How Insurance Is Done

August 1989

Isabella, my favorite decorator, sends me to a grand battleship of an Atherton estate, serviced by a flotilla of pickup trucks of which I am but one.  Carol, the owner, shows me a gate post that was struck by a delivery truck.  The post is a pagoda-like structure with cedar shingles.  One of the shingles is damaged.   

"Write me an estimate," Carol says.  Then she shows me a number of projects: widening a doorway, building an elaborate bench around an oak tree.  Classy work.  I've struck the mother lode. 

"Give me an idea what it'll cost," Carol says.  "Something I can tell my husband."  She winks.  "Then once he's on board, we can build whatever we want.  When can you start?"

"I can start next week.  I'll write up some numbers."

"Don't write it up.  Just tell me.  Except the gate post.  I need a written estimate for the insurance company.  Fax it to me.  Don't be cheap on that one.  I'm in the insurance business, so I know how this is done."

She must sell a lot of insurance to own this estate.

So here's the game: She expects me to bid low for most of the work — a nonbinding oral bid, so I'm fine with that — and bid high for the insurance work.  That evening, I write an estimate for the gate post.

Replace one cedar shingle:  Labor $150, materials $50.
Total: $200.

It's an outrageous estimate.  I'll do the entire job in fifteen minutes.  The materials — one shingle, two nails — will cost less than $1.  I'll make $10/minute on labor, with a 5000% markup on the shingle.

I fax it to Carol. 

She never responds.

Next week I call Isabella.  "What happened to Carol?"

"She didn't like your estimate for the gate post," Isabella says.  "In fact, she was furious."

"Yeah, it was grossly inflated.  She told me, 'Don't be cheap.'"

"No.  Not that.  It wasn't high enough.  Didn't she tell you she knows how insurance is done?  She's always saying that to me."

"She wanted it higher?"

"More zeroes.  Each number should've had one more zero."

"Can I change it?"

"No.  She's decided you're an idiot."