Insurance Rort

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FreeRadical said..

MorningBird said..
I just renewed with Pantaenius, $1002 for the S&S agreed value $65,000. I would only get that in a total loss.
It is a scam in my view but I can afford it and the boat is on Sydney harbour so a bit riskier than where it was before.

So if you decided to self insure instead at say a deposit rate of 5%, it would take over 28yrs for your $1000 per year to reach your agreed $65k (which in itself is exceptional that you can get that agreed coverage on an asset like an old boat). Discount that 25yr $65k to today's dollars for the payout you'd receive if your boat sank tomorrow, then it's hard to see how insurance is such a scam?

Fees and commissions? Well that could be seen as a reason that premiums are generally affordable as it broadens the base by sustaining an industry that is built around it. It probably helps in you being able to get insurance at all if you think about it.

You haven't accounted for the risk (probability) of a total loss, or your assuming a total loss would occur in that investment period.
If Pantaenius charge me $1,000 pa for $65,000 total loss the probability of a total loss occurring is in the order of 350-400 to 1. Maybe higher.
When managing risk it is critical that probability is calculated before consequences. The ultimate consequence of getting in a car is you will be killed in an accident. If you consider this first you never get in a car. In reality we assess the probability of this consequence occurring as being so low we accept the risk.
We usually don't do this with boat insurance. The extraordinarily low probability of a life changing claim and loss occurring doesn't enter our calculations. And the insurance companies vigorously play on that fear.
Those who can self insure are financially better off to do so, which is why brokers set up captive insurance companies for big firms.