I was recently asked by someone to explain the concept of insurance and the working of an insurance company in a way that even a five year old kid can understand it. Like any other professional, I’m prone to the usage of jargon – filled language that even adults may find intimidating at times. So this was an interesting challenge. I thought back to my own childhood and here’s what I came up with:
So you’re a five year old who loves to play with marbles.
But sometimes you lose them or some other kid steals them or your mother confiscates them because you didn’t complete your homework. Your friends and other kids also face the same problems. The tough life of a 5 year old – the adults have no idea!
So here comes Bima uncle and offers a solution. He asks all your friends and yourself to give him 1 marble a month. In return, when you or your one of your friends lose your marbles due to any reason, he will provide 100 marbles to that kid and life is good again!
Now he’s collecting one marble per month from a hundred kids every month. So in a year, he gets one thousand two hundred marbles (1 marble*12 months*100 kids).
However, on an average, eleven of those kids lose their marbles every year. So he has to give away one thousand one hundred marbles (11 kids*100 marbles). So now he’s left with a hundred marbles (1200 collected-1100 given away) by the end of the year. That is his profit and the reason for providing this service.
And that’s how Bima uncle (insurance company)runs his business and helps the kids (his customers) live a happier life. 🙂
Money Ka Doctor 