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It's not freeloading. The WHOLE POINT of insurance is amortizing risk across a wider range to individuals. If you can correctly predict risk exactly for every s

by TrevorJ 11y ago

It's not freeloading. The WHOLE POINT of insurance is amortizing risk across a wider range to individuals. If you can correctly predict risk exactly for every single individual then the whole model is pointless.

SilasX 11y ago
The "whole point" of insurance does not require vastly different risk classes to be lumped together and pay the same premiums; just the opposite. Someone who is known to carry a higher risk but pays as if they had a lower risk, can reasonably be characterized as freeloading, and that is the sense in which I meant the term -- not the mere sense of "they made a claim". (Imagine e.g. someone in Florida being rated for hurricane insurance on the mistaken assumption they lived in Kansas, or a cab driver rated as if the car was just used for a daily commute.) That insight in no way contradicts the principle that a completely predictable event is not insurable, or that insurance allows distribution of the costs of an event across a class.
- TrevorJ 11y ago
  By that definition though, anyone who comes out "ahead" on their premium is a freeloader. Perhaps a less charged term is needed? Freeloading sounds like this person has done something morally wrong, when in fact that have just used insurance as it is meant to be used.
  - SilasX 11y ago
    I've thought about this since my post, and I think a better term for the concept I intended, would be "risk assessment accuracy". That is, you can increase RAA, but at the cost of a loss of some privacy -- that's the dynamic I was describing. But I still think it's fair to call someone a freeloader if they deliberately get mixed in with a low risk class while knowing they're higher risk. Edit: And you're right, that in the case of perfect RAA, the concept of insurance breaks down because it means you know people either will or won't experience the insured event.

by TrevorJ 11y ago

SilasX 11y ago

The "whole point" of insurance does not require vastly different risk classes to be lumped together and pay the same premiums; just the opposite. Someone who is known to carry a higher risk but pays as if they had a lower risk, can reasonably be characterized as freeloading, and that is the sense in which I meant the term -- not the mere sense of "they made a claim". (Imagine e.g. someone in Florida being rated for hurricane insurance on the mistaken assumption they lived in Kansas, or a cab driver rated as if the car was just used for a daily commute.) That insight in no way contradicts the principle that a completely predictable event is not insurable, or that insurance allows distribution of the costs of an event across a class.

TrevorJ 11y ago
By that definition though, anyone who comes out "ahead" on their premium is a freeloader. Perhaps a less charged term is needed? Freeloading sounds like this person has done something morally wrong, when in fact that have just used insurance as it is meant to be used.
- SilasX 11y ago
  I've thought about this since my post, and I think a better term for the concept I intended, would be "risk assessment accuracy". That is, you can increase RAA, but at the cost of a loss of some privacy -- that's the dynamic I was describing. But I still think it's fair to call someone a freeloader if they deliberately get mixed in with a low risk class while knowing they're higher risk. Edit: And you're right, that in the case of perfect RAA, the concept of insurance breaks down because it means you know people either will or won't experience the insured event.