Insurance

[Donald]

I know this is a topic that comes up from time-to-time and a number of us have given our thoughts on the matter. I've been looking at it again for my own circumstances and just can't work out how these things are calculated.

Up until now, I've had my camera gear insured as part of my household contents insurance. Now, I know some folks have suggested that's not a good idea as it's not a dedicated cover for the gear and any claim might affect the overall cost of the contents insurance. Okay, I get all that.

But, because I've made some significant purchases in the past couple of weeks, I have doubled the overall value of my bag of gear. So, I thought I needed to look at this again. And this is where it gets interesting.

I go online and look at the 'specialist' camera gear insurance policies. I get estimates of anywhere between 36GBP to 55GBP per calendar month (e.g. 432GBP - 660GBP per year). Now, I know I've spent a lot on gear, but that is still an awful lot of money for insurance, especially when I think that my house buildings + contents total cover cost is less than half that and my car insurance is way less than half of that. And, by the way, this gives me UK cover with up to A TOTAL of 30 days worldwide cover in a 12 month period.

So, what happens if I speak to my insurance broker about incorporating it all into my home contents policy? Well, the bottom line is that it increases my premium by 42GBP PER YEAR, not per month.

So, I immediately start interrogating the terms and conditions to find out what I'm not getting as part of the home contents deal that I would by buying bespoke camera gear cover. And the thing is - I can't find anything. In fact, by adding it to the home contents policy, I get worldwide cover for up 60 days AT ANY ONE TIME. So, I could go out of the UK on 2 or 3 occasions adding up to, theoretically, 150+ days per year and still be covered.

So, what am I missing here? I keep thinking there's got to be some reason that this is not a good deal.

Anyone got the inside track on the insurance industry that can explain what's going on here? Are the 'specialist' insurance companies just taking photographers for mugs?

[DanK]

I don't have an inside track, but I suspect that three things explain it.

First, insurance costs more than the average client will get back. It has to, or the insurer will go belly-up. This is why many consumer advocates tell us not to buy insurance to cover losses that we could pay for out of pocket, unless we have reason to believe that our risks are well above average. That is also why many retailers reportedly make more on extended warranties than on sales; extended warranties are just insurance policies (and are often in fact written by insurance companies.) Fire insurance is a great counterexample. The probability of a fire is very small, but the cost of one can be huge. I am happy to lose some money over my lifetime to avoid that risk.

Second, all insurance has administrative costs. The administrative costs of maintaining a new, specialty policy are presumably higher than the costs of adding a rider to your extant insurance. I doubt this is a big part of it, but I'll bet it contributes.

The third factor that I would suspect is self-selection of customers. Who will pay for specialty insurance for their cameras? One group is people who expect large risks--called adverse selection. Also, people who are particularly worried about their camera equipment may be willing to pay more.

I suspect that rates are also driven up by the people who file inappropriate claims. I see postings on the web by people recommending that. However, it doesn't seem clear whether that would be worse for people with specialty policies.

I don't have all that much less equipment than you do--my 7D is generation 1, and my 5D is a Mark III--and I rely on my homeowner's insurance for it. However, I think checking the details of the policy, as you did, is essential. In my experience, insurers often have limits on how much they will cover for certain types of property without an additional rider, and I have had one case in which they refused to write one.

[chauncey]

I suggest Donald that the Insurance Industry in Scotland differs quite a bit compared to other countries.
You might be directing this question to a local 3rd party advisor/attorney.

[Mike Buckley]

One of the explanations I've seen for the discrepancy in cost is that the specialty insurance product might provide immediate (as in next day) replacement of the equipment. That's not a need of mine so there would be no benefit for me to pay for it. Perhaps that explains at least part of the difference in cost between your two scenarios.

There seems to be a far wider discrepancy between pricing of services than for pricing of tangible products. The Internet has given power to the consumer to research prices and I think that has led to a narrowing of pricing among providers of tangible products. That's not the case when researching services (I think of insurance providers as service providers) because there are intangible considerations that understandably might motivate someone to pay one provider more than another provider for essentially the same service.

Based on everything you explained, I don't think you're missing anything.

[rpcrowe]

My worry about incorporating my camera gear into my home owners insurance (as a special rider) is that for a relatively small pay off in comparison with the total amount covered in my home (even if I lose all my camera gear) my home owners insurance premiums would go up considerably if I made a claim.

However, premiums like Donald spoke of for specialized photo gear insurance are way out of line in comparison to the payback and the chances of claim that insurance.