Fools & their money…

…are soon enough parted, – or something like that!

It never ceases to amaze me that so called intelligent people can be such absolute dills when it comes to common sense and money!

Back in 1957, when I went to work for a firm of “Lloyds of London” Brokers in Melbourne; after working for seven years with ‘Tariff”  Insurance companies, I learned a couple of very important facts!

One, I discussed in a previous post some years ago, so I’m not going to go into that again, and the second, and the one that’s stayed with me ever since is; ‘if you buy cheap Insurance you get cheap Insurance’ . I assure you Lloyds insurance was not cheap to buy! And that given fact applies to anything!

Now what’s started me on this rant, again? Well let me tell those not living in Australia    about the past few days of weather which struck the East coast of Australia with great force, causing massive damage and death! Sound a bit dramatic? Well it has been very dramatic!

So as not to bore you too much, I’m giving the link to our ABC, and those that are really interested can view for themselves the drama & devastation caused:

http://www.abc.net.au/news/2016-06-06/east-coast-storm-mapped/7481572

What has taken my interest is the disaster on the “Northern Beaches” naturally enough; I lived on the Beaches for half my life, not that far from where the current disaster/drama is heading for it’s climax at Collaroy Beach! I’ve always thought that here was a disaster waiting to happen; the only surprise is why it has taken so long. 

By the time I hit the publish button on this little effort some of those houses ‘built on sand’ will, in all probability, have slipped into the ever hungry sea;  and there are two home owners who will be more devastated than the others. Both had their homes on the market; both were to be auctioned next week; both expecting between 3 and 4 MILLION $$$$ for their property, which is now valued at $0.00.

To exacerbate their troubles, it appears  likely that the insurance on their homes, providing they had it, will not cover the loss. They will have to carry their own, if they have any sort of mortgage they’ll still be liable; and who to blame?

Nobody but themselves. 

What insurer would accept and take on such a risk,  in my not so humble opinion; none! And why not? Because Insurance companies and insurers  will take a risk, but this was not a risk; this was a certainty, this was a certainty waiting to happen, and happen it has.

The general conception that an Insurance company will cover anything providing they’ll make money and not have to pay claims, is not correct. There are some who will try not to meet their obligations, and at times get away with it, but luckily for most,  these not so reputable firms, are few and far between.

Many years ago in London, a smart alec spiv went to a Lloyds brokers and proposed insuring his full unopened packet of cigarettes for a sizable sum, I recall the figure was around 10,000. quid, against loss by fire. The brokers put the proposition to their principles at Lloyds as this was an unusual request. Lloyds accepted the risk and quoted a reasonable premium which said spiv accepted and paid. 

On receipt of his certificate pending issuance of his policy and not caring to wait; he promptly opened the packet of cigarettes and proceeded to smoke the lot; carefully keeping all the ash and butts. When he’d finished  he requested a claim form so that he could claim for his loss by fire.

He was given the claim form, which he duly filled in, submitted along with the ash and butts from the cigarettes. The brokers, (Lloyds brokers besides handling the underwriting also handled the claims) accepted and processed  the claim immediately.

The spiv, thanked them for the cheque, feeling very smart at outwitting the great Lloyds of London, turned to walk out but instead walked into the arms of a friendly Bobby who promptly arrested him, charging him with arson and carting him off to the clink. He went down for several years.  True story? Ask Mr Ripley.

Insurance Companies and Insurers will take a risk, that’s the nature of their business, but they wont take a punt on a certainty because they like all punters don’t like to lose.

There are some dodgy insurers out there, they’ll usually offer you surprisingly cheap premiums, which you may be inclined to take, but remember if you buy cheap insurance you get what you pay for. Cheap insurance. 

A tip from an old insurance man, read your policy, know what your covered for and if you don’t understand your policy, ask the questions! I’ll wager there are a couple of families up there on the Northern Beaches wishing they had done just that!