The Black Swan and Insurance


Professional Advisory


February 23, 2013

February 23, 2013

Recently, I finished what I consider to be, one of, if not the most influential book I have ever read. It is called The Black Swan and it is written by a brilliant individual by the name of Nassim Taleb, who holds a Wharton Business School MBA, a PhD. in Management Sciences, was a Wall Street trader, is a philosopher, university professor, bestselling author, speaks four languages, and is completely unafraid to say “I don’t know” about something.

To sum up, The Black Swan is extremely difficult, other than to say it is about the unpredictability of life and how major unexpected, unpredictable, and random events help explain and shape our lives and the world around us. The reason for the title has to do with fact that for a great number of years, people only thought that white swans existed…until someone sighted the first black swan, and that changed forever how people view swans. A Black Swan according to Taleb is an “outlying event that lies outside of the realm of regular expectations, carries an extreme impact, and retrospective predictability.” Taleb explains that these shocks to our lives can be positive or negative. Everyone reading this article or The Black Swan will certainly be able to go back into their own lives to see what major events or Black Swans have shaped them. Taleb asks “How often did these things occur according to plan?”

Consider just some of the Black Swans in your life including some recent and not so recent world events. You can start with our current financial crisis, the 9/11 terrorist attack, the invention of computers and the internet, how you met your spouse, or even how you became a dentist.

Because of my own life, starting off as a “single, dentist in New Jersey, to where I am today…a married insurance advisor with three kids living in Toronto” I found the premise of The Black Swan to be of great significance. Particularly though, I realized after reading the book that I deal with Black Swans everyday:

1. Convincing individuals that “negative“ Black Swans exist in the form of incurring a severe disability or dying;

2. Helping individuals understand the financial impact of these types of Black Swans on their practices and families;

3. Providing financial protection to individuals who would benefit from it in the event of negative Black Swan;

4. Helping those at “claim time” who have just experienced a negative Black Swan.

What I have found out in my years as an insurance advisor is that many individuals, dentist clients included, like to think they know what the future holds. I routinely hear:

• I have great genes! My parents are completely healthy, and my great grandparents are 100 years old. I’m quite confident nothing will ever happen to me;

• I don’t play any hazardous or dangerous sports, and lead a simple lifestyle;

• I’m young and in great shape, plus I exercise regularly;

• It just won’t happen to me!

It is not uncommon for these same individuals to tell me when and how they are going to die or incur a disability. The logic behind Black Swan events hold the opposite and include:

• You cannot predict the future;

• You cannot choose which disability you might get, when it will happen, how severe it will be, or how long it will last;

•  You cannot predict when or how you will die (unless you commit suicide of course).

Just the other day, I received a phone call from a client commencing the twentieth disability claim that my insurance firm is currently overseeing and managing – a new record. The phone calls I get are always from either the office manager or spouse (usually the worst case scenario) or the client. In this case, it was the client who called. He began by stating what seems to be the opening line for all claimants, “I can’t believe it!,  This was not supposed to happen to me!“ or, “I need to put in a claim…what do I do…where do I start… do I have enough coverage?”

People enjoy a level of comfort and satisfaction in thinking they know or can control to some degree what the future holds. We are raised and educated this way. This includes everyone from professional sports team owners to “all” of the economists who think they can predict how and when the financial crisis is going to end. Not one economist or politician by the way, predicted the current crisis!

I have always known, even before reading The Black Swan that insurance protection can be viewed from a few directions with regards to mathematical probability. The first is that I could recommend insurance coverage based upon statistical probability (which is how all insurance plans are essentially priced). In other words, I could throw my clients onto a “bell curve.” The second is that I can protect them from being blindsided from an unforeseen, random event that could have devastating financial consequences.

It is up to you to decide how best to protect yourself in the event of a Black Swan! PA

By: Dr. Ian WexlerDr. Ian Wexler is a leading authority on insurance issues for dentists. He is the founder and President of Protect Insurance Agencies Inc. in Toronto which provides specialized expertise in life, disability, critical illness, long term care, and other insurance products and services to over 900 dentists across Ontario for the past 17 years. He can be reached for questions or other enquiries at (416) 391-3764 or