Why a sceptic still buys travel insurance

This story was first published in The Straits Times on Oct 26, 2014

Death and taxes, they say, are among the few certainties of life.

Paradoxically, for some, its unpredictability is another absolute.

Of course, no one is immune to the vagaries of life.

However, I think it is a little peculiar when we pay to protect ourselves with a string of insurance policies, but still pray hard that nothing unfortunate happens anyway.

Economists will tell you that we just hate the idea of losing, whether it be our belongings or control over our lives.

But I dislike the notion of monetising these fears and uncertainties and, so, have never warmed to the idea of paying to protect myself against an infinite number of unfortunate possibilities - be it sudden death or sickness.

The concept of insurance originates from the idea of redistributing risk from the individual to the wider community. So the converse means that I would effectively be chipping in for someone else's hospital bills - and the insurance agent's bonus - if nothing ever happens to me.

I have not always been such a sceptic, but an incident while I was on a study trip at the University of California, Berkeley some years ago left a bitter taste in my mouth that still lingers today.

After stuffing months of happy memories into my bags, I headed for Miami to begin a month-long tour of the East Coast.

With the folly of youth and last-minute packing, I carelessly forgot to secure one of my suitcases properly.

As I stood by the carousel in Miami International Airport, impatience morphed into anxiety when one of the suitcases went missing. I was later told by the American Airlines staff that it had been mistakenly loaded onto another flight.

Don't worry, they said, your luggage will be transferred to the next domestic flight to Miami and will reach you tonight.

But my relief was short-lived when it turned up with a broken zip. A pair of expensive shoes I had snagged on a shopping escapade had been pilfered. (Whoever took them, you sure have good taste!)

Upset, I lodged a report with the airline, only to be given a flimsy slip of paper as proof of my reported loss.

All is not lost, I thought, as I still had travel insurance as a backstop. Wisdom - also known as my mother - had told me it was the smart thing to do if I was going to be away for an extended period.

Throughout the next four weeks of gallivanting from Orlando to New York, that piece of paper represented the warped satisfaction I had from knowing that the travel insurance I bought was not useless after all.

But that glimmer of hope that I would eventually recoup my loss was snuffed out when I had to fill out an exhaustive form that asked for the most inane details.

To add insult to injury, the company asked for a copy of the receipt that came with the shoes.

Why, I said, I believe I would not be able to give it to you because it was in the box with the said stolen shoes.

After what seemed like months of frustrated e-mail messages and phone calls to the insurer, I gave up trying to navigate the departments of that behemoth of an entity, which I believe was set up as such to frustrate claimants like me.

It felt as though I had willingly paid the firm to prolong my misery instead of providing the compensation I was promised.

There are theories that people who buy travel insurance most of the time they book a flight do not make good investors because they overrate minor probabilities out of fear.

That fear - or anxiety - is heightened by the realisation that a previously unheeded danger may be lurking around the corner. The danger need not be highly probable; mere possibility is enough to evoke fretfulness.

This is different from risk - a standard finance theory that quantifies uncertainty - which is a measure of how wildly we expect future returns to deviate from our expectations.

I might not make the best punter then, because I found myself taking out travel insurance yet again for an upcoming holiday. I suppose the uncertainty of having nothing to fall back on in a foreign land still eclipses my new fear of yet another ineffectual insurance policy.

It does make sense to buy insurance if a traveller is more at risk or more likely than the average policyholder to make a claim.

I probably tick most of the boxes with a track record of missing suitcases, an itinerary that spans a few countries, and a knack for being "penny wise, pound foolish".

Yes, I am that driver who runs into a store for a few minutes without using a parking coupon, and later receives a parking ticket.

Convincingly, the nightmare of exorbitant medical fees overseas is also a common story cited by others who, unlike me, have somehow made their insurance claims successfully. At the very least, having some coverage would ultimately buy my loved ones peace of mind.

However, the biggest push was knowing that I have only been fortunate enough to have Lady Luck on my side so far.

Fine, take my money because I do not know how long she will continue to like me.

Or maybe it was because travel agencies and airlines make buying travel insurance akin to upsizing your happy meal. "Would you like to add travel insurance to your purchase for just $80?"

How about some fries to go with that?

All right, I guess I'll take the fries this time.