Category Archives: Specialty Insurance

Insurance can get weird

Yesterday’s post about insurance-related Guinness World Records got me thinking: what other weird insurance policies are out there?

If you know much about insurance, you know that the first place to inquire about weird insurance policies is Lloyd’s of London, legendary clearinghouse for the strange and unusual. (And innovative: they were the underwriters for the world’s first auto policy, the first aviation policy, and soon the first space tourism policy.)

Naturally, Lloyd’s has an entire webpage dedicated to what it (in what I imagine to be staid, Oxford-accented English) calls “innovation and unusual risks.” Some top hits include insurance coverage for David Beckham’s legs (£100 million), Keith Richards’ hands ($1.6 million), and cricketer Merv Hughes’ trademark mustache (£200,000).

My personal favorite is insurance for members of a Derbyshire Whisker Club who wanted coverage for their beards against “fire and theft.” Theft?

“Insurability”, or why we can have insurance for weird things

Weird insurance is an object lesson about “insurability.” Ideally, an insurable risk should have, at a minimum, the following features:

  • “Accidental”: insurability usually requires risks be accidental. Otherwise, an insured could just…burn down their house on purpose and collect the insurance money. That’s called fraud.
  • “Pure”: speaking of fraud, insurable risks should probably be “pure” and not speculative – meaning that an insured shouldn’t stand to gain financially from a loss.
  • “Measurable”: if a loss does happen, an insurer should need to know whether this can be measured in both time (can they tell when a loss happened) and money (how much should they pay out).

Fortunately for our hirsute Derbyshiremen, “beard insurance” satisfies all these criteria. Can a beard be destroyed by accidental fire? Check. The beard-wearer doesn’t stand to gain if his beard burns? Check. If the beard burns, we know when it happened and how much the loss would cost the bewhiskered gentleman? Check, check, and check.

There are other “ideal” features of an insurable risk, but they’re not deal breakers. They’re more like “nice to haves”. For example, some argue that an ideal risk is one that is common to a large pool of insureds, so that insurers can better project how much they might need to pay out in the event of a loss. Think of homeowners insurance: you’d probably want a large pool of homeowners to a) figure out the likelihood of certain losses and b) spread the risks out over a larger population.

Some underwriters at Lloyd’s clearly don’t think this is a requirement for insurability. After all, there is only one pair of legs belonging to David Beckham.

And it’s a good thing that a large pool isn’t always necessary requirement for insurability. For one, it means I can read about weird insurance policies. But for another, it means that as long as you’re not, say, abetting bad behavior like insuring an assassin or something, you can probably find someone willing to pay the price to cover your risks. Which makes for a better, more protected world.

Insurance Commissioner challenges Guinness record for tallest politician

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On March 27, Guinness World Records named Brooklyn councilman Robert Cornegy as the tallest male politician in the world. But his title was disputed by North Dakota insurance commissioner Jon Godfread who claims that he stands an inch and 3/4 higher than Cornegy’s 6 feet, 10 inches.

Godfread, who played basketball at the University of Iowa, said he didn’t know that “being a tall politician was a thing,” and that he’d probably get in touch with Guinness. A spokeswoman from Guinness said that the organization would be “be happy to receive an application” from Godfread.

Guinness keeps track of a wide range of unusual records. Insurance related records include: The highest ever insurance valuation ($100 million) of a painting for the move of the Mona Lisa from Paris to the U.S. for a special exhibition; Pittsburgh Steelers’ Troy Polamalu highest insured hair ($1 million); and the largest ever life insurance policy ($201 million).

 

 

A brief history of ransom insurance

Did you know that ransom insurance is one of the oldest insurance coverages out there?

People needed insurance because of pirates

Beginning in the early 16th and continuing into the 19th century, state-supported pirates and privateers operating out of North African coastal cities (the “Barbary States”) preyed upon European and colonial commercial shipping.

One lucrative practice was to capture a ship and sell everyone on board into slavery. We don’t know exactly how many people were captured over the centuries, but they probably numbered in the hundreds of thousands. You may have even heard of one particularly famous captive: Miguel de Cervantes, author of Don Quixote.

(Fun fact: some of the first military conflicts for a young United States were the “Barbary Wars” from 1801 – 1805 and again in 1815 – 1816, which were attempts to stop pirate depredations on American shipping. One researcher estimated that the annual costs of Barbary piracy to the U.S., including insurance costs, were equivalent to $10 billion to $20 billion in terms of today’s economy.)

How did ransom insurance work?

Slaves could generally regain their freedom in two ways (if you don’t count mounting a daring escape). One was to convert to Islam – the Barbary States were Muslim and most of their captives were Christian.

A second way was to pay a ransom.

In the early days, churches and families would set up collections to help pay for the release of enslaved captives. That’s how Cervantes was freed in 1580. But starting in the 17th century, cities and states also began to set up ransom insurance pools.

One of the first pools, called the “Sklavenkasse” (literally: “slave insurance”), was established in the German port city Hamburg in the 1620s. That’s over 60 years before Lloyd’s coffeehouse was first mentioned as a proto-insurance shop.

Other places soon followed suit with insurance pools of their own. Individual sailors, churches, and shipping organizations would typically contribute to these pools, which paid out when a participant was captured by Barbary pirates and held for ransom. There were even established rates for how much a ransom should cost: a steersman could fetch 700 Reichstaler (the currency used in Germany at the time), while a common sailor cost a mere 60 Reichstaler.

(For the German speakers out there, you can read more about how the pools worked here.)

Ransom insurance today

Although Barbary piracy faded away in the 19th century, ransom insurance is still available today, usually for important individuals who travel to dangerous regions. Called “kidnap and ransom insurance”, it generally reimburses for ransom payments and other damages, including some medical payments.

And because criminals are creative, we also now have “ransomware” insurance, which covers costs from a ransomware attack. That’s when a hacker freezes a computer system – and will only unfreeze it in exchange for a ransom payment, usually in bitcoin. How the times have changed.