| For those of us that have grown up with the | | | | something (fairly unlikely) happens. In travel insurance, |
| concept of insuring important or expensive things, | | | | this would be the risk of getting sick or being injured, |
| the idea that it is a form of gambling is usually quite | | | | being the victim of crime, or having logistical |
| foreign. After all, there is a world of difference | | | | difficulties that involve financial loss. |
| between the glazed eyes and bad decisions that fill | | | | People gamble because: |
| pokies venues, and the sensible mainstream idea of | | | | They want to win a large amount of money without |
| insurance. Actually, insurance can be likened to | | | | working for it (possibly the reason that religions often |
| gambling - but only in a very abstract sense. Today | | | | object to it). |
| we explore the Ned Flanders approach to travel and | | | | What is an Aleatory Contract? |
| travel insurance... and why for most of, his | | | | An aleatory contract is a more precise name for the |
| ar-diddly-arguments just don't hold up! | | | | form of agreement that travel insurance represents. |
| The Ned Flanders Approach to Insurance | | | | Its definition is 'a contract in which the performance |
| Actually, the school of thought that says that | | | | of one or both parties is contingent on a particular |
| insurance is a form of gambling is much older than | | | | event'. These contracts can mean a major 'win' for |
| Ned Flanders (ultra-religious neighbour of The | | | | one party, and a loss for the other. With the current |
| Simpsons). However, the pop culture reference to | | | | insurance environment though, the win and loss ratio |
| Ned's belief is quite likely the first time that many of | | | | is usually a lot more even that that seen in gambling. |
| us in the West have encountered the concept. In the | | | | So, what is the purpose of insurance? |
| Simpsons episode from 1996, Hurricane Neddy, a | | | | Travel insurance, and insurance in general, provides a |
| Hurricane hits Springfield but destroys only the | | | | vital social service. If people had no option but to |
| Flanders' house. When Marge asks about insurance, | | | | take on the risk of owning a house, owning a car, |
| Maude says that Ned didn't believe in it - he | | | | being liable for their own overseas medical expenses, |
| considered it a form of gambling. | | | | etc, they might never do any of the above activities. |
| The rationale behind this is that when you take out | | | | Consider that while Australia has socialized health |
| home insurance, travel insurance, etc, you are | | | | care, almost every other country in the world does |
| effectively making a bet with the insurance company | | | | not... and medical bills can run into the tens of |
| that a specific event will not occur (the destruction | | | | thousands very quickly. Without the small expense of |
| of your house, falling ill while you are overseas, etc). | | | | travel insurance, very few people would leave their |
| The insurance company is betting that it will not | | | | home country. We would have a fraction of the |
| occur. | | | | understanding of other cultures, languages, and |
| The Difference Between Insurance and Gambling | | | | religions that make our world so rich today. |
| The idea that insurance is like gambling seems to be | | | | Rather than thinking of holiday insurance as gambling, |
| nothing more than an exercise in twisting logic, when | | | | it is much more useful to consider that you are |
| you look at the purpose of insurance compared to | | | | 'paying for peace of mind'. You are paying a small |
| the purpose of gambling. People buy insurance | | | | amount, to mitigate the enormous financial loss that |
| because: | | | | could occur in the future. When you look at it this |
| They want to mitigate financial loss in the event that | | | | way, it is definitely worthwhile! |