Insurance is not risk management

A problem with insurance is that it’s a passive post-loss device that is often confused as “risk management”, which it is not.  Insurance just sits and waits to see if what just happened to you qualifies as eligible for financial assistance, but it does nothing to help you seek-out the risks in your life and defend your financial position with a plan of action.  And that passivity and insurance-company-centric focus has lead to a widening gap between what insurance can do and what you may actually need.

Insurance is neither revolutionary, nor evolutionary, and it’s easy to see its deficiency when you consider the risks of tomorrow that don’t relate well to the way in which insurance products are manufactured, priced, and serviced.  There are worries among families that don’t get addressed because insurance doesn’t have an answer for them other than, “if that happens, there may be coverage if…”, and many families and advisors then just stop and miss out on what might be a real solution.

We conducted a survey of families and their advisors and asked them to describe what they most worry about, or what they think will affect them most in the years to come.  A list of some of the most common responses are below, but note that very few are “insurancey”, like kitchen fires, toilet overflows, dog bites, or windstorms.  If your risk management process is simply to shop insurance and decide which deductibles are best, you’re not likely to be addressing some of these other concerns.  We believe a better way is to incorporate a truly holistic risk-management approach as your process, with insurance being just one small piece of it.  And it’s in the development of that process that we can help.

risk list table

Photo:  Rachael McGraw in Florence, Italy

The Power of Surrender

During a breakfast conversation today with a friend (thank you Peter Beeson from Fit Insurance), I was reminded of the importance in committing yourself to whom you are called to be, and then leaving the rest behind if you request the assistance of someone else’s calling.  It is tempting and habitual to try and possess responsibility for all decisions and actions, perhaps due to ego, arrogance, or mistrust, but real power comes from recognizing gaps in expertise and leveraging someone else’s ability to take over and help.

I’ve said many times that the clients with whom I work best are those interested in outsourcing intelligence to experts in various fields.  This willingness to draw a line on a subject across which they recognize the need to seek help is, in my opinion, evidence of one’s success and happiness.  The weight and burden of navigating the ingredients of a good risk-management experience, for example, need not be borne by a busy and successful family, but instead can be offloaded with high expectations to someone who stands ready and willing to take up the charge to deliver the right answers and the right results.

Self-serving though it may appear to be, I see everyday the consequence of families trusting no one, or trusting the wrong person in the design of their insurance and it is one of wrong answers, great worry, and inefficiency.  We think a better way (in insurance, business, and life) is to establish high expectations, find the right expert for the topic at hand, match decisions with personal values, and then rely on the strengths of others to deliver a more peaceful approach to complex and serious life issues.

Photo:  North Cascades, Washington State