative actuarial access are gonna be S.O.L though I’m afraid. > [@](#): > > **I was at the meeting where actuary Dave Sanders presented that paper in 1995.** Ah yes, small world this GI actuarial one 🙂 > [@](#): > > **BTW it was my impression that a secondary market for cat reinsuracne might be creeping back in. Do you know whether that’s the case?** First, the obligitory joke on the typo: Reinsuracne? What’s that? Insurance against teenage personal problem? _B’dum tsh_. Now that’s out the way. Oh yes - the same old problems just keep on coming round. 1995 was 2 years after the establishment of Equitas and the various spirals were still vicious memories. But we forget so quickly. Even by 1998 contracts like Steamship Mutual (admittedly PA and not Cat, but same comments apply) were playing merry havoc in the secondary market. My comment, “So that’s OK then” was merely supposed to be an ironic nod to those in the know. As long as we have brokers earning 40% commission, we’ll have incentives for them to extend the life of a claim. And as long as we have underwriters who think they can beat the reinsurer, we’ll have companies willing to take it. These problems will be knocked on the head for a few years after major market issues, but like the hydra they just keep on coming back. pan ---
**Author:** ![kabbes](https://avatars.discourse-cdn.com/v4/letter/k/e99b99/32.png) [@kabbes](https://boards.straightdope.com/u/kabbes)\ **Post date:** [March 5, 2003, 3:15pm UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/75 "2003-03-05T15:15:44Z")
With huge apologies for using the SDMB - and the pit in particular - as a chat-proxy: **december** , through some kind of staggering other-worldly coincidence, I got an e-mail today telling me that David Sanders is giving a talk next Wednesday! What do you think - is he worth going and listening to? pan ---
**Author:** ![AllShookDown](https://avatars.discourse-cdn.com/v4/letter/a/d9b06d/32.png) [@AllShookDown](https://boards.straightdope.com/u/AllShookDown)\ **Post date:** [March 10, 2003, 2:03am UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/76 "2003-03-10T02:03:47Z")
> [@](#): > > \*Originally posted by BioHazard \* > \*\*I Disagree with the OP and agree with everyone else. > > I don’t know of anyof you ever noticed but the Insurance companies have way too much power. 2 examples. > > A friend’s car dies, cancels his insurance on it, and pretty much permenently borrows one of his parents cars. About a month later he gets a letter in the mail that says he has to provide proof of insurance for his dead car, he doesn’t have it, and gets his license suspended. He eventually beats the charges, but it took time and money. > > A former co-worker of mine got a DUI and lost his license. He sold his car to pay for all his legal fees, reinstatment fees, fines, etc. When he tries to get his license back, he found out that he has to get a special type of auto insurance EVEN THOUGH HE DOESN"T HAVE A CAR! > > All I can say is WTF?!?!?!?! \*\* How is it that the insurance company has too much power in either of those examples? The insurance company isn’t requiring your friends to have insurance. The state is. As for your DUI friend…if he’s trying to get his license back I assume he intends to drive a car at some point. If you’re going to drive a car but don’t own one you still need to be insured. There are special policies for drivers who don’t own cars. They’re called Named Non-Owner policies. Or he needs to have his parents list him as a driver on their policy, which may or may not be the proof of insurance he needs, depending on what the law is in your state. ---
**Author:** ![Meros](https://avatars.discourse-cdn.com/v4/letter/m/8797f3/32.png) [@Meros](https://boards.straightdope.com/u/Meros)\ **Post date:** [March 10, 2003, 2:15am UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/77 "2003-03-10T02:15:31Z")
I live in NJ and auto insurance here is a fucking scam. The state has decided to let the companies do whatever the hell they want and its the consumer who gets raped because of it. I’m paying $3600 a year for BARE MINIMUM car insurance with a perfect driving record and about a %20 discount for various reasons.(it’s more than I paid for my goddamn car)…that being liability, if I get in an accident that doesnt involve another driver I get to pay for any and all damages out of my own pocket. To make it even better, my provider threatened to leave the state so the state gave them MORE leeway…I just got the letter yesterday and my premium went up another $600!!! Maybe it is the law, maybe it is necessary, but that doesn’t excuse the fact that myself, and most residents of my state, are being anally raped by these companies every chance they get. I’m usually in favor of keeping the gov’t out of things but this is one instance where the feds need to do some serious regulation. ---
**Author:** ![december](https://avatars.discourse-cdn.com/v4/letter/d/838e76/32.png) [@december](https://boards.straightdope.com/u/december)\ **Post date:** [March 10, 2003, 2:43am UTC](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089/78 "2003-03-10T02:43:16Z")
> [@](#): > > \*Originally posted by kabbes \* > \*\*With huge apologies for using the SDMB - and the pit in particular - as a chat-proxy: **december** , through some kind of staggering other-worldly coincidence, I got an e-mail today telling me that David Sanders is giving a talk next Wednesday! What do you think - is he worth going and listening to? > > pan \*\* Absolutely! [Previous page](https://boards.straightdope.com/t/insurance-why-are-we-buying-this-shit/158089.md?page=3)