Wednesday 17 October 2007

Insurance in the Aftermath

Insurance has always struck me as one of the unsung wonders of capitalist civilisation – a private, commercial means of spreading the cost of some of the worst contingencies of the human condition. Churchill’s characteristically romantic and ringing advocacy of insurance is well-known*.

But after the floods of the summer, we appear to be seeing the insurance paradigm in retreat before the ravages of climate change: the API has suggested that it will not be able to offer cover for large numbers of properties unless the government builds more flood protection. Is this just trying it on à la banking industry ? - or the recognition that some things are just too big, too actuarially iffy for private commerce to be able to step up to the plate.

Similar thought-processes stem from the prospect of advanced genetic screening: what commercial cover will be available for those known to have ultra-high predisposition towards expensive disease ?

The future may thus be characterised by, on the one hand greater certainties in areas previously seen as subject to random events, and on the other, reduced certainties in the face of global upheavals of several kinds. If this is right then a very disquieting shift will take place, towards ever greater roles for government – not, in this scenario, by dint of a socialistic land-grab, but of a capitalistic retreat. This is not a happy prospect.

We have several insurance practitioners amongst our readers: any views ?


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* "If I had my way, I would write the word INSURANCE over the door of every cottage and upon the blotting book of every public man, because I am convinced that for sacrifices which are inconceivably small, families can be secured against catastrophes which otherwise would smash them up forever”.


Old BE said...

Health insurance isn't the same as any other insurance which is why it's not possible to lump it in the same category as, say, hurricane insurance.

I don't like the way the NHS (doesn't) works but I do think there is a strong case for tax-funded healthcare but not for flood insurance.

Anonymous said...

Its odd that the Goverment seems to be baling out people who didnt get insurance - why would I bother if the state will pay?

James Higham said...

As premiums go through the roof, the desirability of insurance will decrease, Nick.

Nick Drew said...

Yes I can see that pricing may be one of the mechanisms by which the retreat is conducted, but unless things 'settle down again', the net result seems to be either or both of (a) greater uncovered exposures; (b) publicly-provided cover to a greater degree

I don't relish the implications of either, they both seem less economically efficient

but perhaps if the underlying reasons are an objective increase in risk, it's inevitable ...

Anonymous said...

"I don't like the way the NHS (doesn't) works but I do think there is a strong case for tax-funded healthcare but not for flood insurance."

Well I certainly don't. The UK is the only country in the world that runs its health system as a huge monolith like this - the NHS is the worlds bigest employer (strangely it fails to benefit from its size when purchasing derugs etc but it is obviously run by dimwits). In Germany the system is run by compulsory insurance which can be topped up with optional insurance. The hospitals are effectively regulated private practices which are guaranteed some income from the state but get the rest of their income from patients. This guarantees the future of the hospital but gives the patient very significant buying power, ensuring good and prompt treatment. It also means that the top-up insurance payments are used effectively - rather than being used to create an entirely private system in parallel to the pubic system as in the UK the money is spent in the self-same hospitals so in practice everyone gets to benefit a bit from the extra expenditure available.

The problem with the NHS is the patients have no buying power. Hence doctors (who rapidly become immune to human suffering, to protect their own sanity) see patients as a "problem" thus fewer patients = fewer problems. Putting old people on waiting lists in the hope they might die before needing treatment therefore becomes a good strategy. In Germany this doesn't happen, because old people have buying power in the system.

Newmania said...

health is a little like Life Insurance and any other sort of 'Assurance' PA for example.

No this is silly I would be able to set up a scheme for flood distressed risks myself, perhaos we should .In France the have Nat Cat Pools that cover catastrophic accumulation risks and we have a Terrorrism Pool here.

The problem is no that there isn`t as yet a Premium that the market can set its that the inhabitants may not wish to pay it and the law of large numbers will not operate sufficiently on their behalf initially .

I think what may be happning is a pre retalliation at the squawks that will go up when the Premiums are offered. People oddly view this fabulous boon as like atax . It is not , it is the deal of your life but people resent it being so used to the buyer being the stronger partner.

There is also the bullshit factor .The Composite market actually no fuck all less nothing about anything and love going to meetings to discuss matters of social import when they should be doing the photocopying .

If there any money in it I`ll do it myself the accumulation is a problem but

Newmania said...

In the US they have a surplus slum pool which you have to take a proportion of to get a licence. We don`t control that now it an EU function , but a flood pool would be easy to set up , in fact Insurers would love it.

Fussy though. we are awash with capacity in the market now there are all sorts of ways to solve this. had the same problem with subsidence a while ago which is less obvious but just as costly ...anyway I am trying to think of a graphic blurb for our new wholsesale web site. So far I have

Giving you an Edge
A better way of doing business
Certainty aquired at speed

WE`re fucking cheap !!!
Whores are us ?

( ok not the last bit )

Nick Drew said...

we are awash with capacity

does this mean all the whingeing & special-pleading is just a try-on, Mr M ?

If we set our minds to it, I am sure we can assist with your slogan-hunt ...

Newmania said...

Insurance has its own cycle and it is currently deep into the softest Market here i have seen in twenty years . Risks paying £50,000 are now paying £10,000 hence the pressurre on old Mr. 10%( who was doing very nicely a year or two ago)
Capacity feeds through the reinsurance Market into the front Insurers and it is effected by world wide fluctuations and Hurricanes and and so on.

This means there are endless people around willing to do anything for anything . In this country it is even worse as you can now be licensed anywhere in Europe so the old stability is gone .

If anyone cannot place some flood business give it to me . I `ll do it .. take a week to set up and only on the promise of a good flow but no problemo.

Any help would be good Nick ,,,but no Solutions ,...and nothung funny or quirky or memorable . Dull and reliable

Newmania said...

does this mean all the whingeing & special-pleading is just a try-on, Mr M ?

Yes its amarjketing thing . As I say people resent premiums and they do not want to look exploitational. Its the Governments fault .

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