4 ms·

Yep, an alternative model enabled by technology is mutual / cooperative insurance in which the policyholders not only own the company but also govern the releas

by Empact 11y ago

Yep, an alternative model enabled by technology is mutual / cooperative insurance in which the policyholders not only own the company but also govern the release of funds. This way incentives are aligned - the insured want the insurance to act fairly, even with respect to others, so that it will be there for them. It would be something like gofundme but on a subscription basis, with up or down decision-making by subscribers. https://en.wikipedia.org/wiki/Mutual_insurance https://en.wikipedia.org/wiki/Mutual_insurance

JoshTriplett 11y ago
Vanguard would be a good model to look towards.
chimeracoder 11y ago
> Yep, an alternative model enabled by technology is mutual / cooperative insurance in which the policyholders not only own the company but also govern the release of funds. This way incentives are aligned - the insured want the insurance to act fairly, even with respect to others That doesn't really align incentives, though. There's really no benefit to each individual to approving another person's claim (all it means is less money in the pot). Claims are rare enough that it's not enough to simply say 'if you vote this way for someone else, we'll apply the policy consistently for you', since the expected number of claims that a person is likely to file over the course of their plan is close to zero. (And even if it weren't, the whole issue is that insurance has relatively well-written rules for clear-cut cases, but the complaints people have - like this one - are generally about the interpretation of those policies for special cases, since policies can't possibly enumerate every possible outcome.)
ubernostrum 11y ago
I'm pretty happy with my (mutual) auto coverage. In fact, right now I'm getting around on a rental car courtesy of my policy, while my car is being repaired; I'll be out of pocket about $250 total for around $2000 worth of damage to the car (tl;dr -- driving home a few nights back, didn't see a traffic cone that had rolled out into my lane and ran over it at 50mph, which is not good for some of the things on the underside of the car).
- unclebucknasty 11y ago
  You sure they won't claw back that claim in the form of raised premiums?
  - duaneb 11y ago
    Doesn't that make sense? Insurance is to cover immediate problems, but the risk given the driver increases with each claim (I'm assuming, that just makes sense to me). So, premiums should reflect this.
    - msandford 11y ago
      No, it doesn't. Because I don't get insurance coverage for a nominal fee like $1 per month. I pay a non-trivial amount of money every month. So in my mind, 90% of that is going towards the possibility that I'll eventually make a rare claim (float), 5% is going towards administration, and 5% is profit. I know those numbers aren't right, but lets say that they are. In that case, paying $100/mo for insurance and not making a claim for 10 years there's over $10,000 worth of loose money (more once you factor in interest!) sitting around that's just for me because according to your analysis insurance isn't risk pooling but risk smoothing. So then I make a claim for the whole car, $20k. Fine, half of that comes out of the money I already paid to them for risk smoothing, the other half should come from the future payments I'll make to them for risk smoothing. My rates should double in this case. But most people don't total their cars every 10 years, many people go their whole lives without ever making a claim. So at the end, they might have paid $50k in self-insurance risk smoothing premiums that the company gets to just keep, that's not right is it? Clearly no. So what people actually think is supposed to happen is that everyone pays about the same amount and some people get unlucky and make claims and that doesn't get counted against them. They're all wrong, but that's how insurance is sold so it's understandable. In reality I suspect that the breakdown of float, administration and profit is more like 30%, 30% and 40% which is why premiums can go up so much after you make a claim; you're actually making almost no real contribution towards the float at "regular risk" insurance rates. Of course this also neglects the risk pooling aspect.

by Empact 11y ago

JoshTriplett 11y ago

Vanguard would be a good model to look towards.

chimeracoder 11y ago

> Yep, an alternative model enabled by technology is mutual / cooperative insurance in which the policyholders not only own the company but also govern the release of funds. This way incentives are aligned - the insured want the insurance to act fairly, even with respect to others That doesn't really align incentives, though. There's really no benefit to each individual to approving another person's claim (all it means is less money in the pot). Claims are rare enough that it's not enough to simply say 'if you vote this way for someone else, we'll apply the policy consistently for you', since the expected number of claims that a person is likely to file over the course of their plan is close to zero. (And even if it weren't, the whole issue is that insurance has relatively well-written rules for clear-cut cases, but the complaints people have - like this one - are generally about the interpretation of those policies for special cases, since policies can't possibly enumerate every possible outcome.)

ubernostrum 11y ago

I'm pretty happy with my (mutual) auto coverage. In fact, right now I'm getting around on a rental car courtesy of my policy, while my car is being repaired; I'll be out of pocket about $250 total for around $2000 worth of damage to the car (tl;dr -- driving home a few nights back, didn't see a traffic cone that had rolled out into my lane and ran over it at 50mph, which is not good for some of the things on the underside of the car).

unclebucknasty 11y ago
You sure they won't claw back that claim in the form of raised premiums?
- duaneb 11y ago
  Doesn't that make sense? Insurance is to cover immediate problems, but the risk given the driver increases with each claim (I'm assuming, that just makes sense to me). So, premiums should reflect this.
  - msandford 11y ago
    No, it doesn't. Because I don't get insurance coverage for a nominal fee like $1 per month. I pay a non-trivial amount of money every month. So in my mind, 90% of that is going towards the possibility that I'll eventually make a rare claim (float), 5% is going towards administration, and 5% is profit. I know those numbers aren't right, but lets say that they are. In that case, paying $100/mo for insurance and not making a claim for 10 years there's over $10,000 worth of loose money (more once you factor in interest!) sitting around that's just for me because according to your analysis insurance isn't risk pooling but risk smoothing. So then I make a claim for the whole car, $20k. Fine, half of that comes out of the money I already paid to them for risk smoothing, the other half should come from the future payments I'll make to them for risk smoothing. My rates should double in this case. But most people don't total their cars every 10 years, many people go their whole lives without ever making a claim. So at the end, they might have paid $50k in self-insurance risk smoothing premiums that the company gets to just keep, that's not right is it? Clearly no. So what people actually think is supposed to happen is that everyone pays about the same amount and some people get unlucky and make claims and that doesn't get counted against them. They're all wrong, but that's how insurance is sold so it's understandable. In reality I suspect that the breakdown of float, administration and profit is more like 30%, 30% and 40% which is why premiums can go up so much after you make a claim; you're actually making almost no real contribution towards the float at "regular risk" insurance rates. Of course this also neglects the risk pooling aspect.