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You'd need something akin to Minority Report to get to the point where your premium is what you'll claim. And that would be excellent. Peppercorn insurance for

You'd need something akin to Minority Report to get to the point where your premium is what you'll claim. And that would be excellent. Peppercorn insurance for drivers who won't have an accident. Killers will effectively be banned from driving. Zero traffic deaths.

takeda 10y ago
What I'm trying to say in that scenario, I would essentially pay what my damages would cost the insurance + extra premium to pay for insurance employees' salary. In that case, why not just cut out the middle man and pay out of pocket when accident happen, it would be cheaper. Essentially this tendency defeats the purpose of having insurance in the first place.
- sverige 10y ago
  Actually, insurance premiums are designed to pay 100% of the losses the actuaries predict will occur over a large pool of people. There is a number commonly discussed by insurance companies called the "loss ratio." A loss ratio of 93% (i.e., $93 paid in claims for every $100 collected in premiums) for a year is very good. On the other hand, a loss ratio of 105% or even 110% in a year is not good, but not unheard of. Insurers make their money on investments of premium dollars, not on loss ratios. Sure, they might have a good year or two with low loss ratios, but that means they're collecting too much premium compared to competitors and so may lose market share if the others lower premiums due to more accurate forecasts of losses (closer to 100%). This is one reason insurance marketing and advertising work so hard to drive customer loyalty and retention. So your rates went up even though you didn't have an accident? Better look to see what the stock market has been doing lately.
- bbcbasic 10y ago
  It's a spectrum with that scenario at one end and at the other end: everyone paying exactly the same amount regardless of age, car, location gender, previous convictions etc. I think that tailoring the premiums based on the driving style is fair, and would give bad drivers the option to improve to reduce their insurance, with the nice side affect of making the roads safer. It isn't going too far down the slope to do this. In the extreme, it would mean everyone would need to become a safer driver or not drive at all, which is probably a good thing. They will become safer drivers then pay a small premium to cover them for chance accidents like a collapsing bridge or a blown out tire.

takeda 10y ago

What I'm trying to say in that scenario, I would essentially pay what my damages would cost the insurance + extra premium to pay for insurance employees' salary. In that case, why not just cut out the middle man and pay out of pocket when accident happen, it would be cheaper. Essentially this tendency defeats the purpose of having insurance in the first place.

sverige 10y ago
Actually, insurance premiums are designed to pay 100% of the losses the actuaries predict will occur over a large pool of people. There is a number commonly discussed by insurance companies called the "loss ratio." A loss ratio of 93% (i.e., $93 paid in claims for every $100 collected in premiums) for a year is very good. On the other hand, a loss ratio of 105% or even 110% in a year is not good, but not unheard of. Insurers make their money on investments of premium dollars, not on loss ratios. Sure, they might have a good year or two with low loss ratios, but that means they're collecting too much premium compared to competitors and so may lose market share if the others lower premiums due to more accurate forecasts of losses (closer to 100%). This is one reason insurance marketing and advertising work so hard to drive customer loyalty and retention. So your rates went up even though you didn't have an accident? Better look to see what the stock market has been doing lately.
bbcbasic 10y ago
It's a spectrum with that scenario at one end and at the other end: everyone paying exactly the same amount regardless of age, car, location gender, previous convictions etc. I think that tailoring the premiums based on the driving style is fair, and would give bad drivers the option to improve to reduce their insurance, with the nice side affect of making the roads safer. It isn't going too far down the slope to do this. In the extreme, it would mean everyone would need to become a safer driver or not drive at all, which is probably a good thing. They will become safer drivers then pay a small premium to cover them for chance accidents like a collapsing bridge or a blown out tire.