Risk , probability and insurance: why you SHOULD prepare.

greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Most of us do this intuitively rather than rationally. We look both ways before crossing the street. Think twice about saying something at a business meeting. Buy a mutual fund instead of the underlying stocks themselves. We buy insurance.


When was the last time your house burnt down? Its never happened to me personally. Even insurance companies buy insurance for their insurance committments (this is called re-insurance).

We do these things because we feel that the price for risk avoidance or risk minimization is worth it to us even if we never experience the worst. I am certainly glad that my spouse hasn't had to use the Life Insurance we pay for regularly but it is worth it for us to hedge our mortality and its economic impact on the survivor's life.

Y2K presents a tremendous increase in risk for most people who depend upon modern systems for their livelihood and for maintaining the context of their world. It does not matter whether you believe this problem will result in The End Of The World As We Know It (TEOTWAWKI) or only minor inconveniences. Senator Bennet said in early 1998 that if Y2K occured at that time then we would experience a truly tragic fallout from it all. That was his assessment at that time. He was assessing risk.

We need to seperate the issues around providing insurance for ourselves and our conclusions about what will actually happen. What you think will happen (probability) and what you should prepare for happening are two entirely seperate issues.

I do not believe that I will die between July and October but I paid my life insurance policy for that time period. No one ever has insinuated that I was foolish for spending that money either.

You do not in the slightest have to believe that the world will come crashing down on you due to Y2K in order to prepare for the worst aspects of what MIGHT happen should that occure. Though you will risk being thought of as odd if you divulge that preparation (strange world isn't it?).

Think about that for a minute.

It is quite unfortunate that people in the US have forgotten that they should save for a rainy day. We all should be doing that. Prior to Y2K issues surfacing financial advisors were counselling people that as their first priority before making ANY INVESTMENTS in stocks or real estate they should have a nest egg of at least 6 to 9 months worth of salary on hand to protect against unemployment .. should that occure.

How many do this? Probably not many by the looks of it. We are a 'spend it when we don't even have it' kind of country right now.

If Y2K is the issue which pushes you over the edge in terms of motivation to do what you should have been doing all along these days then thank God for it. You finally got wise. In the long run it will reward you.

If you are letting your assessment of the probability of significant problems dictate that you should NOT prepare wisely then you will rue the day should any difficulty have the same effect in your life.

I know a farmer who keeps draft horses. I wonder why. He has a fine set of tractors and has never had to use those draft horses. Maybe deep in the back of his mind he is hedging his bets. I notice that he does not have quarter horses.

In the old days a land owner would reserve a nice stand of pine trees for insurance against the day that his house or barn might burn down. He knew that money would be very tight as he tried to rebuild. He had lumber 'on the hoof' so to speak and every year that stand of pine would GROW. Interesting concept.

Just a few thoughts about preparing.

-- ..- (dit@dot.dash), July 01, 1999


dit, thanks for the sobering thoughts. i for one am planting some trees this evening.

-- corrine l (corrine@iwaynet.net), July 01, 1999.

Rational people do not prepare for anything and everything that might happen, because they know that this is a task of infinite scope. Rational people make reasonable judgments as to what is worth preparing for and what is not, based on risk and consequences. To do otherwise is to waste limited resources, whether it is time, money, food, whatever. Woe unto the self-righteous, condescending preachers of panic, who can only think that if others choose not to prepare for this particular invented crisis, that it only proves their own moral superiority. In their dark hearts, they secretly wish for calamity in order to justify themselves.

-- cd (artful@dodger.com), July 01, 1999.

cd, you got something against trees??? be honest with yourself, everyone likes trees.

don't be a sap you big sweetie.

-- corrine l (corrine@iwaynet.net), July 01, 1999.

having a couple weeks of food and water on hand should be mandatory. blizzards,quakes,hurricanes,etc. just my .02!!

-- eddy (xxx@xxx.com), July 01, 1999.

Plant bamboo! Grows much faster than trees, yet makes a perfectly good house.

-- Mad Monk (madmonk@hawaiian.net), July 03, 1999.

Natural disasters can last more than a week. It helps to always be prepared...



Emergency Food and Water Supplies

If an earthquake, hurricane, winter storm or other disaster ever strikes your community, you might not have access to food, water and electricity for days, or even weeks. By taking a little time now to store emergency food and water supplies, you can provide for your entire family.

This brochure was developed by the Federal Emergency Management Agency's Community and Family Preparedness Programs which provides information to help families prepare for all types of disasters.


-- Linkmeister (link@librarian.edu), July 03, 1999.

There's a good comment by Victor Porlier of Westergaard 2000 on Y2K, insurance and risk in this article...


...that I think explains pretty well what is it we're trying to do when we call this forum:

Life is filled with risk and surprising outcomes. That is why we pay insurance premiums to cover improbable, but not impossible surprises that can damage our health, homes, cars, and businesses. Every such situation requires a personal assessment. Should your car insurance include a collision rider? If not, you can reduce your current out-of-pocket expense. How risk averse are you?

People buy insurance, and they even go to the trouble of doing a personal assessment to decide how extensive their coverage should be. And all this happens, even though the person doesn't necessary believe they'll need this insurance during, say, a particular 12- month period.

I know that some people believe this forum concentrates on bad news. We know that more than 50% of all organizations in the U.S. will complete their remediation of mission critical systems. The Gartner Group estimates the figure will end up being about 85%. That other 15%, though, could have unexpected impacts on the 85%.

Good news, while always hoped for, is not the basis of personal Y2K risk assessment. To personally assess risk, you have to look at the bad news as well, even if the percentage of the news that is bad is less than 50%.

Just like with insurance.

-- Linkmeister (link@librarian.edu), July 03, 1999.

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