Please ensure Javascript is enabled for purposes of website accessibility

The Very Odd Risks that Insurance Companies Measure

By Motley Fool Staff - Apr 9, 2016 at 6:01AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Insurance companies are tasked with measuring and predicting some very odd risks. Here are a couple examples of risks that insurers must measure and accurately quantify.

If you can think of a risk, you can probably find an insurance company willing to underwrite it at the right price. Some of these risks are truly oddballs, and some are hard to believe.

Join The Motley Fool's Gaby Lapera and Jordan Wathen as they discuss things like how much gold rushers paid for insurance, why clergy members are generally seen as higher risk, and whether amusement park rides are safer than rides at a carnival.

A transcript follows the video.

This podcast was recorded on April 4, 2016. 

Jordan Wathen: All right, let's go back to the gold rush. Apparently, mining for gold is a very, very dangerous industry because back in the day they charged you 4 times the standard rate if you happened to be one of the crazies that went out to San Francisco to mine for gold.

Gaby Lapera: I wonder if there's a modern day equivalent of that. Would that be like, I dated this guy for a while who's really into that Discovery Channel show about deep sea fishing. Do you know what I'm talking about?

Wathen: Yes I know exactly what you're talking about.

Lapera: Yeah, I wonder if those people have a higher insurance premium.

Wathen: That's actually a fun one. There's been a few studies about that, and actually, say the general population, people who are riskier actually are clergy members, which is really fascinating.

Lapera: What? Really?

Wathen: They think it might be because maybe you just run a red light because your faith will save you, I don't know. Who knows, but yeah that's actually a thing, is that clergy members are typically higher risk than say your standard office worker.

Lapera: That is so interesting. I wouldn't think that that's a profession that puts you in the line of fire.

Wathen: Yeah exactly. It seems like a profession where life just goes on and you live to be 100, based on all my experiences with church.

Lapera: That is true. I've been at some churches with some very, very, very old nuns. Yeah, wow that's so interesting. Anyway, I think that I've covered everything that I want to know about insurance. Do you have anything else you'd like to talk about Jordan? Any favorite? If you had to invest in an insurance company right now which one would you pick?

Wathen: Probably Progressive (PGR 1.70%), or I would go the easy route and take Berkshire Hathaway (BRK.A 2.26%) (BRK.B 2.26%).

Lapera: Yeah.

Wathen: This is year wasn't too great for Geico and their other insurers, but if history serves you'll do quite well. They're trading at a valuation that's very cheap on historical basis. It's very interesting to me.

Lapera: Yeah. Yeah, I think that if I had to choose one I would go back to that weird specialty insurer, Markel (MKL 0.68%), just because I'm so fascinated by their business model, and they've done a great job underwriting the risks for all the very, very odd things. I would love it if I could call whoever is in charge of that at Markel and be like, "How do you even go about figuring out the risk for," I don't know, "parasailers." Very interesting.

Wathen: Exactly. No, here's a fun one, which is more dangerous? Do you think it's carnival rides or amusement park rides?

Lapera: I want to say amusement park rides, because I feel like people, there's a lot of scrutiny on carnivals, they seem like they're a little bit shiftier.

Wathen: You know see, I was thinking they're shiftier, so they're not as safe, but you're actually right. Amusement rides are less safe because they don't disassemble them and put them back together every day. Which, wouldn't think about that but that's something you only learn by writing that insurance and losing money on it, and then finally figuring out that amusement park rides aren't good bets anymore.

Lapera: See, I would definitely would have guessed it would have been amusement park rides, because I thought that people are generally suspicious of carnival workers, which is a terrible stereotype I guess. I'm sure there are plenty of very nice carnival workers out there. I don't know. I guess I'm just buying into what mainstream media tells us about carnival workers.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$466,816.07 (2.26%) $10,316.07
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$310.91 (2.26%) $6.86
The Progressive Corporation Stock Quote
The Progressive Corporation
PGR
$112.88 (1.70%) $1.89
Markel Corporation Stock Quote
Markel Corporation
MKL
$1,342.13 (0.68%) $9.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.