business owner looking at the camera from the hospital emergency room

The Statistical Realities of Life and Business

Simply put, when certain risks become statistical, they are not avoidable – they can only be managed – that is why you need risk insurances.

Why do statistics matter in life and Life insurance?

We all understand the growing importance of big data and how we use statistical averages to estimate the risk of a particular event happening. Governments collect census big data every five years to help them better plan for the future needs of the population and hospitals have been using statistical data to help predict how many Australians will need emergency healthcare and how many will need ongoing treatment - and on average, for how long.

Using big data to better predict the future is a necessary part of life.

Preparing for the percentages and still planning for a future

The ability to try and predict a long term future is part of what makes us human and separates us from the rest animal world

  • Actuaries have been analyzing data for years but it's only more recently has the general public become more aware of how big data statistics help us all better manage the typical risks of life.
  • This could be estimating the possible chance of an adverse weather event occurring, understanding the percentages of expected car accidents each year or knowing what percentage of our population will need emergency health care (or long term cancer care) each year.

All our preparation is based upon understanding the percentages of risks and that's particularly true for the Life Insurance industry and its army of actuaries (the big data boffins) who use very large amounts of statistical health data to understand and predict what percentage of people will face specific health challenges and when.

The problem of predicting the future better

The problem of being able to predict the likelihood of the future for a big percentage of people is that it often forces us to face uncomfortable questions.

  • The upside of being able to better predict the future is that we have a better chance of an advanced warning and being better able to prepare for it – so we can try and smooth out the inevitable bumps and be ready for the inevitable challenges we will all face.

And that's true of the Life Insurance industry that specialises in predicting the percentages of certain risks occurring for a range of medical conditions and then offering to provide insurance products that protect against them. (This is known as pooling the risk, and is a worldwide risk management principle).

How we see risks

We understand that for every adult, the future is to a large extent uncertain - and that's uncomfortable to think about.

  • When it comes to helping our clients better manage their own personal (and business) risks, we talk about four possible ways to manage risks.

We see risks as either:

  1. Avoidable - where possible avoid serious risks
  2. Acceptable - risks that are usually not that expensive
  3. Manageable - risks that are important
  4. Transferable - the best way to manage big risks with catastrophic consequences, whether emotional or financial or both.

Pro Insight: The worst risks to face unprepared are those that are statistical – and not personal. This is because they are unavoidable and have to be prepared for and managed. The worst combination of risks is those that are statistical and have the power to bring catastrophic consequences we personally may not have the resources to deal with. These risks are always best transferred to a Life insurance policy to carry for you.

Relax, it's not personal – it's just statistical

Understanding that some risks in life and business are just statistical realities (and not personal), helps remove some of the natural fears and discomfort we all face when thinking about something unknown or unpleasant in the future, and how that could affect our life, business, and family.

  • We can't avoid them, they are statistical, it's not personal - they happen to us all.

All we can do is manage them so that if they do happen, we have a backup plan already in place.

Taking an adult look at an outdated approach

We all need to get past the childish notion that merely talking about serious illness, such as Cancer, will in some metaphysical way attract it into our lives.

If this is your firm and fixed belief of how the natural world works and the best way to manage life's big risks is simply to avoid talking about them - we're probably not the type of Financial Adviser you'd feel comfortable doing business with anyway.

But if you're the type of person who accepts that life and business are naturally risky, that there are risks we all have to be prepared to manage (after all, that's why we wear seat belts, look both ways before crossing the road and check the use-by-dates on perishable foods and lock our doors at night) then we'd like to get to know you better.

The worst risks we all face - are not avoidable so they have to be managed. The biggest risks we all face are those that have both emotional and financial consequences - because we never do our best work during an emotional and financial catastrophe.

The Numbers of Life | The Statistical Risks of Life we all face

Crisis and Trauma insurance Crisis & Trauma
We all have a 1 in 3 chance of suffering a critical medical trauma or significant illness during our working life.

Income Protection insurance Income Protection
We all have a 1 in 4 chance of being sick or injured and unable to work for at least 3 months during our working life.

Life and Terminal Illness insurance Life & Terminal Illness
We all have a 1 in 10 chance of unexpectedly passing away during our working life.

Total and Permanent Disability insurance Total & Permanent Disability (TPD)
We all have a 1 in 20 chance of being disabled long term with a total and permanent disability.

Source: Life Underwriting Guidelines

Risk Insurance | Factors that can affect the cost of an insurance policy

Amount of Cover Amount of Cover
The more you’d like to receive, the more it will cost.

pie chart GreyDark Claim payment benefit period
It’ll cost more the longer you want to receive payments.

calendar month GreyDark Waiting period before claim
Your premiums will be less expensive if you’re willing to wait longer to receive payments.

birthday cake GreyDark Age
Disability insurance may be less expensive when you’re young.

health cross GreyDark Health
Your costs will be lower the healthier you are when your first apply.

briefcase occupation GreyDark Occupation
If you have a dangerous job, your premiums can be higher.

So where to now?

Here's the first simple mental shortcut (or unconscious bias) that you'll need to get past as you start to plan for a more secure future

'The issue is not the cost, it's that you don't think these things will ever happen to you'

Remember, the biggest risks are those that have both emotional and financial consequences - because we never do our best work during an emotional and financial catastrophe.

Chances of you needing to claim on your life insurances policy

the average lifetime cost of 5 major illnesses

How we can help

Understanding the statistical realities of life and business is a core function of living a bigger life and protecting your business and your family, from the business.

Contact us for a confidential chat about your needs.

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