Even though we – the policyholder – are eternally at an economic disadvantage, are existing standardized insurance policies just a mere triumph of clever marketing?
By: Ringo Bones
For all intents and purposes, an insurance agreement is normally just a contract of adhesion. That is, one that’s not open to individual negotiations. Policy forms are often standardized – except for the opportunity of selection among various basic forms and endorsements, the buyer – i.e. you and me – in most instances has only the choice of taking insurance on the insurer’s terms or declining it altogether.
Ever since the start of the modern insurance industry, the average insurance buyer has always been at a bargaining disadvantage due to his or her limited range of choice, his or her inferior economic position and his or her inferior understanding of insurance in comparison to the insurance provider. Ordinary freedom-of-contract principles have, therefore, been qualified in ways favourable to the insured. For example, in cases of ambiguity, which the courts have been assiduous in finding, the contract is usually interpreted against the insurer.
Standardization of insurance contracts was accomplished mainly by the initiative of the insurers, singly or in cooperation. Such private initiative is still a very important factor, but the methods by which standardization is now achieved include legislative adoption of policy provisions under legislative authorization, administrative approval or disapproval of forms presented by insurers, and legislative or administrative disapproval of particular policy provisions.
Standardization cuts down the range of choice of the individual buyer of insurance, but has compensating benefits. It provides an approximation of the insurance needs of most persons based on accumulated underwriting experience, makes it easier to find an appropriate basis for premiums and – most important of all – makes possible the economy of mass marketing.
Insurers are often held liable for a loss occurring to the insured before his or her receipt of a formal insurance policy. Believe it or not, oral contracts of insurance are valid in most circumstances, though seldom used except in the in the form of an oral binder for a brief period pending preparation of a written policy. A temporary contract that’s good until a permanent policy is issued may also be made in writing. An agent who purports to make a temporary contract, oral or written, but is without power to bind the insurer he or she pretends to represent, is held liable personally as if he or she were the insurer in the event of loss. Another basis on which many courts have imposed liability is unreasonable delay by the insurer in acting on an application.
Customarily, the terms of a life insurance policy make it effective only upon delivery of the policy, unless a binding receipt for temporary insurance has been issued. In some instances, however, delivery is found to have taken place when the policy has reached the hands of another, often the agent, to be held for the insured. This is true despite the fact that the insured has not received it.
So what does this all mean to the average insurance policy holder – i.e. you and me? Given that we are for all intents and purposes at an economic disadvantage, the wide choices available out there by competing insurance providers now places the average consumer at a better economic advantage – even when compared a few years ago due to the wide variety of policies being offered. Some are even seem to be tailor made to what we're looking for while being offered at mass market policy holder prices.
Wednesday, October 20, 2010
Thursday, October 7, 2010
A Surfeit of Natural Disasters: Good for Insurance Companies?
It might seem counter-intuitive, but does the recent increase in the number of natural disasters provide profit opportunities for insurance companies?
By: Ringo Bones
Insurance company Lloyds had recently dubbed 2010 as “The Year of Natural Disasters”. In retrospect, even before the year is out, it does seem that 2010 could be the year of natural disasters. Like the tragic earthquake in Haiti at the start of the year, followed by months later a much stronger earthquake in Chile and the more recent one in New Zealand. Not to mention the extreme monsoon floods in Pakistan back in July and the wildfires brought about by a prolonged drought in Russia. Thus making 2010 a year of natural disasters, but how is this good for insurance companies?
The earthquakes in Haiti, Chile and New Zealand, the extreme monsoon floods in Pakistan and the prolonged drought that started a fire in Russia might have resulted in a 57% drop in forecasted profits this year for Lloyds of London due to insurance payouts. But the famed insurance company’s ability to pay it’s policyholders through thick and thin had resulted in more corporations availing themselves of more insurance policies against natural disasters. Doesn’t more policies – in other words capital input – usually translate to more potential profit?
Anyway you look at it, most of the existing insurance companies – if they play their cards right – could probably profit from the opportunities provided by the “Year of Natural Disasters” through increased capital input in the form of new clients / new policyholders. Corporations that avail themselves of natural disaster policies with guaranteed payouts can be one sure way to hedge their assets against potential risks. It is only logical that more issued policies usually translate themselves to more profits for the insurance company providing them.
By: Ringo Bones
Insurance company Lloyds had recently dubbed 2010 as “The Year of Natural Disasters”. In retrospect, even before the year is out, it does seem that 2010 could be the year of natural disasters. Like the tragic earthquake in Haiti at the start of the year, followed by months later a much stronger earthquake in Chile and the more recent one in New Zealand. Not to mention the extreme monsoon floods in Pakistan back in July and the wildfires brought about by a prolonged drought in Russia. Thus making 2010 a year of natural disasters, but how is this good for insurance companies?
The earthquakes in Haiti, Chile and New Zealand, the extreme monsoon floods in Pakistan and the prolonged drought that started a fire in Russia might have resulted in a 57% drop in forecasted profits this year for Lloyds of London due to insurance payouts. But the famed insurance company’s ability to pay it’s policyholders through thick and thin had resulted in more corporations availing themselves of more insurance policies against natural disasters. Doesn’t more policies – in other words capital input – usually translate to more potential profit?
Anyway you look at it, most of the existing insurance companies – if they play their cards right – could probably profit from the opportunities provided by the “Year of Natural Disasters” through increased capital input in the form of new clients / new policyholders. Corporations that avail themselves of natural disaster policies with guaranteed payouts can be one sure way to hedge their assets against potential risks. It is only logical that more issued policies usually translate themselves to more profits for the insurance company providing them.
Monday, October 4, 2010
Self –Insurance: Insurance of Choice of Big Corporations?
Currently made famous during the course of the BP Gulf of Mexico oil spill investigation, is self-insurance the primary insurance of choice of big corporations?
By: Ringo Bones
With the scope of the catastrophic oil spill necessitating in the replacement of British born chief executive Tony Hayward with the American born Bob Dudley, BP had recently thrust into the media limelight the concept of self-insurance – albeit for all the wrong reasons. Given the billions in payouts BP will eventually give away to one of the most litigious countries in the world affected by the catastrophic April 20, 2010 Gulf of Mexico oil spill, is self-insurance still the ideal primary insurance of choice of big corporations?
As far as it became available, everyone in the insurance business already have a consensus view that self-insurance is practical only for large organizations and / or corporations with widely separated risks – as in multi-national corporate firms. Very useful when the firm using self-insurance must be prepared to pay losses as they currently occur. A firm wanting to avail themselves of self-insurance may purchase excess insurance so as to avoid the effect of catastrophic losses. Although large corporations can handle the relatively higher-cost premiums of self-insurance, will there be any unforeseen pitfalls if they elect to avail themselves to this sort of insurance?
Given the risks and the certainty of catastrophic losses that the oil company BP faces on its day-to-day operation must be important enough to warrant self-insurance, the steep premiums of such insurance has recently made everyone closely watching the BP Gulf of Mexico oil spill investigation wonder whether BP diverted their safety budget to pay for self-insurance premiums in order to save money; Even if such a move have resulted in catastrophic accidents to occur, like the 2005 Texas City BP Oil Refinery explosion.
From spending millions in PR adverts that could have been more useful being used to compensate fishing industry workers affected by the catastrophic April 20, 2010 oil spill to whether slashing their safety budget to prop-up their bottom line, BP’s current economic viability might still be in doubt. Only time will tell if the company’s choice for self-insurance will actually pay-off so that they can be profitable again as they move on from the catastrophic Gulf of Mexico oil spill – which now has overtaken the Exxon Valdez spill of 1989 as the worst oil spill disaster to occur in US territory. If BP manages to stay afloat despite of the billions in pay-outs, then self-insurance could be the best profitable choice for big corporations.
By: Ringo Bones
With the scope of the catastrophic oil spill necessitating in the replacement of British born chief executive Tony Hayward with the American born Bob Dudley, BP had recently thrust into the media limelight the concept of self-insurance – albeit for all the wrong reasons. Given the billions in payouts BP will eventually give away to one of the most litigious countries in the world affected by the catastrophic April 20, 2010 Gulf of Mexico oil spill, is self-insurance still the ideal primary insurance of choice of big corporations?
As far as it became available, everyone in the insurance business already have a consensus view that self-insurance is practical only for large organizations and / or corporations with widely separated risks – as in multi-national corporate firms. Very useful when the firm using self-insurance must be prepared to pay losses as they currently occur. A firm wanting to avail themselves of self-insurance may purchase excess insurance so as to avoid the effect of catastrophic losses. Although large corporations can handle the relatively higher-cost premiums of self-insurance, will there be any unforeseen pitfalls if they elect to avail themselves to this sort of insurance?
Given the risks and the certainty of catastrophic losses that the oil company BP faces on its day-to-day operation must be important enough to warrant self-insurance, the steep premiums of such insurance has recently made everyone closely watching the BP Gulf of Mexico oil spill investigation wonder whether BP diverted their safety budget to pay for self-insurance premiums in order to save money; Even if such a move have resulted in catastrophic accidents to occur, like the 2005 Texas City BP Oil Refinery explosion.
From spending millions in PR adverts that could have been more useful being used to compensate fishing industry workers affected by the catastrophic April 20, 2010 oil spill to whether slashing their safety budget to prop-up their bottom line, BP’s current economic viability might still be in doubt. Only time will tell if the company’s choice for self-insurance will actually pay-off so that they can be profitable again as they move on from the catastrophic Gulf of Mexico oil spill – which now has overtaken the Exxon Valdez spill of 1989 as the worst oil spill disaster to occur in US territory. If BP manages to stay afloat despite of the billions in pay-outs, then self-insurance could be the best profitable choice for big corporations.
Thursday, September 16, 2010
Basel III: An Effective Banking Insurance Policy?
As the latest incarnation of Basel Accords primarily designed for insuring the financial risks of banks, will it finally prevent the reoccurrence of another global financial crisis?
By: Ringo Bones
Touted as the financial risk reduction proposal that could one and for all reduce the occurrence of the financial crisis that plague our global economy back in 2008, Basel III – the latest version of Basel Accords aimed at reducing financial risks of banks by finding out the adequate amount of Core Tier 1 Capital a bank has to maintain in reserve – is seen by most bankers as mere management-related rigmarole rather than a truly effective financial tool to hedge risks. But in truth, it is much more than that.
All of the three Basel Accords grew out of the consensus of the Basel Committee of the Bank for International Settlements in Basel, Switzerland. The Basel Committee on Banking Supervision provides a forum for regular cooperation on banking supervision matters. Its objective is to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide.
The Basel Committee seeks to do so by exchanging information on national supervisory issues, approaches and techniques, with a view to promoting common understanding. At times, the Committee was this be-all-end-all of common understanding to develop guidelines and supervisory standards in areas where they are considered desirable. In this regard, the Committee is best known for its international standards on capital adequacy; the Core Principles for Effective Banking Supervision; and the Concordant on cross-border banking supervision.
The Basel Committee’s members come from Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. Countries are represented by their central banks and also by the authority with formal responsibility for the prudent supervision of banking business that is not the central bank.
The latest capital requirement revamp primarily grew out of various governments’ decision to avoid using taxpayers’ money to prop-up failing banks. And could – in theory at least – allow banks better cope even if large numbers of borrowers default on their debts, triggering a subprime mortgage crisis. But most bankers have reservations over the new capital requirement reforms because it could hurt their potential future earnings by making less money available for potential borrowers.
The latest Basel III agreement now requires central banks to triple the size of its capital reserve. This ratio will “supposedly” protect against another banking crisis, the 7 % ratio includes a “conservation buffer”. And failure to maintain the ratio could result in penalizing the banks by cutting bonuses of bank executives. The new rules will be submitted to the upcoming G-20 meeting in South Korea. The question now is, will the new Basel Accord really work in preventing another global financial crisis?
Given that banks do need to earn a profit, the issue of lowered potential earnings will probably dominate the discussion in implementing the latest version of the Basel Accord. Adequate capital ratio verification process could also prove tricky – remember the 2001 era currency swap that the Greek central bank did with Goldman Sachs that eventually lead to the current Greek debt crisis? With all its promised insurance against financial risks, Basel III might prove to be a hard sell. Sad, after all a healthy business environment has always been the be-all-end –all of the insurance industry, isn’t it?
By: Ringo Bones
Touted as the financial risk reduction proposal that could one and for all reduce the occurrence of the financial crisis that plague our global economy back in 2008, Basel III – the latest version of Basel Accords aimed at reducing financial risks of banks by finding out the adequate amount of Core Tier 1 Capital a bank has to maintain in reserve – is seen by most bankers as mere management-related rigmarole rather than a truly effective financial tool to hedge risks. But in truth, it is much more than that.
All of the three Basel Accords grew out of the consensus of the Basel Committee of the Bank for International Settlements in Basel, Switzerland. The Basel Committee on Banking Supervision provides a forum for regular cooperation on banking supervision matters. Its objective is to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide.
The Basel Committee seeks to do so by exchanging information on national supervisory issues, approaches and techniques, with a view to promoting common understanding. At times, the Committee was this be-all-end-all of common understanding to develop guidelines and supervisory standards in areas where they are considered desirable. In this regard, the Committee is best known for its international standards on capital adequacy; the Core Principles for Effective Banking Supervision; and the Concordant on cross-border banking supervision.
The Basel Committee’s members come from Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. Countries are represented by their central banks and also by the authority with formal responsibility for the prudent supervision of banking business that is not the central bank.
The latest capital requirement revamp primarily grew out of various governments’ decision to avoid using taxpayers’ money to prop-up failing banks. And could – in theory at least – allow banks better cope even if large numbers of borrowers default on their debts, triggering a subprime mortgage crisis. But most bankers have reservations over the new capital requirement reforms because it could hurt their potential future earnings by making less money available for potential borrowers.
The latest Basel III agreement now requires central banks to triple the size of its capital reserve. This ratio will “supposedly” protect against another banking crisis, the 7 % ratio includes a “conservation buffer”. And failure to maintain the ratio could result in penalizing the banks by cutting bonuses of bank executives. The new rules will be submitted to the upcoming G-20 meeting in South Korea. The question now is, will the new Basel Accord really work in preventing another global financial crisis?
Given that banks do need to earn a profit, the issue of lowered potential earnings will probably dominate the discussion in implementing the latest version of the Basel Accord. Adequate capital ratio verification process could also prove tricky – remember the 2001 era currency swap that the Greek central bank did with Goldman Sachs that eventually lead to the current Greek debt crisis? With all its promised insurance against financial risks, Basel III might prove to be a hard sell. Sad, after all a healthy business environment has always been the be-all-end –all of the insurance industry, isn’t it?
Tuesday, August 10, 2010
Are Insurance Companies Currently Engaged In War Profiteering?
With their ability to sell war risk insurance that’s akin to selling ice cubes to Eskimos, are insurance companies virtually engaged in war profiteering in our post 9/11 world?
By: Ringo Bones
From the aftermath of the September 11, 2001 terror attacks to the ever increasing scourge of maritime piracy off the coast of Somalia, war risk insurance had managed to turn itself almost into a household name – albeit for all the wrong reasons. Such insurance policies do provide a service to corporate entities that allows them to hedge their risks in the brave new word after the 9/11 terror attacks. Despite of its “apparent” usefulness in our post 9/11 world, isn’t war risk insurance just another name for war profiteering?
A war profiteer is often defined as someone who makes what is considered an unreasonable profit on the sale of essential goods during times of war and / or conflict. War risk insurance may not – or will ever be – classified under “essential goods” by ordinary folks like us, yet ever since the 9/11 terror attacks – and especially the rise of piracy targeting maritime commerce of the coast of Somalia – premium rates of war risk insurance has been on the rise, and making insurance companies who flog them unreasonable profit from our perspective. If things go on as they are, the time would come that premium rates of even the most basic of war risk insurance policies will no longer be deemed economically viable by corporate entities that need them the most.
So, are insurance companies engaging themselves in war profiteering when it comes to providing war risk insurance in a post 9/11 world? It is best to be pragmatic when it comes to such matters, but corporate entities finding ways to hedge their risks against the next 9/11 or just coping with the inherent risk involved doing maritime commerce in the pirate infested waters of the Somali coast are prone to financial exploitation by insurance companies. Given that the risk dynamic of terror attacks and piracy seems to defy the somewhat relatively "static" mathematical models used in most risk assessment tools, a re-evaluation of war risk insurance premiums would not be that much unreasonable - unless of course insurance companies are truly engaged in war profiteering in our brave new post 9/11 world.
By: Ringo Bones
From the aftermath of the September 11, 2001 terror attacks to the ever increasing scourge of maritime piracy off the coast of Somalia, war risk insurance had managed to turn itself almost into a household name – albeit for all the wrong reasons. Such insurance policies do provide a service to corporate entities that allows them to hedge their risks in the brave new word after the 9/11 terror attacks. Despite of its “apparent” usefulness in our post 9/11 world, isn’t war risk insurance just another name for war profiteering?
A war profiteer is often defined as someone who makes what is considered an unreasonable profit on the sale of essential goods during times of war and / or conflict. War risk insurance may not – or will ever be – classified under “essential goods” by ordinary folks like us, yet ever since the 9/11 terror attacks – and especially the rise of piracy targeting maritime commerce of the coast of Somalia – premium rates of war risk insurance has been on the rise, and making insurance companies who flog them unreasonable profit from our perspective. If things go on as they are, the time would come that premium rates of even the most basic of war risk insurance policies will no longer be deemed economically viable by corporate entities that need them the most.
So, are insurance companies engaging themselves in war profiteering when it comes to providing war risk insurance in a post 9/11 world? It is best to be pragmatic when it comes to such matters, but corporate entities finding ways to hedge their risks against the next 9/11 or just coping with the inherent risk involved doing maritime commerce in the pirate infested waters of the Somali coast are prone to financial exploitation by insurance companies. Given that the risk dynamic of terror attacks and piracy seems to defy the somewhat relatively "static" mathematical models used in most risk assessment tools, a re-evaluation of war risk insurance premiums would not be that much unreasonable - unless of course insurance companies are truly engaged in war profiteering in our brave new post 9/11 world.
Monday, July 12, 2010
Should There Be A Nuclear War Risk Insurance?
With the growing concern and diplomatic tension of rogue states with nuclear capability, does the establishment of a nuclear war risk insurance now a commercially viable enterprise?
By: Ringo Bones
The Cold War may be a distant memory for most of us but the threat of Nuclear Armageddon has and is always been still at a moment’s notice – especially now with the tensions between North and South Korea are on an all time high due to the sinking of a South Korean warship under suspicious circumstances that resulted in the death of 46 South Korean sailors. Not to mention Iran’s clandestine nuclear weapons program that has raised serious concerns on every UN Security Council sessions. Add to that Taiwan’s desire to be fully independent from Beijing and loose nukes falling to the hands of extremist groups making it still a safe bet that the possibility of a nuclear war is still not zero. It really seems that the Doomsday Clock at the headquarters of the Bulletin of the Atomic Scientists is stuck at two minutes to midnight. Given that the threat of nuclear annihilation today is probably no more or no less of a possibility as it was at the height of the Cold War, does the establishment of nuclear war risk insurance still economically viable?
Ordinary war risk insurance came into being when the need for an affordable marine insurance arose during the threat of submarine warfare back in World War II. The US Congress then passed the War Risk Insurance Act, which provided insurance protection for cargo and crew ships supplying for the Allies. Since private underwriters at that time did not dare insure civilian ships engaged in commerce except at premiums far above those which could be paid. The War Shipping Administration – much to the relief of the private underwriters – offered premiums far below commercial rates which only the US government has the revenue to afford to take such risks at that time. Given that the legal precedents for establishing war risk insurance are already in place, is there one needed for the establishment for nuclear war risk insurance?
At least for mail in the United States that is, back in the early 1950s, the US Postal Service developed an emergency planning manual, outlining procedures that would still allow mail delivery following a nuclear attack. These plans were regularly updated and a complete revision was undertaken back in1981. In addition, Executive Order 11490, dated October 28, 1969, as amended by Executive Order 11921, dated June 11, 1976, assigned the post office responsibility for emergency mail service and other duties associated with civil defense programs of the time. Detailed instructions were also stockpiled, telling people how to fill up forms and account for any missing persons – and for postal officials, how to test cards for radioactivity before processing them.
Among the actions outlined in the 1981 revisions state the authorization of local postmasters to burn stamps to prevent them from falling into enemy hands. Restrict mail sent after a nuclear attack to first class letters and to place an immediate ban on the issuance of money orders for payment in the country that attacked the United States. At a 1982 congressional hearing, a post office official acknowledged that a massive nuclear attack would – at the very least – make implementing the agency’s plans very difficult. But he then defended them by saying that the agency must be prepared.
Given that today’s US Congress are currently embroiled in immigration and healthcare than in revising Executive Order 11490 and Executive Order 11921 in order for a better tailored emergency response against nuclear attacks from rogue states and extremist groups. Or better yet serve as a legal precedent for equitably structured nuclear war risk insurance. The establishment of a nuclear war risk insurance – as it seems – has become as dubious a concept as personal meteorite strike insurance - a catastrophic risk whose possibility of happening is exceedingly small from a statistical standpoint, reminiscent of the concept behind the Partitioned Multi-objective Risk Method developed by Yacov Haimes when it comes to the risk assessment rationale behind nuclear war risk insurance. Maybe insurance company brokers better consult their underwriters’ box and loss adjusters whether nuclear war risk insurance is a sound business model before their competitors beat them to an increasingly lucrative niche insurance market. It could be a very Dr. Strangeloveian way to make a profit.
By: Ringo Bones
The Cold War may be a distant memory for most of us but the threat of Nuclear Armageddon has and is always been still at a moment’s notice – especially now with the tensions between North and South Korea are on an all time high due to the sinking of a South Korean warship under suspicious circumstances that resulted in the death of 46 South Korean sailors. Not to mention Iran’s clandestine nuclear weapons program that has raised serious concerns on every UN Security Council sessions. Add to that Taiwan’s desire to be fully independent from Beijing and loose nukes falling to the hands of extremist groups making it still a safe bet that the possibility of a nuclear war is still not zero. It really seems that the Doomsday Clock at the headquarters of the Bulletin of the Atomic Scientists is stuck at two minutes to midnight. Given that the threat of nuclear annihilation today is probably no more or no less of a possibility as it was at the height of the Cold War, does the establishment of nuclear war risk insurance still economically viable?
Ordinary war risk insurance came into being when the need for an affordable marine insurance arose during the threat of submarine warfare back in World War II. The US Congress then passed the War Risk Insurance Act, which provided insurance protection for cargo and crew ships supplying for the Allies. Since private underwriters at that time did not dare insure civilian ships engaged in commerce except at premiums far above those which could be paid. The War Shipping Administration – much to the relief of the private underwriters – offered premiums far below commercial rates which only the US government has the revenue to afford to take such risks at that time. Given that the legal precedents for establishing war risk insurance are already in place, is there one needed for the establishment for nuclear war risk insurance?
At least for mail in the United States that is, back in the early 1950s, the US Postal Service developed an emergency planning manual, outlining procedures that would still allow mail delivery following a nuclear attack. These plans were regularly updated and a complete revision was undertaken back in1981. In addition, Executive Order 11490, dated October 28, 1969, as amended by Executive Order 11921, dated June 11, 1976, assigned the post office responsibility for emergency mail service and other duties associated with civil defense programs of the time. Detailed instructions were also stockpiled, telling people how to fill up forms and account for any missing persons – and for postal officials, how to test cards for radioactivity before processing them.
Among the actions outlined in the 1981 revisions state the authorization of local postmasters to burn stamps to prevent them from falling into enemy hands. Restrict mail sent after a nuclear attack to first class letters and to place an immediate ban on the issuance of money orders for payment in the country that attacked the United States. At a 1982 congressional hearing, a post office official acknowledged that a massive nuclear attack would – at the very least – make implementing the agency’s plans very difficult. But he then defended them by saying that the agency must be prepared.
Given that today’s US Congress are currently embroiled in immigration and healthcare than in revising Executive Order 11490 and Executive Order 11921 in order for a better tailored emergency response against nuclear attacks from rogue states and extremist groups. Or better yet serve as a legal precedent for equitably structured nuclear war risk insurance. The establishment of a nuclear war risk insurance – as it seems – has become as dubious a concept as personal meteorite strike insurance - a catastrophic risk whose possibility of happening is exceedingly small from a statistical standpoint, reminiscent of the concept behind the Partitioned Multi-objective Risk Method developed by Yacov Haimes when it comes to the risk assessment rationale behind nuclear war risk insurance. Maybe insurance company brokers better consult their underwriters’ box and loss adjusters whether nuclear war risk insurance is a sound business model before their competitors beat them to an increasingly lucrative niche insurance market. It could be a very Dr. Strangeloveian way to make a profit.
Wednesday, June 30, 2010
Musical Instrument Insurance, Anyone?
With the mishandled guitar debacle between country musician Dave Carroll and United Airlines a year or so ago becoming headline news in certain circles, is the musical instrument insurance biz still economically viable?
By: Ringo Bones
Back in July 2009, the conflict between country musician Dave Carroll and United Airlines over mishandled guitars might have gained Carroll a new fanbase, but other touring musicians might be wondering whether it is high time for them to get musical instrument insurance. After all, not all touring musicians – especially after the age of Napsterization – are fortunate enough to have their own touring planes or be able to buy one in the foreseeable future.
Compared to homeowner’s insurance, musical instrument insurance are probably about as common as hen’s teeth. But that still doesn’t mean that this “niche market insurance” has been immune from the admen’s charms. “Real World Coverage” has been the recent buzzword being branded about in the musical instrument insurance market and your typical touring musician still managed to eke out a commercially viable living in today’s world were on-line music piracy is the norm rather than the exception. Thus guaranteeing the demand for such insurance given Dave Carroll’s recent high-profile guitar debacle with United Airlines.
When a touring musician who’s still at the mercy of big airline companies consults their nearest insurance agent about musical instrument insurance, they are usually told that the current musical instrument policy they are about to avail provides about the same coverage as their competitors. Not to mention the oft cliché pitch that theirs provide “real world coverage”.
Ten years ago, musical instrument insurance coverage was pretty basic when compared to today’s typical coverage policies. Which now includes: Thirty days free coverage for borrowed instruments – which is a must in today’s free online download generation were a touring musician can seldom afford quality musical instruments commensurate with his or her skill level. The right to keep undamaged parts of any instrument suffering a loss – a must for us who still harbor that emotion called sentiment. Right to repurchase – permitting you, the owner, to repurchase recovered instruments at the price paid for the claim regardless of the increase in market value of the instrument during that time. Loss of market value coverage that pays you the difference in market value for instruments that had been damaged and / or repaired. No exclusion for instruments in a motor vehicle – for those still touring in a run-of-the-mill tour bus. Inflation Guard policy that provides insurance beyond policy limits. And most of all free transferable coverage for replacement instruments – i.e. “loaners” – while yours is still being repaired for a claim.
Lets just hope that the provider’s real world coverage policies work in the real world of your typical touring musician and should provide every touring musician adequate financial compensation. Whenever he or she encounters a problem like that of Dave Carroll when he boarded United Airlines with his musical instruments back in July 2009. The days of the multi-millionaire Rock-Star might be long gone, but it still makes good fiscal sense for touring musicians to be protected from the real world perils of their occupation.
By: Ringo Bones
Back in July 2009, the conflict between country musician Dave Carroll and United Airlines over mishandled guitars might have gained Carroll a new fanbase, but other touring musicians might be wondering whether it is high time for them to get musical instrument insurance. After all, not all touring musicians – especially after the age of Napsterization – are fortunate enough to have their own touring planes or be able to buy one in the foreseeable future.
Compared to homeowner’s insurance, musical instrument insurance are probably about as common as hen’s teeth. But that still doesn’t mean that this “niche market insurance” has been immune from the admen’s charms. “Real World Coverage” has been the recent buzzword being branded about in the musical instrument insurance market and your typical touring musician still managed to eke out a commercially viable living in today’s world were on-line music piracy is the norm rather than the exception. Thus guaranteeing the demand for such insurance given Dave Carroll’s recent high-profile guitar debacle with United Airlines.
When a touring musician who’s still at the mercy of big airline companies consults their nearest insurance agent about musical instrument insurance, they are usually told that the current musical instrument policy they are about to avail provides about the same coverage as their competitors. Not to mention the oft cliché pitch that theirs provide “real world coverage”.
Ten years ago, musical instrument insurance coverage was pretty basic when compared to today’s typical coverage policies. Which now includes: Thirty days free coverage for borrowed instruments – which is a must in today’s free online download generation were a touring musician can seldom afford quality musical instruments commensurate with his or her skill level. The right to keep undamaged parts of any instrument suffering a loss – a must for us who still harbor that emotion called sentiment. Right to repurchase – permitting you, the owner, to repurchase recovered instruments at the price paid for the claim regardless of the increase in market value of the instrument during that time. Loss of market value coverage that pays you the difference in market value for instruments that had been damaged and / or repaired. No exclusion for instruments in a motor vehicle – for those still touring in a run-of-the-mill tour bus. Inflation Guard policy that provides insurance beyond policy limits. And most of all free transferable coverage for replacement instruments – i.e. “loaners” – while yours is still being repaired for a claim.
Lets just hope that the provider’s real world coverage policies work in the real world of your typical touring musician and should provide every touring musician adequate financial compensation. Whenever he or she encounters a problem like that of Dave Carroll when he boarded United Airlines with his musical instruments back in July 2009. The days of the multi-millionaire Rock-Star might be long gone, but it still makes good fiscal sense for touring musicians to be protected from the real world perils of their occupation.
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