Insurance – Managing Your Risks


Despite 2011’s tally of 99 catastrophic storms and weather-related disasters—an all-time record—and some of the largest property insurance payouts in U.S. history—14 storms doing more than $1 billion in damages—customer satisfaction with the insurance industry boosted its batting average up to .833 on a 1,000-point scale in 2012. That is 10 points higher in satisfaction than in 2011. The Northeast Region, however, beat the national average with an 18 point jump in approval. Auto owners also ranked their insurance satisfaction quite favorably, with scores as high as .873 for some companies. (Statistics: J.D. Power and Assoc.)

Satisfaction is hard to achieve, when payouts remind you of the disasters that triggered them. Satisfaction begins, however, with customer relationships, not payouts. Local insurance agents provide for special relationships to assure a customer that his or her personal needs are considered. In close-knit communities typical of Western New York, agents and staff in every office are likely to be friends, neighbors or friends of neighbors. In this day of on-line shopping, the insurance industry offers a refreshing social anchor within every neighborhood.

The principle behind your insurance is simple. Lots of people pay a little bit of money into a very big pool. If one of those people has a certain highly unlikely accident, the pool is big enough to pay that person’s damages. For example, in more than 130,000,000 U.S. households, an average of only 47 deaths occurred from lightning hitting the house during the first decade of the 2000s (NFPA).

Of the nearly 11,000,000 vehicles on New York State roads and highways, 95 percent are insured. On the other hand, only 80 to 85 percent of Americans have health insurance. As the number of insured drops, the risk is shared by fewer, and the premiums must go up. On the other hand, while relatively few people are killed by lightning, almost everybody gets sick; the higher the risk, the higher the premium.

An experienced and knowledgeable insurance agent is specially trained in the best, most efficient methods of balancing risk against cost in the science of risk management.

The insurance industry has grown a few lesser known branches too. They are involved in every day life in ways the average citizen may not expect.

If you offer a $1,000,000 prize, for instance, for a hole-in-one hit on your golf course, you can buy “hole-in-one insurance” to cover you on the 1-in-26,500 chance that a duffer will actually do it. There’s even an entire Hole-in-One Insurance Services Trade Association to protect sponsors of “tee to hole” and “putt for dollars” types of contests.

Then there is the Prize Indemnity Insurance that paid off after The Price Is Right’s “$1,000,000 Spectacular” produced three totally unexpected millionaires in only six episodes in 2008. Show producers had hoped it would be the rarest of accidents, but they learned too late that they had miscalculated the games’ chances of producing a winner. The Price is Right changed the game.

Risk management means an individual can also “change the game.” Insurance companies are more and more frequently lowering premiums for people who lower their risks. Health insurance can benefit from weight loss, smoking cessation and other sensible preventive activities. Auto insurance can benefit from showing safer driving practices and a no-accident history.

However, sky divers from 40,000 feet, 200+ mph NASCAR drivers and NASA astronauts may still experience some challenges in obtaining some kinds of insurance. Only a good insurance agent can tell.

Insurance is almost as ancient in human history as risk. Chinese and Babylonian traders, as long ago as 4,000 to 5,000 years, realized that merchants on treacherous rivers or traveling where thieves and pirates lurked needed to manage their risks. The Chinese spread their wares among many vessels to limit their losses; no single cargo could become a total disaster. A Babylonian merchant who obtained a loan to fund his shipment, could pay the lender extra to cancel the loan if the shipment was stolen.

The methods may be different today, but not much less creative when a good insurance agent sits down with a client to map out all the risks and find intelligent ways to manage them.

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Walt Pickut
Walt Pickut’s writing career began with publishing medical research in1971 while working at the Jersey City Medical Center and the NYU Hospital and School of Medicine. Walt holds board registries in respiratory care and sleep technology as well as bachelor's degrees in biology and communication, and a master's degrees in physiology from Fairleigh-Dickinson University in New Jersey, with additional graduate work in mass communication completed at SUNY Amherst. He currently teaches Presentational Speaking in the Houghton College PACE program at JCC and holds memberships in the Society of Professional Journalists and the American Society of Business Publication Editors. He lives in Jamestown with his wife Nancy, an MSW social worker, and has three children: Dr. Cait Lamberton in Pittsburgh, Bill Pickut, a marketing executive in Chicago, and Rev. Matt Pickut in Plymouth, IN.