Insurance. It's a word that rarely inspires enthusiasm. For most people, it represents another bill, another obligation, another reminder that life comes with risks. Yet, as Karl Susman explains in his episode of Insurance Hour, this aversion to insurance often masks a deeper misunderstanding about why it exists, how it protects us, and what role we play as policyholders.
This post dives into those key insights, breaking down why many consumers feel "forced" into buying coverage, what responsibilities we share with our agents and brokers, and how our own behaviors — from deferred maintenance to distracted driving — directly impact premiums and claims.
Most people first encounter insurance as a requirement, not a choice. When you buy a house, your lender mandates homeowners insurance. When you finance or lease a car, the bank requires auto coverage. In both cases, the underlying reason is the same: lenders want to protect their collateral.
From the consumer's perspective, this feels unfair. After all, you've already made a down payment, signed on for decades of mortgage payments or a car loan, and now — one more expense — you must buy insurance. It feels like an imposition rather than protection.
But take a step back. Imagine the alternative. What if the bank didn't require insurance — would you be comfortable leaving your largest asset uninsured? If your home burned down or your car was totaled tomorrow, could you absorb that financial loss on your own? Probably not.
Insurance, at its core, is risk management. While it's true that lenders require it for their own protection, it equally safeguards your investment. Just like the FDIC protects your money in the bank, your insurance policy protects the tangible things that make up your financial foundation.
Susman points out another major frustration among consumers: "Why do my rates go up after I file a claim? Isn't that what insurance is for?"
It's a fair question — and one that reveals how easy it is to misunderstand how risk-based pricing works. Insurance isn't a savings account; it's a risk pool. Every policyholder contributes premiums that fund the collective pool used to pay claims.
When you file a claim, your individual risk profile changes. You've moved from being a "low-risk" insured (no losses) to someone who has had a loss event. Statistically, that increases the likelihood of future claims. From a business perspective, your premium must now reflect that higher probability.
It's not personal — it's math. Just as your auto insurer reassesses your premium when you get a speeding ticket, your homeowners insurer reevaluates after a claim. Annual renewals exist precisely for that reason: to adjust to new information about you, your property, and your risk exposure.
Here's a sobering truth Susman highlights: very few policyholde ...
