Wednesday, September 21, 2011

Cavalcade of Risk - Terrorism, CyberWar, Floods, Bad Mortgages, Robberies, Investment Losses and Disease Edition

The Disease Management Care Blog is reconsidering the wisdom of agreeing to host the Cavalcade of Risk #140. The links below are a unpleasant reminder that disasters are lurking everywhere and that there is no escape.  Being a contrarian physician-blog that dwells on health care and insurance, your DMCB was confident that it could intellectually digest the topics below.  After writing this Cav of ubiquitous hazards, however, the DMCB now wants to digest some Xanax and PeptoBismol.

Who knew that so much could go so wrong out there?

Ever heard of the "Terrorism Risk Insurance Act" (TRIA) of 2002?  Neither has the DMCB, but readers can learn more about it at the Insurance Regulatory Law Blog's post on Quantifying the Unquantifiable: Some Perspective on Terrorism Risk.  It turns out the U.S. government is providing "reinsurance" (insurers can buy their own insurance) for a host of commercial companies that have to deal with a threat that is hugely expensive, quite rare and non-random, which is the very antithesis what the usual market needs to function well.  And by the way, TRIA is set to expire 2014 and it looks like it may not be renewed.  Seems some sort of budget issue has come up.

If being reminded about terrorism isn't enough to rattle you, how about cyberwar?  That's tackled by the Risk Management Monitor Blog in this post on how UK Infrastructure Providers 'Accept an Unexpectedly High Level of Risk' of Cyber-Threats, and the National Response Is 'Fractured and Incoherent'.  It appears, lacking a coordinated response by their government, that the Brits' businesses and banks have decided to deal with this risk on their own.  Unfortunately, they're not dealing with it very well.  Not only have some companies been slow off the mark, others have decided to accept the inevitability of an intrusion and plan on simply dealing with it then.  How many other key industries worldwide have adopted the same cavalier attitude, asks the DMCB?

Terrorism, cyber attacks.... it's enough to make the DMCB flee to the country and seek sanctuary on a farm and live simply off the land.  But wait, even that isn't safe, because Lynch Ryan's Workers Comp Insider Blog points out that the risk of getting trapped, suffocated or crushed in a grain bin is increasing.  In response, the National Grain and Feed Association has a video on one more reason why our nation's farmers deserve a lot of respect.  The DMCB thinks it deserves to flee back to the suburbs.

So it might be best to stay safe and stay at home, right?  Well, if you have a mortgage on that home, the canadianfinanceblog warns that your sneaky bank may try to to sell you "mortgage life insurance."  It turns out this may be a lousy deal, since the premium may not change even as the balance on the mortgage declines.  Better to get standard term life policy.  And when you've done that, you can scrutinize the rest of that small print in the mortgage documents that you signed for some other unpleasant surprises.

After you read all that fine print and discover what you've unwittingly agreed to, you may want to think about property losses from hurricanes, floods, tornadoes and earthquakes. Yes, you can buy a specific insurance policy for each of those possibilities, says the Free From Broke Blog.  On the other hand, given how uncommon hurricanes, tornadoes and earthquakes are, it may make more sense to invest in a sump pump and simply stash away an emergency fund.  The DMCB followed that game plan during the recent flooding from Tropical Storm Lee and now needs a basement mold mitigation fund and a get-rid-of-wet-carpets fund.

Plus, you may want to get "home insurance" against the possibility of a loss from a robbery.  Unfortunately, says the My Personal Finance Journal Blog, the cousins across The Pond are grappling with a daily toll of more than $3.5 million in home insurance fraud.  As a result, the DMCB calculates that honest home owners there are unnecessarily having to add a hidden tax of $1 for every $3 in insurance.

While you're putting bars on your home windows and barricading the doors, it may be smart to take that money out from under that mattress and seek some investment income, right?  If that's your plan, you may want to check out this "101" posting on the fundamentals of investment risks posted at The Financial Literates Blog.  How many things can go wrong, you ask?  "Fifteen" says the FLB!

Or if you want to avoid those 15 dreaded errors, how about an "annuity?"  This lengthy post by the Free Money Finance Blog on Why Do We All Hate Annuities explains that the fine print is perplexing, the sellers are a shady lot, their fees are high, the company (like AIG) could go belly-up, you lose control of your money and they're still a big gamble.  One option is "laddering."  Another option, says the DMCB, is digging a hole and stashing away some precious metals.

While being attacked, hacked, crushed, ripped off or making a bad investment bet is a possibility, at least we Americans have an enlightened government that is helping us buy health insurance, right?  Think again, says Louise of the Colorado Health Insurance Insider.  She points out the fed's online "healthcaredotgov" web site can be misleading.  It appears that the site reports blunt pricing underwriting statistics that fail to capture what is really going on.  While Louise makes the point that brokers can help customers navigate this complicated marketplace, the DMCB thinks that the healthcaredotgov website is a telling reflection of the unsophistication of Washington DC's health insurance bureaucrats.  Good grief, and these amateurs actually want to be in charge.

Maybe you should take charge, then, and confront the risk that you may come down with a debilitating, crippling and non-curable condition and need long term insurance.  The curiously named High Yield Savings Accounts Blog  offers up a check list of what to look for in such a policy, such as excluded services, maximum lifetime benefit terms, riders and renewable guarantees.

While we're struggling with hazards, perils, dangers, disasters, terrorism and disease, Hank Stern over at the Insure Blog suggests there is a way out from all this danger, at least for the fairer sex. Women may want to have a mid-day tipple because another observational study has shown that there is an association between imbibing and well being.  To that, the DMCB says "Cheers!" and points out if you end up in the hospital anyway, your physicians will know what to do.

"Gulp!" says the DMCB.  While it likes the idea of imbibing to support the DMCB spouse's continuing good health, it thinks it should also look into buying an electric generator, firearms and a year's stash of fresh water and vacuum-packed ready-to-eat meals.  While it's doing that, it'll be looking forward to Jay Norris of Insurance Shoppers hosting the next edition of the Cav.


H G Stern said...

Is it wrong of me to want to laugh?

Great job, Jaan, esp because of how you tied all these posts together with a bit of (much needed) humor.

Jacob @ My Personal Finance Journey said...

Thanks for including my article about home insurance fraud!

Van R Mayhall III said...

Great article, really well done. Kudos.

peggylou said...

Gee, your inclusion of firearms, precious metals, a year's worth of water and unperishables is like, perhaps, maybe, well - insurance ain't such a good bet in the end! Thanks for the dose of good nature about it all! Nice job :)