Smoking fuse box, Home Emergency Cover declined as we turned the power off!!

[Harry Bloomfield]

In many contexts, 'self-insurance' therefore makes sense (for those who could 'cope with' the financial risk it involves). A half-way house that I have very occasionally heard of being implemented is for a group of people to get together to 'insure themselves' - which has all the cost/risk-sharing advantages of insurance but without any money being 'wasted' on an insurer's profit.

I haven't heard of such a scheme, but it sounds a good idea.

All anyone need do to self insure for the lower cost items, is put the money into a bank account instead.

 

[JohnW2]

I haven't heard of such a scheme, but it sounds a good idea.

It's a 'co-operative' concept. It's similar to what happens when a group of people living in the same building agree to share 'communal' costs.

All anyone need do to self insure for the lower cost items, is put the money into a bank account instead.

It deppend what you mean by 'all' (they need to do). That approach does not remove the risk that, because one is 'very unlucky', the costs over a period of time prove to be considerably greater than the 'expected average' that would have determined (plus the 'profit element') what insurance premiums would be, or what regular amounts you put aside in an bank account.

It's inevitably probabilistic, so such 'self insurance' is only appropriate for those who are prepared (and financially able) to take the gamble that their costs will not prove to be much greater 'than expected' (i.e. 'the average expected'), should they be unlucky.

Kind Regards, John

 

[crystal ball]

Some friends of ours never insured their contents for 40+ years, quids in now

 

[securespark]

They never made a major "claim" then.

 

[Harry Bloomfield]

It's inevitably probabilistic, so such 'self insurance' is only appropriate for those who are prepared (and financially able) to take the gamble that their costs will not prove to be much greater 'than expected' (i.e. 'the average expected'), should they be unlucky.

Large companies, can self insure their motor vehicles via a bond.

I would suggest they would need to be very, very unlucky. My own lifestyle is based upon not needing to call anyone in to do any work here, apart from some very rare exceptions, seeking out the best value I can find available in all things I purchase, being careful with what I own and putting plenty of money to one side to cover unpredictable emergencies. For me, it works very well indeed.

 

[SUNRAY]

I had a £9K burglary claim in 1992, other than that my, and my partners, families have had no reason to make a claim so an avarage premium price of say £100/Annum since 1950's or £6K. Extend that across an average of about 10 properties would have easily covered it with oodles of cash to spare.

However a gas explosion or fire resulting in total loss is a different matter.

 

[SUNRAY]

Large companies, can self insure their motor vehicles via a bond.

I used to work for BT and that was exactly what they did. As I understood it they had to deposit a bonded amount of money with an external body based upon the number of vehicles owned, in 70's/80's I believe it was in the order of £50M, I'll very happily be told the figure is incorrect though.

 

[JohnW2]

Some friends of ours never insured their contents for 40+ years, quids in now

They never made a major "claim" then.

I had a £9K burglary claim in 1992, other than that my, and my partners, families have had no reason to make a claim so an avarage premium price of say £100/Annum since 1950's or £6K. Extend that across an average of about 10 properties would have easily covered it with oodles of cash to spare.

It's not really different from any other type of gambling.

Of those who choose to insure, the majority will 'lose' that gamble ('wasting' more money on insurance premiums than they would have suffered in losses/costs in the absence of insurance), but a small minority will be 'winners', possibly 'in a big way' (if they successfully make a claim for considerably more than they have paid in insurance premiums,

Looked at the other way around, of those who choose not to insure, the majority will 'win' that gamble (suffering less losses/costs than they would have paid in insurance premiums), but a small minority will be 'losers', perhaps catastrophically so (if they suffer a very large loss, far greater than insurance premiums would have cost them).

The problem is that, without crystal balls, no-one knows whether they are going to be in 'the majority' or that ('unlucky') 'small minority' - and, if the latter, nor whether the large loss will happen 'tomorrow' or in 40 years time.

It's therefore down to one's attitude to gambling and to whether one feels one could somehow cope with a situation in which one lost much/all of one's uninsured house contents, particularly if that loss occurred 'soon' (before one had had time to put aside any significant amount into a 'self-insurance kitty'). As Sunray goes on to say ...

However a gas explosion or fire resulting in total loss is a different matter.

... and that's the problem. As above, no-one can know whether they will be one of the unlucky few who suffer a major loss or, if they did, whether it would happen 'tomorrow' or in the distant future.

In passing, I think Sunray's figures are probably misleading. Although the insurance industry is very much 'profit-making', I don't think that it is anything like as 'bad' as his figures suggest. He implies that £60,000 of insurance premiums would be associated with only £9,000 paid out in claims, a mere 15%.

The problem is that his sample of 10 is far too small to show what actually happens 'on average' (over very large numbers of people/households). It would only take an eleventh person who has suffered a loss of £57,000 (far from impossible for total loss of house contents) for his sums to indicate that a total of £66,000 in premiums paid had resulted in £66,000 having been paid out in claims - now 100% ! The truth, averaged over a large number of people/households is obviously somewhere between 15% and 100% !

Kind Regards, John

 

[Harry Bloomfield]

I used to work for BT and that was exactly what they did. As I understood it they had to deposit a bonded amount of money with an external body based upon the number of vehicles owned, in 70's/80's I believe it was in the order of £50M, I'll very happily be told the figure is incorrect though.

I heard somewhere long ago, there was a minimum amount for such a bond of £1M.

 

[crystal ball]

They never made a major "claim" then.

AKAIK no

 

[SUNRAY]

I heard somewhere long ago, there was a minimum amount for such a bond of £1M.

Yeah I suspect it's more than that now, my previous vehicle insurance (as s/e person) had a £5M cap. But my latest is post retirement and I haven't looked at those details.

 

[JohnW2]

Some friends of ours never insured their contents for 40+ years, quids in now

They never made a major "claim" then.

AKAIK no

We're back to the 'gambling'. Extremely few people win the Lottery (or even much more modest {much easier to win} raffles etc.) but for the tiny few who do, it can be 'life-changing' - as, I imagine, can be the (very unlikely, but not impossible) total loss of all one's uninsured house contents.

Kind |Regards, John

 

[bernardgreen]

Large companies, can self insure their motor vehicles via a bond.

It used to be that private motorists could use a bond instead of insurance ( may still be so ). If the motorist and/or the vehicle were seen by insurance companies as an un-insurable risk then a bond was the only way to be able to legally use the vehicle.

 

[JohnW2]

It used to be that private motorists could use a bond instead of insurance ( may still be so ). If the motorist and/or the vehicle were seen by insurance companies as an un-insurable risk then a bond was the only way to be able to legally use the vehicle.

I may be completely misunderstanding but, on the face of it, it would seem that this 2019 ('amending') legislation (click here) may have removed that option - the clue seems to be in the title of Schedule 1 of the legislation, namely ...

SCHEDULE 1
Amendments of primary legislation to remove securities and deposits as alternatives to motor insurance
PART 1: Amendments of the Road Traffic Act 1988

Kind Regards, John

 

[securespark]

I'd be surprised, because that's what the police do, and blue chip companies as well.