Risk Management Takedown

When I was growing up in Tulsa, Oklahoma championship wrestling was quite a source of entertainment.  Gorgeous George, pictured at right, was one of my favorites along with characters like Haystack Calhoun of course;-)  What does this have to do with Risk Management you ask?  Well some things never change like wrestling AND insurance companies ability to turn a risk management issue into a product to sell to the public.
  I just went through a major review of all of our insurance for numerous properties and vehicles.  Whew!  State Farm is who we have been using for many years but in the last two years we changed agents.  The conversations are interesting when we start talking about RISK MANAGEMENT as compared to insurance policies.  So far to me it seems there is a policy for EVERY risk--real or perceived--and the more ads you see and the more chances you get to buy the more likely it is NOT something you really need.  

Let's go back to the point of RISK MANAGEMENT:
There are a few things one can do to manage risk--

1. Avoid--like don't buy a motorcycle.
2. Minimize--if you buy a motorcycle wear a helmet and don't drive at night.
3. Share or transfer--exchange a small known risk (premium) for a large unknown risk that you otherwise can't afford.

So applying these principles to my situation I chose to insure the properties for the amount of money I had invested in them (no mortgage company to satisfy) rather than the full market value currently.  Since there are several of them in different areas of town I am willing to take the risk that they don't all get wiped out at the same time.  

There is a 100% chance that the premium will be paid (a loss to me) but  so far 30 years into it these houses are still around. There are many features of property insurance that could be looked at this way:

• Uninsured motorist
• Earthquake
• Flood
• Deductible
• Etc.

This is part of my concern for how the new medical insurance system is working. There does not seem to be a huge incentive for insurance companies to control costs and therefore it turns into a massive COST PLUS contractor situation on a much larger base.  The Affordable Care Act did address access to care for more people but NOT cost controls.

Bottom line of our insurance review was we cut $2600 per year out of the premiums AND decided to lower the amount of risk we transferred to the insurance company.  

Have you had a RISK MANAGEMENT conversation with your agent lately?