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Tuesday, January 04, 2011

Griper Blade: Major Insurer Sounds Global Warming Alert

Warming planetThere are a lot of industries that would be adversely affected by global warming -- agriculture, fishing, real estate development, tourism, and timber all come immediately to mind. Shifting weather patterns means greater uncertainty for industries that rely on weather and a rising sea level means the redrawing of maps. As the world changes, the ancient evolutionary law kicks in -- adapt or die. Many of these industries may be able to adapt, but behind them all stands a second industry; the insurance industry.

As we all know from the dragged out healthcare debate, insurance isn't about avoiding risk, so much as it is shared risk. It's simple math -- bad things happen, but they don't happen to everyone. If only X in ten people suffer a heart attack in their lives, for example, those who don't have heart attacks pay into a fund that helps pay for the victim's treatment. It's like a bet -- you bet you'll have a heart attack, even though the odds are against it. And, because the insurer is willing to give you odds, the money is worth it, since the payout is the only way you'd be able to afford the consequences of winning the bet.

This is also the reason why you can't buy insurance for some eventualities. You can't insure your car against rust or the paint on your house against peeling. These are things that happen to almost everyone and are practically unavoidable. You can insure against death, but the bet there is that you'll die earlier than most people, before you've paid in the amount that the insurer pays out, not that you'll die eventually. The concept of insurance is, at its heart, mathematical and rational...[CLICK TO READ FULL POST]

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