I have never had anyone say to me, unprompted, “I love insurance”. I have had people tell me they hate it, though!
I don’t believe these people actually hate insurance at all. I think what they mean is they hate having to think about insurance, because that means thinking about the terrible things that insurance protects us against. I think what they mean is they hate having to deal with insurance, either because they have had a bad experience with a provider, or it seems like just another task to have to manage andanother bill to pay.
So, I think what most people mean when they say they hate insurance is that they hate wasting money and being scared. You know what? I hate that, too.
But no satellite gets shot into the sky without insurance; no new technology is introduced to the public without insurance. Insurance enables innovators to test their products. It should be a good thing.
To be honest, I wasn’t immediately attracted to the insurance industry. When I moved to London to practice law I began to work with Lloyd’s underwriters, handling claims with Australian banks, and it opened my eyes to an amazing part of the financial and legal world I hadn’t had any experience in, but in which seemed full of possibility.
I was headhunted back to Australia working for a large international broker as a legal manager. On the business side, I helped financial institutions develop and put in place their complex insurance needs. It was the best of both worlds, and I learned that I loved the business side. The more I worked in insurance, the more I learned to love it.
Why insurance isn’t a waste of money
In order to fully appreciate what you’re paying for when you take out an insurance policy, you have to understand the policy. Often it can be couched in impenetrable legalese and you’re left feeling more confused than you were when you began searching.
This is where your financial literacy comes into play. This is a topic I’m very passionate about. The more you know, the more comfortable you can be in your decisions. Recently CHOICE, the consumer advocacy group, has called media attention to how difficult it is for policyholders to really understand what they’re getting when they buy into government-subsidised health insurance, calling it “junk” insurance. People don’t know what they’re getting, and they’re finding it difficult to switch to a policy they do understand – if they can even find one.
Insurance is a tool. It’s one tool of many that can help you reach your financial goals. While you may feel like it’s more beneficial to invest your money or put it into savings rather than buy insurance, it’s vital to understand that an insurance payout is there for when the cost is too great for personal savings.
Let me put it this way: if you have the right kinds of insurance, you pay insurance premiums hoping you never have to make a claim. Insurance is designed to cover situations that are unlikely to happen and that would result in significant financial loss for which you will probably never have the personal savings required to cover it on your own. When something is highly likely to happen, insurance is not cost-effective. If you have the savings or you can avoid the risk, you don’t need the policy.
That’s why insurance isn’t a waste of money. It might save your house or livelihood from a circumstance you can’t begin to imagine.
Read more: Why you need a saving buffer
Why insurance isn’t scary
You don’t wear a bulletproof vest hoping to be shot. If you end up taking the vest off without ever being shot, then you’re glad you had the protection even if you didn’t need it. If you do get shot, then you’re happier to have had the benefit of the protection.
That’s why insurance isn’t scary. You’re not scared of the bulletproof vest. You’re scared of being shot.
To put it back into insurance terms, it’s the risk that’s scary. But by increasing your financial literacy, by putting money aside for emergencies and accidents and irregular expenses, and by having insurance, you can increase your chances of surviving the kinds of events that could ruin your financial health.
Everyone can have a car accident, or have a storm suddenly rip through their house. Everyone can slip down the stairs. Everyone can look away for a second and have a toddler spill hot coffee over themselves. I’ve had experience with claims where businesses have unintentionally given negligent advice and their professional indemnity policy claims have responded. There’s a significant amount of relief there. Yes, they made a mistake and were sued and had to go to court, but the policy responded appropriately and eased the bad situation.
Insurance isn’t scary. The world can be scary; insurance is there to help with the risk of living in it.
Read more: 3 easy way to boost your financial smarts
Insurance is evolving
Insurance is associated with the bad times, and it’s probably never going to have a golden reputation. It’s also hard to trust someone selling you something that you’re probably never going to get to see or touch or use, which is probably why insurance agents rank below politicians in terms of trustworthiness. I’m a passionate believer in the industry though, and I know that it is making changes in the right direction.
New research from Roy Morgan indicates customer satisfaction in smaller health insurance funds is increasing. Personalisation is a huge thing in the insurance and insurtech industries right now: insurers are asking what customers want insured and customising plans to suit.
Technology is enabling new policies and claims to be turned around faster, and insurers are becoming more transparent about showing how it’s done.
Insurance is about figuring out what risk you have and where you’re exposed, and then finding policies in the market that exist to mitigate that risk, to protect you from that risk. Finding the right policy for the right risk is key, and that’s why, if you don’t have complete confidence, you can find an insurance broker who can take care of it for you. It’s not about buying the cheapest policy; it’s about buying the right one.
Why should we love insurance? People make mistakes. People do stupid things. Most of the time, no one is hurt by our stupidity or our lapse of judgement. In the space of a moment, you could lose your house, your savings, your reputation – everything. A good insurer recognises the situations where negligence was unintended, and where it could have profound consequences.
When insurance works, it works beautifully. If you embrace it, it’s like having an employee who looks after all your administration; you never notice it when they’re there, but when they’re gone, suddenly the problems pile up.
It’s often difficult to understand insurance. It’s associated with worry, risk and financial distress. But I love it, because I understand it, and because I want to protect myself from the kinds of unlikely events that I know could happen any day. I’m not scared of my insurance, and you shouldn’t be, either.
Read more: Starting a business? Did you forget insurance?
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