I reckon this is a more than a pet hate – more of a huge, wild, ravening, man-eating velociraptor hate: Insurance companies. Most of my friends will have already heard my spiel about why I avoid taking out insurance unless there’s some unusual circumstances, but the rest of you might find it a little bizarre to know that I spent exorbitant amounts of money buying and doing up a VW Kombi van, which is my most prized possession, and then adamantly refused to insure it. “But what if you have an accident?” If I had a dollar for all the times I’ve been asked that question, I could afford to have all the accidents I want. It’s actually a very relevant question, especially in the light of the fact that recently I did indeed have an accident, and it cost me all of $10,000. On the face of it, I’m an idiot.
But consider this very important and uncontested truth: Insurance companies make money. In fact they make huge gobs of it. And they make their money by working the averages. It seems fairly clear that if an average person is insured their entire life, and makes an average number of claims, then they’ll end up paying out more money in premiums than they receive back in claims. Otherwise how could insurance companies make a profit? And that’s an average person. If you’re in any way better than average, safer than average, or healthier than average, you’ll rarely make a claim and be wasting even more money.
And of course, if you do ever need to make a claim, they fight you every step of the way, quoting fine print exceptions or conditions that you never knew existed, eventually paying out only what they consider to be fair. My mother had a mobile phone stolen a little while back. Naturally it was insured, for something like $1100. The insurance company eventually paid up, but only $700, saying that the phone only cost that amount to replace these days. And they were right, of course, but they didn’t bother to tell Mum this for two years as they cheerfully accepted the premium for an $1100 phone. Or there was the outrageous case of the recent floods in Wollongong last year. Several residents in one street had their claims denied by the NRMA
because the damage was apparently “storm water damage, not flood damage.” Can you believe that? You have to imagine some pigeon-chested little turd of a bean-counter, sitting in his office thinking to himself, “if we say that it was storm water damage, we’ll save ourselves $450,000. Hoo-hah!” People are having their houses washed away! I can’t believe it’s not possible to arrest someone like that and throw away the key. Can’t we invent some criminal charge like “being a total prick to the rest of the human race?” Apparently not. Apparently it’s all legal. They eventually paid, of course, after it became a PR debacle and they had their arses hauled up onto Today Tonight.
Or that old-age pensioner in Seven Hills who held a life insurance policy for 55 years, and then the insurance company cancelled it on her because she got too old. True story.
Insurance is an industry founded on fear. No-one ever goes into insurance hoping to do a little good for the world – it’s always money. Real estate is the same (don’t get me started on real estate agents), but unlike real estate, insurance feeds off the general population’s Fear of Bad Things. We have this fear largely because we sit glued to the TV every evening fascinated at the proliferation of carnage, crime and destruction that is paraded before us masquerading as news (am I mistaken, or isn’t the word news actually a derivative of the word new? When was the last time you saw something new on the news?). We see these awful tragedies every day on our televisions, so we assume that they must be commonplace. They’re not, of course, but it’s a delusion that the insurance companies are very happy for us to live under. If I was paranoid, I’d be going around saying that the six o’clock news is being secretly funded by insurance companies. I’m not paranoid, of course. I know that everyone secretly thinks that I am, but I’m not.
Let’s say that you’re one of the lucky ones, and you actually get a claim paid in full by your insurance company. What happens to your no-claim bonus? Well, naturally it’s gone. A “no-claim bonus” is really just a happy, warm-and-fuzzy way of saying that those who make claims get penalised. With some insurance companies, if you’re unfortunate and have to make more than one claim in a year, your premium and your excess are actually raised! Like, all of a sudden you’re a bad risk. Try it on with the claims department one more time, and, once they’ve paid, they’ll often refuse to reinsure you in future. “Sorry, you’ve become a Bad Risk” (read between the lines: “we only insure good risks”).
So let’s summarise. If you’re an average, or above average, person, you end up paying more to insurance companies than they pay you (over the course of your insured life). If you’re considered the sort of person that’s in any way likely to make a claim, you’ll get penalised with higher premiums and excesses, or perhaps you simply won’t be able to get insured at all.
So, yes I paid out $10,000 after my accident, but if I added up the cost of that and the other one or two minor scrapes I’ve had to pay for, and compare the total to the cost of insurance premiums and excesses for the last 14 years, I think I may well be ahead.
I would imagine that the costs of health, car, life, income, home and contents insurance must set the average family back easily two or three thousand dollars every year. I’m going to suggest that, if you’ve got the discipline, instead of insuring, you take that $3000 and put it in the bank (or even better – buy some shares in an insurance company), and call it your “Accident and Emergency Fund.” I would bet that by the time you’re seventy you’d have, including interest, the best part of a million dollars, and probably never have had to make a withdrawal. Food for thought.
These days I only take out an insurance policy if I’m planning a scam. In my book, ripping off insurance companies ought to be a national sport
So. There’s my two cents’ worth. I’ll get down off my soapbox now. If anyone out there has any thoughts on this (or anything else) that they’d like to share, I’d love to know about them. Use the “Comments” link/box below…
Tim Rosser Says:
April 2nd, 1999 at 3:04 pmVisit Tim Rosser
Mark, for the most part I agree so hard I could have written it myself. And not only is my car mostly uninsured, I don’t lock it. Let’s face it, it’s easy to get in – just break the window – but getting it started is a whole lot harder. I learnt this when I lived in Surry Hills after a broken window and screwdriver in the lock. The culprit just wanted to look in the glovebox and knock off some lose change. So I let em. It’s cheaper than replacing the window.
There are a few exceptions (where I pay for inusrance).
– Where you can’t afford the consequence. So don’t every buy a flash car and you won’t need to insure.
– Required by law – CTP, on the house for a mortgage. Though I will underestimate the value of the house to reduce the premium.
– Other benefit. Eg professional indemnity insurance lets me bid for government business.
Value of insurance = cost of insurance – (insurance company profit and overhead + insurance fraud + your time to apply and claim)
The other cost is delay. If you have to submit paperwork and get three quotes and fight for years, you may as well not have the insurance. The more your time is worth the less it is worth claiming. Self insure.
Rohan Says:
April 2nd, 1999 at 3:04 pmVisit Rohan
I once installed a cut off switch in my rusty 1967 VW Kombi. After an entire carpark full of sympathetic holiday makers had pushed the beast around the car park, burning their feet on the hot ashphalt and cursing me, the NRMA (quietly) suggested the cutoff switch was still activated. He was right and after a few more push starts it ran like a dream. All that effort, all those pissed off people – just so I could protect my rusty $800 investement. But that was my theft insurance.
I am still a firm beleiver that so long as the car runs well enough, then
a: It doesnt need to be new
b: doesnt need insuring for theft/fire
c: chicks know I have a huge penis cos’ I’m not trying too hard
d: hence I dont have to wear Menage anymore
In fact, i dont have to worry about parking in scary places, or next to menacing paint gouging 4WD’s. Parts are cheaper and I am acting in an environmentally sustainable manner.
Life must be pretty empty if folks really need a fancy car to self actualise.
G. T. Smith Says:
April 2nd, 1999 at 3:04 pmVisit G. T. Smith
Mark, no one hates insurance companies as much as I have learned. It all started in 1994 when I had an accident on the way to work. I had a few speeding tickets and one theft report on my insurance record, but, I was not speeding on my way to work. I don’t remember the actual accident and I vaguely remember being discharged from the Rehab. I don’t remember the hospital at all where I was in the coma.
I do remember the insurance company adjuster was with me from day one of my discharge. A lot of people had told me to get a lawyer and what have you but, I mistakenly thought that that would be disloyal to my adjuster as she was with me from day one. I told her that the physical therapist and social workers had all told me to get a lawyer and she acted shocked and said she was there to help me and asked me if I was going to get a lawyer. I said no because she seemed to want to help me.
The next year and a bit they kept me busy with Volunteer work and when they were able to they cut my Income Replacement Benefits off. For the first time in my life I couldn’t pay rent and other needed bills. I had wondered why in the past year that these people, my adjuster had helping me, were also showing me where the Welfare Office was and where the food bank line-ups were. These things came in handy.
After all this hell I went through I had moved to Ontario with family and got a job in a warehouse. I was cycling home from work 2.5 years ago when I was hit by a car breaking my shoulder in two places. I have needed surgery to get the shoulder back to less then 50% recovery. The Dr.’s and surgeon all say that physical labor is over for me.
The Insurance companies have called me and told me not to get a lawyer. This province is not like British Columbia and we have private insurance companies where I will get substatially more money without a lawyer. I told this joker that I heard this song before back in British Columbia and that trusting attitude left me flat broke on the street. I do have representation here in Ontario. I would never face these Insurance companies again without representation. I feel that Insurance Companies are no better then criminal organizations. I don’t know how the people working for them can sleep peacefully at night.
This new lawsuit isn’t over yet, but, I don’t think I will end up in the poor house like I did in B.C. after my head injury. I am going after everything that is rightfully mine without any feelings of guilt. These insurance companies would love me to start feeling guilty again. They are all the same everywhere I am finding.
Mark Says:
April 2nd, 1999 at 3:04 pmVisit Mark
Ouch!
Lesson well learned. Thanks for that, G Smith.
And good luck with the lawsuit!
Mark.
Michael Says:
April 2nd, 1999 at 3:04 pmVisit Michael
amazing how chizelling, petty and paranoid insurance companies have become. they won’t insure me for life insurance after i quit my job. I had chest pain that i went to see my GP about. He sent me for ECG’s, echocardiograms,stress tests, blood work- all ok. then the cardiologist said i needed to have a thalium test “just in case’. When I asked about the radiation exposure, half life of the isotope, incidence of false positivest etc, he didn’t know. There is no way i was going to have that test. Not having that test was the basis of the insurance company refusing to give me a fair premium! I went to a physical therapist and found the cause of my pain to be an old skeletal muscular injury
Makkus the law Says:
April 2nd, 1999 at 3:04 pmVisit Makkus the law
People, we must be aware that today we live in capitalism….the reason why all companies in the world exist is….. drumroll…. MONEY
Andrew Says:
April 2nd, 1999 at 3:04 pmVisit Andrew
Agree with the idea of leaving your car unlocked. My car was broken into….and the thief didn’t find anything worth taking.
Glass replacement excess is $400.00. I could get it repaired the next day (a Sunday) for $500.00. I could wait until the Monday (which I am sure the insurance company would have made me do) it would have bee $399. So rather than go through the insurance bs I just paid for it to be done that Sunday so I could get to work on time.
This very Sunday Evening my car caught fire …. unfortunately I didn’t have my PDS on me and access to a website wouldn’t help me as to this very moment NRMA only has the PDS for Comprehensive has the big disclaimer of being for NSW and ACT only (I live in Queensland).
Made a claim while the fire brigade were disconnecting the battery. Told the girl on the line exactly what was happening. No problem they would pay for everything including the line “give your claim number to the tow truck driver (which they arranged)and they will bill us (NRMA) direct”. Same story on Monday with the claims officer.
Only Today (Tuesday) do I get the assessor on the line telling me they wont* pay anything because the fire was caused by electric malfunction and the actual fire appears to have done no damage (which should be a good thing!)
One I am annoyed at the no payment stance but what is a bigger annoyance is the backflip. If they had of told me straight away that they won’t pay for anything caused by electrics, when what I had told them clearly indicated that was the cause. I could have saved time and money.
I could have got a free tow with RACQ to the closest auto electrician and would have my car back faster and at less cost…. Having insurance ahs cost me MORE money than if i was not…and that is not including the 5 years of premiums they got from me.
* Still ongoing and I am going to fight it due to their misrepresentations over the phone but I can see where it is going.