Demotivation

I wonder who came up with the idea of insurance – in it’s perfect form, insurance is a lot like gambling for the really high roller.

You pay me money each month and in return I’ll agree to pay you a much larger value of money should something terrible happen to you. Typically the amount you pay me each month is based on two things – 1) how much money you want if something goes wrong and 2) the probability of something going wrong.

In the US, if you want car insurance you pay a premium each month. You provide the value of the car, choose the level of coverage, choose how much you’re willing to chip in if something happens (deductible) and I run a background check to verify your driving record, looking for any previous accidents/claims or citations. The system mirrors capitalism, those who receive more insurance payouts should have to pay higher premiums or get cut out all together.

In Doha, I’ve learned that the government not only regulates gas prices (good), it also regulates insurance (bad). If you want car insurance you simply pay a certain % of your car’s appraised value each year and bingo, you’re covered. When it comes time to renew your insurance (typically annually), your car’s value is depreciated 20%, your premium decreases 5% and bingo, you’re covered for another year. Obvious Catch#1: your car’s resale depreciates about 10% annually, so each year you’re coverage is artificially reduced while your premium hardly changes. Obvious Catch#2 these formulas are nearly universal – that means that if you manage to go an entire year in Doha without an accident or claim (good luck), your coverage behaves the same as someone who totals 5 Land Cruisers. Someone has to pay for those 5 Land Cruisers, and if everyone’s insurance formula is the same, disregarding prior accident history or citations, everyone shares the burden equally. Isn’t equality great…

On second thought, as long as you can take the initial hit of a large claim and pass that cost on to your customers... insurance suddenly looks a lot like a pack of marlboros or a tank of gas, you've gotta have it - and you're willing to pay for it. The very things we resent are often the things we sustain.