A Miracle Called Insurance

Recently, I went to give a lecture on Insurance at a local school in Muscat. The lecture was, in fact, intended to tell basics about insurance. All went well. Couple of days later, I received this following mail from a girl called Ms. Priya. This girl has asked a very innocent question. The answer tests our understanding of Insurance. I am imperfect. However, I tried my best to answer her.

Please Read on…

The Letter:

Dear Sir,

My teacher says there is no such thing as insurance in this world anymore; it is all just financial services and cash flow statements. I think my teacher is not correct. Will you please tell me if there is really such a thing as insurance in this world?

Looking forward for your reply, I remain Sir.

Sincerely,

Priya

The ReplyWell, Priya, you have asked an interestingly profound question. And at the right time of year! There are a lot of people who agree with your teacher. It does seem lately that everywhere you go, all the talk is about financial instruments, banks, alternative-market mechanisms, the Internet and cash-flow underwriting. It is almost as if insurance either has become a bad word or has just gone away! Some may even wonder if it was ever here at all, or if it was just a word made up by some long-lost marketing person.

If you were to talk about Goddess Laxmi visiting our homes on Diwali – the concept is gladly accepted. However, talk about Insurance – you would be wondering if there is still something to believe in, some magical thing known as insurance that actually exists and makes people’s lives a bit brighter.

Dear Priya, I believe there is.

Insurance and its wonderful philosophy may have been buried within all the fine print and legalisms. It may have gotten snarled in all the financial mergers and consolidations. It may have slipped between the cracks of the banking and alternative-market issues. I do not think it went away; on the contrary, I think many of us just quit looking for it.

We have become too cynical, Priya. Forgive us. We think it is more important to argue over the commas and full stops in a form than to see the true meaning of insurance. We get caught up in fighting for our point of view and forget why any of it matters. To paraphrase a famous philosopher Descartes, we have fallen into the trap of thinking, “I know exclusions, therefore I am.” We are successful in mastering the words over meaning. In other words, Priya, we can no longer see the forest for the trees.

Some may blame it on lawyers and others our education, but that would not be fair. We have done it to ourselves, and for that grievous error I am deeply sorry & I apologise from the bottom of my heart. Please do not think badly of your teacher. Perhaps I have contributed to his or her thinking with these very articles.

You may ask why you should apologise. And how did you contribute?

I could have well contributed by talking about the words and not the meanings; By discussing the forms and not the results. By focusing on the individual jigsaw pieces and ignoring the picture on the box. By entirely forgetting the miracle called Insurance.

It is the miracle, which is what Vijayadashami / Diwali is all about. But one legendary life insurance salesman, called insurance: “the miracle of pen and ink.”

Oh, I know many in our world are suppressing a cynical grin or even dismissing me with an “of course you are right.” Some may say, “He was talking about life insurance!” Please do not listen to them, Priya. They don’t really mean it. Just like your teacher, they have forgotten or just become so caught up in the endless and often trivial details that they have lost sight of the miracle. And the miracle is no less real in property and liability insurance than in life coverage.

And the miracle is still there, Priya. It continues to exist. The miracle is there when we look at replacement cover in a home insurance policy and realize that we’re giving a flood -ravaged family not just a new building, but a new home.

The miracle is still there when we look at a commercial-liability claim and realize we are not just dealing with lawyers but we are protecting a business while helping an injured party to heal and to gather the pieces of fallen life.

The miracle is there when we handle a workmen compensation claim and realize we are not just calculating lost salaries; we are, in fact, putting food on an injured worker’s table.

The miracle is there when we settle an motor liability claim and realize we are not just paying a lot of money to a grievously injured widowed mother; we are making it possible for her children to go to college if she can no longer earn the money herself.

The miracle is there when we pay towards a settlement to someone accidentally injured by an insured and realize we are not only helping the injured person recover; we are actually comforting our insured who is grieving over having caused the unfortunate accident.

The miracle exists when nothing happens at all, but our insured sleeps better at night because we have given him or her that much less to worry about from the vagaries of nature and chance.

Is it not a miracle when we realize that a householder paying Rs. 1,000 a year for a householder’s policy on a Rs. 100,000 house will take 100 years to pay in the coverage limit — and that is only the basic cover! To break even on a Rs. 300,000 liability claim under the same policy, the insurer will have to collect premiums for another three centuries! Heaven forbid there also should be a loss-of-use claim!

The miracle is there when we see a politician circling over a disaster area promising government money, and we realize that those funds will be a drop in the bucket compared with what insurance companies will pay to rebuild that community.

It is a miracle when an insured pays Rs. 300 for a personal-umbrella policy and realizes his insurer just opened a bank account in the insured’s name and deposited Rs. 1 million that can be tapped into whenever a covered liability claim arises — even if that is only an hour later!

People who do not see these truths as miracles need to reset their cynic meters. They have been working too hard for too long. I proudly carry a card that says, “Miracles still happen to those who believe in them.” Believe me Priya, without insurance, our world would be a darker, more dangerous place. In fact, insurance is so crucial to our lives that if it did not exist, we would have invented it.

I am very glad you wrote, Priya. Thank you, I am reminded how great the industry I have chosen as my own truly is, and how much better off we are for having it. Yes, Priya, there is insurance. I hope this indisputable fact brings you some happiness this festive season, because that would make two of us.

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By: Dr. K. Raja Gopal Reddy Phd, FIII, FCII(UK), FLMI (US), Chartered Insurance Practitioner