Insurance-Foolproof or Fool's Gold?

• Published in: Environmental Claims Journal Vol. 16; no. 1; pp. 41 - 53
• Main Author: Anderson, Eugene R.
• Format: Journal Article Trade Publication Article
• Language: English
• Published: Boca Raton Taylor & Francis Group 01.01.2004; Taylor & Francis Ltd
• ISSN: 1040-6026; 1547-657X
• DOI: 10.1080/10406020490437433

Insurance and insurance-like products have perfectly obvious characteristics that are little appreciated. Insurance is bought today that will not be delivered for years to come, if ever. The "if ever" characteristic means that the interests of the policyholder and the insurance company diverge as soon as a claim is made. Large claims are unlikely to be paid promptly and willingly by commercial insurance companies. The keystone of insurance is the assumption by buyers that their claims will be paid. When that assumption disappears, then insurance is of no value. Insurance is based on trust. A premium is paid with confidence that, should a future loss occur, the insurance company will have both the resources and the willingness to pay. From an insurance company's point of view, resisting large claims has become an effective, perhaps even necessary, competitive strategy. From a policyholder's point of view, the cost of collection has gone way up and reliability has gone way down.