While training for insurance, I heard the following story to explain the concept of insurance.
Many years ago, there was a human settlement on a hilly region of China. During summer, menfolk would descend the hills, cross the dry river bed and set up tents on the plains.
Next, they would start ploughing the land, sow the seeds and wait for rains. Later, they would harvest the crop and start their journey back to their settlement.
The dry river bed would now have water flowing forcefully and hence, each man would make a wooden barge, keep his agricultural produce on it and cross the river. Every year, about one in ten men would face the peril of the barge being swept away by the waters. He would then swim across the river, but his entire year’s crop would have gone. There were a few intelligent men in the settlement. They decided that from the subsequent year onwards, once they came near the river, they would form groups, each with ten members. Each team member, like always, will make a wooden barge. However, unlike previous years where every individual kept his produce on his barge alone, going ahead, each team member would distribute his produce across barges of other team members. Thus, the total produce of an individual would be spread across ten wooden barges in a team.
If one of the barges was swept away, each would only lose only 10% of his total crop. This ensured that no member of the settlement would lose the entire produce and live in poverty for the rest of the year.
Insurance is all about spreading risk and sharing losses.
My IPO
All of us have heard the term IPO. The performance of that IPO, during the offer period and once it is listed, is unknown. However, there is one IPO over which we all have control. That is ‘My Insurance and Protection Options.’
My IPO for my family
‘My IPO’ is for my family. Once I was asked by a renowned MNC to conduct a workshop on financial planning for employees. Before the workshop, I was casually talking to their senior HR manager. I was inquiring about the kind of medical cover the company gave its employees. She explained in detail. I enquired if the employees were aware of it. Her response was in the affirmative.
During the workshop, I asked the participants what kind of health cover the employer provided, how much the cover was, whether the whole family was covered, whether any cashless options were available and so on. Similar to my past experiences with other organisations, only a third of the participants were fully aware of the details.
Last year, one of my clients working at a very senior level in a telecom company, suffered a massive heart attack while he was touring on work. He was in the ICU for a few days and later, succumbed. The family had to pay a large amount. Of course, he was covered well by the employer and the full amount was reimbursed. Interestingly, the company had a tie-up with that hospital and if only the details had been given to the hospital, cashless treatment would have been possible.
The family would have been saved from the trouble of making online fund transfer. Unfortunately, the family had no clue.
‘My IPO’ is for the benefit of our family. Keep them completely abreast. Introduce them to your insurance agent. Have annual meetings with him.
One important activity I suggest to my clients is to request their health and life insurance agent to visit their homes and explain the procedure for filing claims. “I had prepared a complete file of the required papers for claiming health insurance,” said Ms. Rustogi, adding“my claim was processed within a fortnight.”
Personally, I recall, a few years ago, when my family had to make a claim for health insurance, I had prepared the file in detail, including indexing it. A few weeks later, when a query came from the insurance company, I gave only a copy of the invoice along with the page numbers, all the originals were with them. Since they had acknowledged the receipt of the file, they processed my claim without any further communication. Our insurance is for ourselves and our family. It is ‘My IPO.’
(The writer is a financial planner and author of the Yogic Wealth)