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April 2, 2012 | by  | in Opinion | [ssba]

C.R.E.A.M. – Insurance Actuaries Are The Tru Blud Gangstarz

Some people are into weird things: obscure German board-games, erotic sci-fi fan fiction or boxing, for example. I’m much more normal. I like insurance markets.

For the uninitiated, my fixation with insurance might come off as odd, so I’ll make my case. The insurance industry’s purpose is to find out fascinating things: how likely it is that you’ll die tomorrow and whether your Cantabrian friends will lose their home next week. By figuring out the probability that something bad will happen, insurance companies make good bets. By free-riding on their work, we find out fascinating things.

Consider smoking. Insurance companies typically count you as a ‘non-smoker’ if you haven’t smoked for two years.
The risk of a gruesome death often convinces us to not smoke, yet insurance companies are saying that we can just quit later and get back to square one. Who’s right? Insurers are bringing the money to the table, so it’s unsurprising that evidence is on their side. According to the American Cancer Society, two years after quitting smoking your risk of heart disease and cancer will have dropped off, almost back to normal. The insurance policy makes sense.

Insurance premiums can tell us about smoking, but the secrets that they hide go deeper still. The USA is the home of both paranoid nutters and greedy arseholes. Combing these two groups has lead to a thriving alien abduction insurance market. The payouts are big: for a hundred dollars, you can get a policy that will pay one million dollars if you get abducted by aliens. Competition amongst insurers has made the deal as sweet as possible for those buying policies, so there’s a one-in-ten-thousand chance that you’ll get abducted by aliens. Probably not worth worrying about.

Insurance is cool, and cool people have realised this. Gennaro Pelliccia tastes coffee for a living, which is clearly awesome, and he would be gutted if anything happened to his tongue. He bought an insurance policy that pays ten million pounds if anything happens to it. That means that, to him, the tragedy of a broken tongue requires ten million pounds to rectify. Similarly, Celine Dion, Bob Dylan and Bruce Springsteen all have their vocal cords insured. Keith Richards also took out a policy on a body part, but deemed that his fingers were a more valuable asset.

Insurance is fascinating because it tells us both what people value and their risk of losing it. People don’t like risk, and so we can be sure that insurers will always be around to shoulder that burden. In doing so, we’ll learn more about our bodies and our lives. More importantly, we’ll learn about aliens, and that is clearly a good thing.


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