5 ms·

Car insurance is making its way towards variable pricing on how much and how well you drive. Health insurance will inevitably start to care about what you eat a

Car insurance is making its way towards variable pricing on how much and how well you drive. Health insurance will inevitably start to care about what you eat and how much you exercise. Technology enables much more accurate and precise assessment of risk, and businesses with a lot of money riding on good risk assessment (banks, insurance companies) would be stupid not to take full advantage of that. If markets tend towards efficiency, this will happen. And I'm not sure that's a bad thing. Being young and male, I pay for the sins of my demographic category in car insurance premiums. I'd much rather pay for my actual driving style. Similarly, credit risk can probably be assessed by actual spending behavior rather than history. If you find it uncomfortable that lending institutions and insurance companies might act in the most rational, efficient manner, consider whether you're really comfortable with capitalism.

signal11 11y ago
> I pay for the sins of my demographic category in car insurance premiums Does your insurer offer lower premiums if you get a "black box" attached to your car and can demonstrate you drive safely? Asking because I'm curious -- car insurance rates for young men are very high and this was mentioned as a possible mitigation.
- oh_sigh 11y ago
  Yup. It's not even young men who are screwed over. I'm a 31 year old man with a flawless driving record(zero accidents, zero tickets), having driven over 400k miles over the past 14 years, and yet I still pay more in insurance than my 19 year old female cousin who already has rear ended a person in the 2 years she has been driving.
  - superuser2 11y ago
    You probably drive a nicer car than she does? But still, definitely.
  - chrisBob 11y ago
    That is only a fair comparison if you live in the same area. Where you live impacts your insurance cost a lot.
  - deleted 11y ago
    [deleted]
  - learc83 11y ago
    I'm guessing that is much more a product of the value of the car you drive. Statistically, you're extra experience (and safe driving record) makes you a much, much safer driver and insurance companies know this.
- wnevets 11y ago
  Progressive does, their snapshot measures how hard you brake.
- janesvilleseo 11y ago
  Allstate and State Farm do too. I partipate in the Allstate one currently. I can cut my bill by 30%. However, it is next to impossible to get the max. You get 10% just for enrolling and I'm on track for another 10%. The interesting part is this is all based on off the app on my phone. I do not connect anything to my OBD.
noblethrasher 11y ago
> Technology enables much more accurate and precise assessment of risk, and businesses with a lot of money riding on good risk assessment (banks, insurance companies) would be stupid not to take full advantage of that. If markets tend towards efficiency, this will happen. The problem is that you can't eliminate risk[1][2], you can only shift it to someone else. But, we now live in a time in which people with the most powerful computers can shift all of the risk away from them. Consider where that risk ends up getting shifted. [1] http://c2.com/cgi/wiki?YouCantEliminateRisk http://c2.com/cgi/wiki?YouCantEliminateRisk [2] Well, science probably does eliminate risk and uncertainty, but that's a totally different enterprise.
- kefka 11y ago
  I argue that they can eliminate risk. What happens is the top 10% of the people who cost insurance get the boot. Now, unless they choose just to not pay out, they can still reduce their risk levels below threshold of the industry. That's what actuarial science is founded on.
  - omegaham 11y ago
    > That's what actuarial science is founded on. Oh, you mean "that branch of science that everyone ignores because it's politically unpalatable?" "Gee, we promised the moon for our pension obligations and funded them at an absurdly low level, and now we're bankrupt? I don't know how this could have happened!" ~ Municipal governments
  - ubernostrum 11y ago
    For some types of insurance, "top 10% get the boot" may not be possible, as there might be laws requiring the insurer to write a policy for anyone willing to pay the premium.
- riskneural 11y ago
  You can diversify risk which is almost the same thing. The whole point of insurance is that each person has x% probability of dying, so they pay x% * the sum assured, and, as the pool of insured gets large enough, there is enough cheese in the fridge. Yes, the pool is not always large enough, so you can throw it into a reinsurer from the insurance company. Yes, the reinsurance pool isn't always large enough, so you can retrocede to a few other reinsurers for diversification. That pool isn't aways large enough, so you can securitise away the tail risks and aggregate loss risks into a cat bond, or a pandemic bond, or a longevity swap, or something fun. These will then in turn be bought up by pension companies, in order to diversify against their market risks, and the needle returns to the start of the song, and we all sing along like before.
radmuzom 11y ago
How is this relevant to the article at all? As a credit risk modeller, we already use spending behaviour to assess credit risk; and I am pretty sure the insurance industry does too. No retail portfolio can be tailored to the individual level (or the methods are not that sophisticated yet); hence the average behaviour of your demographic will matter whether you like it or not. To your specific point, in my country we have the concept of a "no claim bonus" where the insurance premium is drastically lower if there is no claim made in a year - not sure whether there is a similar practice in the US.
- superuser2 11y ago
  My understanding is you have access to total monthly credit usage vs. credit availability, not what I'm spending money on. I would think there's information to be gleaned from whether the distribution of spending across categories looks like a deliberate household budget, whether purchases include luxury items, etc. that would let you spot people likely to bury themselves in credit card debt before they actually do so. Just as people's social networks might tell you about their attitudes towards money when influenced by friends.
  - radmuzom 11y ago
    I have not worked for the US market the last five years, but as far as I remember there is a law in the US that a bank cannot take adverse action on a existing customer holding the bank's product based on credit history from another bank - so for example, my bank cannot decrease the limit of a card because the customer defaulted in a personal loan held with another bank. Of course, at the time of origination of the credit card, we can use this information. The whole point being that just because data is available does not mean I can use it even though it may be statistically significant for me to use it. Again, I am not sure of insurance regulations so there may be a possibility around using more data, if available, in insurance models.
- riskneural 11y ago
  Pretty much all countries have the no claim bonus for driving. (It's in the earliest actuarial exams.) You can clock up several years of no claims bonuses, and the discount increases with each year. Interestingly, the no claims bonus can be insured. Now, generally only risk averse people will insure their no claims bonus - and these people also tend to drive more risk aversely and hence have less accidents (or perhaps less likely to make claims - who the hell knows). So, the very fact that somebody wanted to insure their no claims bonus should in theory give them a discount on their premiums. But you cannot offer a discount for an extra feature! This means you have to dive into your generalized linear model and fiddle with a couple of parameters to make sure there is some sort of nominal charge for the insurance on the no claims bonus.
TallGuyShort 11y ago
>> consider whether you're really comfortable with capitalism My favourite thing about capitalism is that you actually only have to consider whether or not you're comfortable with this policy. If you don't like it, by no means do you HAVE to take a loan. You DO have to buy insurance in many situations, but at that point it's no longer a true free market anyway.
- cookiecaper 11y ago
  Insurance is a large-scale perverter of the market, because it muddies the direct relationship between the cost and the value of the service and makes the pricing all screwy. Creating this opening for pencil-pushing middlemen to profit off a service to which they provide no value is a big problem. This is blatantly apparent in the health industry, where if you're a cash patient that knows the right magic incantations, you can get 90% of the bill waived, and if you don't know those incantations, you're forced into bankruptcy with hundreds of thousands in medical debt. The American health system is despicable and must be rectified.
  - tjr 11y ago
    Do you have any further links or information on these magic incantations ?...
    - cookiecaper 11y ago
      Here's an article about the differences: http://articles.latimes.com/2012/may/27/business/la-fi-medical-prices-20120527 http://articles.latimes.com/2012/may/27/business/la-fi-medic... The specific incantations are different for every provider or hospital. Sometimes you can get it just by saying up front "I'm paying cash today." Sometimes you have to go through a complicated Patient Financial Services system to get the bill reduced, and then you have to say the right words to the right people if you want reduction. A massive bulk of "medical" labor goes into these cat and mouse games between patients, insurers, providers, and facilities. They're all trying to figure out how to maximize their profit and/or savings and it gets very complicated. If insurers learn that other people, even cash patients, are getting "a better deal", they'll punish the provider and/or facility by removing them from the network, thus cutting the patient traffic. When providers and facilities bill insurers, they expect to get maybe 10%-20% of the billed amount, so they rack the cost of everything up through the roof so that they'll be OK with the pittance they get in return. And that's the tip of the iceberg. There are a lot of people whose jobs are dedicated to nothing more than these billing shenanigans.
27182818284 11y ago
>Health insurance will inevitably start to care about what you eat and how much you exercise. At a conference in 2007, I learned that health care companies were already exploring data they could get from those free get-a-discount grocery store cards. Unfortunately that's about as much as I know about it. I wish I would have asked the lecturer for more information at the time.
bbrazil 11y ago
> Health insurance will inevitably start to care about what you eat and how much you exercise. This is already happening, I met the founder of http://wesavvy.com/ http://wesavvy.com/ recently which uses your phone to track exercise and reduce your insurance premium.
- riskneural 11y ago
  There is also Vitality UK from Prudential, and Beam - the wifi connected toothbrush. Telematics is all the rage in risk.
  - sjg007 11y ago
    wifi connected toothbrush... wtf.. wow.
    - riskneural 11y ago
      I give you Beam. http://www.beam.dental/ http://www.beam.dental/ My understanding of the idea, which may be rubbish, runs as follows. 1. Find a way to identify good risks - in this case regular teeth brushers, or occupants of a crack-house that share a toothbrush. 2. Hence, offer lower premiums to low-risk customers than those companies that charge an average premium to average-risk customers. 3. Get a few customers together and make sure the shareholders of the polyopoly dental insurance mammoths get wind that you are thieving their customers. Panic sets in among the incumbents. Innovation!! Drat!! 4. Get bought out for a Unicorn bill before you even pay a dental claim or cover your costs.
- zeidrich 11y ago
  I think there's a big difference between these two things. When you use a phone to track exercise and reduce insurance premiums, that's a good thing, it encourages (or at least rewards) people who exercise and become healthier and might need less medical care. When you use social networks to track and monitor who your friends are in order to approve you for credit, that causes a different set of rewards and incentives. It rewards you for choosing who you are willing to be friends with based on their creditworthiness. It punishes people who have associations with people with poor credit. It essentially keeps good people down too. If you are a role model in your group of peers. If you're the guy out of your group of friends who got an education and got a steady job. If you pay your bills and don't carry debt, and you want to buy a house and have the money and responsibility to do so, you should be allowed to. When you do that, it shows those friends what you can do, and it allows you to move forward. On the other hand, if you get an education, get a job, pay your bills, and don't carry debt, but when you go to buy a house your mortgage application is denied simply because you have some friends who are struggling on facebook, what is the impact of that? It just causes you to stop moving up. Maybe it discourages you. Maybe it makes you realize that the world doesn't really want you to be better than what your friends have become. What the problem is has less to do with being judged by your actions, but rather being judged by the actions of those you associate with.
deleted 11y ago
[deleted]
deleted 11y ago
[deleted]
Silhouette 11y ago
If you find it uncomfortable that lending institutions and insurance companies might act in the most rational, efficient manner, consider whether you're really comfortable with capitalism. The trouble is that the situation you describe is idealised and probably unachievable. In the real world, it seems more likely that a different, more complicated set of strict automated rules will be created, and it will simply create different loopholes through which some innocent people fall and get treated unfairly as a result. There will just be a lot more loopholes with fewer people falling through each one, making the system as a whole less accountable. I learned a useful lesson just after I graduated from university. I had a decent job offer, I wanted to consolidate my modest amount of student debt into a sensible place as the student banking perks were expiring, and I wanted a small loan to buy a car to commute to that new job (which was far cheaper than either moving or taking public transport). I went to the bank I'd been with for years as a student, with all the paperwork including the signed contract for the new job, and explained what I was looking for. The guy I was speaking to looked a little sheepish, said that he thought what I was asking to do seemed perfectly reasonable... and then off the record suggested I didn't formally apply for it, because he already knew the computer would say no. My new job didn't start until the following week, and apparently that would mean the computer would have considered me to have no income at that time and so all the application would have done was get an automatic refusal and a mark as such on my credit record. I think the moral of the story is that more data is only as useful as the analysis you make of it, and trying to codify and automate matters as complex as a typical adult's financial affairs is unlikely to lead to a reliably good analysis. In fact, I think it's even the law in my country these days that any such automated decision has to be reviewed by a real human on request, which might or might not be worth much in practice but does give some idea of the scale of the problem.
- SilasX 11y ago
  I went through the same thing! After 18 months on my first real job, I had zero debt (ever), no dependents, and income of three times the median for the area, and yet I was still classified as subprime. Why? Because I'd never gotten a credit card before. Had I simply moved existing purchases onto it, and taken the same (zero) revolving debt, I would have appeared as much less risky. [1] What's worse is that when I went to the "what's my FICO"/credit report sites, they would consistently say that my credit score should be 740, even though this never translated into any observable consequences in terms of ease of getting loans. And what made that even worse was that there were actual critics of the subprime practices then that refused to believe this was happening, that anyone classified as subprime must have deserved it in some way, even after I offered to forward this information over! [1] Yes, I know, I should have known to pointlessly get a credit card and switch which buckets expenses go in, which is somehow informative about my credit risk.
learc83 11y ago
>Health insurance will inevitably start to care about what you eat and how much you exercise. Doesn't the ACA prohibit this. I thought they were now only allowed to base price on Age, Sex, and smoking status.
- jsprogrammer 11y ago
  Aren't age and sex federally protected attributes? How are insurance companies discriminating against people in this manner?
  - learc83 11y ago
    Anti-discrimination laws don't cover everything. For instance, it is generally OK to put out a casting call for a blonde male actor, and a company can refuse to hire someone in a wheelchair for a warehouse job.
    - eli 11y ago
      Those are both examples of employment. It's true that there are some exceptions to employment anti-discrimination laws, but they don't apply at all to how much you charge someone for health insurance. (And not to belabor your example, but the person in the wheelchair has to actually be unable to do the job even with "reasonable accommodations" from the employer. It's not enough to say "it seems like it might be dangerous" or "we don't have ramps")
    - jsprogrammer 11y ago
      Well, we aren't talking about everything. Only insurance premiums.
  - eli 11y ago
    I'm pretty sure men and women are now required to get the same rates for health insurance under ACA. How are they allowed to charge people differently based on age? Well, because there's no law against it. Age discrimination is illegal in employment and housing, but not in what you charge for insurance.
joesmo 11y ago
"If you find it uncomfortable that lending institutions and insurance companies might act in the most rational, efficient manner, consider whether you're really comfortable with capitalism." Basing credit scores off of other people's credit scores is about as rational and efficient as basing my temperature and blood pressure readings on the average of my friends' readings.
ergodic 11y ago
>And I'm not sure that's a bad thing. You surely can find other cases in which you end up paying more than the average. In the end, what matters is information asymmetry in any negotiation. In those terms, the consumer seems to be in an increasingly weaker position with the recent technological changes, social media, etc. As a consumer I don't think that allowing market micro-segmentation is a sensible strategy. It's more something that I don't know very well how to stop, and it worries me.

signal11 11y ago

> I pay for the sins of my demographic category in car insurance premiums Does your insurer offer lower premiums if you get a "black box" attached to your car and can demonstrate you drive safely? Asking because I'm curious -- car insurance rates for young men are very high and this was mentioned as a possible mitigation.

oh_sigh 11y ago
Yup. It's not even young men who are screwed over. I'm a 31 year old man with a flawless driving record(zero accidents, zero tickets), having driven over 400k miles over the past 14 years, and yet I still pay more in insurance than my 19 year old female cousin who already has rear ended a person in the 2 years she has been driving.
- superuser2 11y ago
  You probably drive a nicer car than she does? But still, definitely.
- chrisBob 11y ago
  That is only a fair comparison if you live in the same area. Where you live impacts your insurance cost a lot.
- deleted 11y ago
  [deleted]
- learc83 11y ago
  I'm guessing that is much more a product of the value of the car you drive. Statistically, you're extra experience (and safe driving record) makes you a much, much safer driver and insurance companies know this.
wnevets 11y ago
Progressive does, their snapshot measures how hard you brake.
janesvilleseo 11y ago
Allstate and State Farm do too. I partipate in the Allstate one currently. I can cut my bill by 30%. However, it is next to impossible to get the max. You get 10% just for enrolling and I'm on track for another 10%. The interesting part is this is all based on off the app on my phone. I do not connect anything to my OBD.

noblethrasher 11y ago

> Technology enables much more accurate and precise assessment of risk, and businesses with a lot of money riding on good risk assessment (banks, insurance companies) would be stupid not to take full advantage of that. If markets tend towards efficiency, this will happen. The problem is that you can't eliminate risk[1][2], you can only shift it to someone else. But, we now live in a time in which people with the most powerful computers can shift all of the risk away from them. Consider where that risk ends up getting shifted. [1] http://c2.com/cgi/wiki?YouCantEliminateRisk http://c2.com/cgi/wiki?YouCantEliminateRisk [2] Well, science probably does eliminate risk and uncertainty, but that's a totally different enterprise.

kefka 11y ago
I argue that they can eliminate risk. What happens is the top 10% of the people who cost insurance get the boot. Now, unless they choose just to not pay out, they can still reduce their risk levels below threshold of the industry. That's what actuarial science is founded on.
- omegaham 11y ago
  > That's what actuarial science is founded on. Oh, you mean "that branch of science that everyone ignores because it's politically unpalatable?" "Gee, we promised the moon for our pension obligations and funded them at an absurdly low level, and now we're bankrupt? I don't know how this could have happened!" ~ Municipal governments
- ubernostrum 11y ago
  For some types of insurance, "top 10% get the boot" may not be possible, as there might be laws requiring the insurer to write a policy for anyone willing to pay the premium.
riskneural 11y ago
You can diversify risk which is almost the same thing. The whole point of insurance is that each person has x% probability of dying, so they pay x% * the sum assured, and, as the pool of insured gets large enough, there is enough cheese in the fridge. Yes, the pool is not always large enough, so you can throw it into a reinsurer from the insurance company. Yes, the reinsurance pool isn't always large enough, so you can retrocede to a few other reinsurers for diversification. That pool isn't aways large enough, so you can securitise away the tail risks and aggregate loss risks into a cat bond, or a pandemic bond, or a longevity swap, or something fun. These will then in turn be bought up by pension companies, in order to diversify against their market risks, and the needle returns to the start of the song, and we all sing along like before.

radmuzom 11y ago

How is this relevant to the article at all? As a credit risk modeller, we already use spending behaviour to assess credit risk; and I am pretty sure the insurance industry does too. No retail portfolio can be tailored to the individual level (or the methods are not that sophisticated yet); hence the average behaviour of your demographic will matter whether you like it or not. To your specific point, in my country we have the concept of a "no claim bonus" where the insurance premium is drastically lower if there is no claim made in a year - not sure whether there is a similar practice in the US.

superuser2 11y ago
My understanding is you have access to total monthly credit usage vs. credit availability, not what I'm spending money on. I would think there's information to be gleaned from whether the distribution of spending across categories looks like a deliberate household budget, whether purchases include luxury items, etc. that would let you spot people likely to bury themselves in credit card debt before they actually do so. Just as people's social networks might tell you about their attitudes towards money when influenced by friends.
- radmuzom 11y ago
  I have not worked for the US market the last five years, but as far as I remember there is a law in the US that a bank cannot take adverse action on a existing customer holding the bank's product based on credit history from another bank - so for example, my bank cannot decrease the limit of a card because the customer defaulted in a personal loan held with another bank. Of course, at the time of origination of the credit card, we can use this information. The whole point being that just because data is available does not mean I can use it even though it may be statistically significant for me to use it. Again, I am not sure of insurance regulations so there may be a possibility around using more data, if available, in insurance models.
riskneural 11y ago
Pretty much all countries have the no claim bonus for driving. (It's in the earliest actuarial exams.) You can clock up several years of no claims bonuses, and the discount increases with each year. Interestingly, the no claims bonus can be insured. Now, generally only risk averse people will insure their no claims bonus - and these people also tend to drive more risk aversely and hence have less accidents (or perhaps less likely to make claims - who the hell knows). So, the very fact that somebody wanted to insure their no claims bonus should in theory give them a discount on their premiums. But you cannot offer a discount for an extra feature! This means you have to dive into your generalized linear model and fiddle with a couple of parameters to make sure there is some sort of nominal charge for the insurance on the no claims bonus.

TallGuyShort 11y ago

>> consider whether you're really comfortable with capitalism My favourite thing about capitalism is that you actually only have to consider whether or not you're comfortable with this policy. If you don't like it, by no means do you HAVE to take a loan. You DO have to buy insurance in many situations, but at that point it's no longer a true free market anyway.

cookiecaper 11y ago
Insurance is a large-scale perverter of the market, because it muddies the direct relationship between the cost and the value of the service and makes the pricing all screwy. Creating this opening for pencil-pushing middlemen to profit off a service to which they provide no value is a big problem. This is blatantly apparent in the health industry, where if you're a cash patient that knows the right magic incantations, you can get 90% of the bill waived, and if you don't know those incantations, you're forced into bankruptcy with hundreds of thousands in medical debt. The American health system is despicable and must be rectified.
- tjr 11y ago
  Do you have any further links or information on these magic incantations ?...
  - cookiecaper 11y ago
    Here's an article about the differences: http://articles.latimes.com/2012/may/27/business/la-fi-medical-prices-20120527 http://articles.latimes.com/2012/may/27/business/la-fi-medic... The specific incantations are different for every provider or hospital. Sometimes you can get it just by saying up front "I'm paying cash today." Sometimes you have to go through a complicated Patient Financial Services system to get the bill reduced, and then you have to say the right words to the right people if you want reduction. A massive bulk of "medical" labor goes into these cat and mouse games between patients, insurers, providers, and facilities. They're all trying to figure out how to maximize their profit and/or savings and it gets very complicated. If insurers learn that other people, even cash patients, are getting "a better deal", they'll punish the provider and/or facility by removing them from the network, thus cutting the patient traffic. When providers and facilities bill insurers, they expect to get maybe 10%-20% of the billed amount, so they rack the cost of everything up through the roof so that they'll be OK with the pittance they get in return. And that's the tip of the iceberg. There are a lot of people whose jobs are dedicated to nothing more than these billing shenanigans.

27182818284 11y ago

>Health insurance will inevitably start to care about what you eat and how much you exercise. At a conference in 2007, I learned that health care companies were already exploring data they could get from those free get-a-discount grocery store cards. Unfortunately that's about as much as I know about it. I wish I would have asked the lecturer for more information at the time.

bbrazil 11y ago

> Health insurance will inevitably start to care about what you eat and how much you exercise. This is already happening, I met the founder of http://wesavvy.com/ http://wesavvy.com/ recently which uses your phone to track exercise and reduce your insurance premium.

riskneural 11y ago
There is also Vitality UK from Prudential, and Beam - the wifi connected toothbrush. Telematics is all the rage in risk.
- sjg007 11y ago
  wifi connected toothbrush... wtf.. wow.
  - riskneural 11y ago
    I give you Beam. http://www.beam.dental/ http://www.beam.dental/ My understanding of the idea, which may be rubbish, runs as follows. 1. Find a way to identify good risks - in this case regular teeth brushers, or occupants of a crack-house that share a toothbrush. 2. Hence, offer lower premiums to low-risk customers than those companies that charge an average premium to average-risk customers. 3. Get a few customers together and make sure the shareholders of the polyopoly dental insurance mammoths get wind that you are thieving their customers. Panic sets in among the incumbents. Innovation!! Drat!! 4. Get bought out for a Unicorn bill before you even pay a dental claim or cover your costs.
zeidrich 11y ago
I think there's a big difference between these two things. When you use a phone to track exercise and reduce insurance premiums, that's a good thing, it encourages (or at least rewards) people who exercise and become healthier and might need less medical care. When you use social networks to track and monitor who your friends are in order to approve you for credit, that causes a different set of rewards and incentives. It rewards you for choosing who you are willing to be friends with based on their creditworthiness. It punishes people who have associations with people with poor credit. It essentially keeps good people down too. If you are a role model in your group of peers. If you're the guy out of your group of friends who got an education and got a steady job. If you pay your bills and don't carry debt, and you want to buy a house and have the money and responsibility to do so, you should be allowed to. When you do that, it shows those friends what you can do, and it allows you to move forward. On the other hand, if you get an education, get a job, pay your bills, and don't carry debt, but when you go to buy a house your mortgage application is denied simply because you have some friends who are struggling on facebook, what is the impact of that? It just causes you to stop moving up. Maybe it discourages you. Maybe it makes you realize that the world doesn't really want you to be better than what your friends have become. What the problem is has less to do with being judged by your actions, but rather being judged by the actions of those you associate with.

deleted 11y ago

[deleted]

deleted 11y ago

[deleted]

Silhouette 11y ago

If you find it uncomfortable that lending institutions and insurance companies might act in the most rational, efficient manner, consider whether you're really comfortable with capitalism. The trouble is that the situation you describe is idealised and probably unachievable. In the real world, it seems more likely that a different, more complicated set of strict automated rules will be created, and it will simply create different loopholes through which some innocent people fall and get treated unfairly as a result. There will just be a lot more loopholes with fewer people falling through each one, making the system as a whole less accountable. I learned a useful lesson just after I graduated from university. I had a decent job offer, I wanted to consolidate my modest amount of student debt into a sensible place as the student banking perks were expiring, and I wanted a small loan to buy a car to commute to that new job (which was far cheaper than either moving or taking public transport). I went to the bank I'd been with for years as a student, with all the paperwork including the signed contract for the new job, and explained what I was looking for. The guy I was speaking to looked a little sheepish, said that he thought what I was asking to do seemed perfectly reasonable... and then off the record suggested I didn't formally apply for it, because he already knew the computer would say no. My new job didn't start until the following week, and apparently that would mean the computer would have considered me to have no income at that time and so all the application would have done was get an automatic refusal and a mark as such on my credit record. I think the moral of the story is that more data is only as useful as the analysis you make of it, and trying to codify and automate matters as complex as a typical adult's financial affairs is unlikely to lead to a reliably good analysis. In fact, I think it's even the law in my country these days that any such automated decision has to be reviewed by a real human on request, which might or might not be worth much in practice but does give some idea of the scale of the problem.

SilasX 11y ago
I went through the same thing! After 18 months on my first real job, I had zero debt (ever), no dependents, and income of three times the median for the area, and yet I was still classified as subprime. Why? Because I'd never gotten a credit card before. Had I simply moved existing purchases onto it, and taken the same (zero) revolving debt, I would have appeared as much less risky. [1] What's worse is that when I went to the "what's my FICO"/credit report sites, they would consistently say that my credit score should be 740, even though this never translated into any observable consequences in terms of ease of getting loans. And what made that even worse was that there were actual critics of the subprime practices then that refused to believe this was happening, that anyone classified as subprime must have deserved it in some way, even after I offered to forward this information over! [1] Yes, I know, I should have known to pointlessly get a credit card and switch which buckets expenses go in, which is somehow informative about my credit risk.

learc83 11y ago

>Health insurance will inevitably start to care about what you eat and how much you exercise. Doesn't the ACA prohibit this. I thought they were now only allowed to base price on Age, Sex, and smoking status.

jsprogrammer 11y ago
Aren't age and sex federally protected attributes? How are insurance companies discriminating against people in this manner?
- learc83 11y ago
  Anti-discrimination laws don't cover everything. For instance, it is generally OK to put out a casting call for a blonde male actor, and a company can refuse to hire someone in a wheelchair for a warehouse job.
  - eli 11y ago
    Those are both examples of employment. It's true that there are some exceptions to employment anti-discrimination laws, but they don't apply at all to how much you charge someone for health insurance. (And not to belabor your example, but the person in the wheelchair has to actually be unable to do the job even with "reasonable accommodations" from the employer. It's not enough to say "it seems like it might be dangerous" or "we don't have ramps")
  - jsprogrammer 11y ago
    Well, we aren't talking about everything. Only insurance premiums.
- eli 11y ago
  I'm pretty sure men and women are now required to get the same rates for health insurance under ACA. How are they allowed to charge people differently based on age? Well, because there's no law against it. Age discrimination is illegal in employment and housing, but not in what you charge for insurance.

joesmo 11y ago

"If you find it uncomfortable that lending institutions and insurance companies might act in the most rational, efficient manner, consider whether you're really comfortable with capitalism." Basing credit scores off of other people's credit scores is about as rational and efficient as basing my temperature and blood pressure readings on the average of my friends' readings.

ergodic 11y ago

>And I'm not sure that's a bad thing. You surely can find other cases in which you end up paying more than the average. In the end, what matters is information asymmetry in any negotiation. In those terms, the consumer seems to be in an increasingly weaker position with the recent technological changes, social media, etc. As a consumer I don't think that allowing market micro-segmentation is a sensible strategy. It's more something that I don't know very well how to stop, and it worries me.