From the 'Why Didn't I Think of That?' file: Divorce Insurance
If John Logan has his way, sometime in the very near future, people across the globe will be able to purchase insurance coverage against the potential financial devastation often caused by divorce.
Logan, Chairman & CEO of SafeGuard Guaranty Corporation, a Nevis based insurance company with operational headquarters near Research Triangle Park in North Carolina, announced plans to offer divorce insurance internationally sometime in early 2007.
“We’re on the tail end of funding, but everything else is ready.” said Logan, “I’m guessing six months or so depending on how fast we can come to terms with a few investors.”
The coverage will be geared toward rewarding people who have a long and successful marriage, not for people contemplating divorce in the immediate future, but will compensate those unfortunate enough to fall into the statistic of the 50% or so marriages that eventually fail year after year.
“You can’t buy flood insurance when it’s raining.” Logan remarks, “It’s the same with us. This is precautionary coverage, like disability or cancer insurance. The facts are if you decide to build your house on a flood plain, you may never get flooded, but the odds against you are real. Today, the odds that your marriage may end in divorce are very real too, regardless of your socio-economic status.”
“Times have changed.” said Logan. “Divorce rates here in the US haven’t changed much in 30 years, but back then typically only one parent in a household worked, they weren’t strapped with more house than they could afford, they had some savings in the bank and they had little, if any, credit card debt. If their marriage failed, there was an opportunity for the non-working spouse to create additional income in addition to any support they received. Today that landscape is much different. The typical household today has $2,000 or more in credit card debt, a much higher percentage of their overall income goes to their mortgage and both parents are working full time. If they split now, there’s little opportunity to find additional income to offset the costs of setting up an entirely new household. Add the average cost of $15,000 to $30,000 in legal fees for divorce here in the US and that’s a recipe for financial disaster. Most people overlook that. And it’s worse elsewhere.”
In a recent publication of the Australian Journal of Sociology, Jay Zagorsky’s study titled “Marriage and Divorce’s Impact on Wealth” makes the point clear. Zagorsky, an Ohio State University sociologist, followed baby boomers from youth to their 40s through the National Longitudinal Survey of Youth. Zagorsky found that on average, by their mid-40s, married individuals will have over 75% more wealth per person than singles will, but the divorced are far worse off, losing an average of 77% of their net worth. A little more research points to the fact that divorce is the number one reason for bankruptcy and poverty among single mothers worldwide.
“We will provide a financial safety net for people who suffer the often devastating financial consequences of a failed marriage, but the biggest payout is for those policyholders that have a long and successful marriage.” said Logan. “We want our policyholders to stay married for a long time, for obvious reasons, and we’re providing significant monetary incentive to do so, but we know divorce rates worldwide aren’t changing for the better anytime soon, so we’ll be here for those folks that need to start a new life too. If we can prevent even one child from spending a life in poverty, all the monetary benefits pale in comparison.”
Mr. Logan was secretive about the details of the coverage.
“I can’t divulge that information just yet because we have a business method patent application pending and the competitive environment in the industry is notoriously cut-throat,” said Logan, “But I can tell you that it will be affordable to everyone and no one will be turned down.
When questioned why he’s so confident that SafeGuard will be successful where insurance companies with armies of actuaries have dared not tread, Logan quipped “I just read that a Russian mathematician solved the Poincare conjecture, a conundrum that has stymied the world's most brilliant minds since 1904. If you boil things down, insurance is just a math problem too…and we’ve solved it.”
Like most successful entrepreneurs, confidence is not something he lacks. Neither is proof of the market.
Logan points to reams of data from his team’s six years of research and development and market surveys conducted in the fourth quarter of 2005 as evidence of an already existing demand for this type of coverage. But he is quick to point out that’s only the tip of the iceberg. Eventually, insurance companies offering similar coverage will work to reduce the number of claims they pay out by creating networks of marriage counseling and support groups just like they did with the auto industry to reduce accidents and the injuries that resulted from them.
“Don’t kid yourself into believing our legislators came up with safety belt and motorcycle helmet laws on their own years ago.” Logan commented “The insurance industry lobbied to make those changes in our lifestyle to help reduce their claims payouts. The benefit is more people live longer and everybody’s happy. The same goes for helping people make their marriages work. That’s a good thing in my book.”
Whether or not SafeGuard’s offering will meet the public’s demand remains to be seen, but there’s little doubt the market is there with an estimated 10 million marriages expected to end in divorce by 2015 in the US alone. Logan estimates the market at nearly $200 billion worldwide, but he knows his monopoly won’t last forever.
“This is big money. I’m sure once the industry digests how we’re making this work, some major players will surely join in, but in the short term we’ll make our current investors very, very happy. And there’s still room for a few more,” he said.