4 ms·

Interesting. Seems like the insurance industry will change dramatically with the introduction of more data and AI capabilities. Imagine if an insurer ran a se

Interesting. Seems like the insurance industry will change dramatically with the introduction of more data and AI capabilities. Imagine if an insurer ran a search of social check ins at bars against their auto insurance customers. Seems like some people might be paying $2K/mo for car insurance while others pay $40/mo... since with more analysis it will become a lot easier to determine when those big loses are coming and exactly who from rather than guessing/averaging like they do now.

lucaspiller 10y ago
Until they decide that as you don't have an active social profile you are a 'high risk' client :-)
- mee_too 10y ago
  That until won't last long. I know for a fact FB was negotiating last year with a few big insurance companies. Many individual metrics correlated to insurance risk are already available to FB customers, but the FB standard terms limit their use currently.
AnthonyMouse 10y ago
> since with more analysis it will become a lot easier to determine when those big loses are coming and exactly who from rather than guessing/averaging like they do now. This is kind of going to break insurance. When you create more risk pools, you increase the number of low risk people and decrease the number of high risk people who buy insurance. But it isn't clear that having more uninsured high risk people is a societal win -- especially if it means replacing insurance claims with bankruptcies. Meanwhile "more [low risk] people with insurance" is not an unmitigated good, because people will buy things when the insurance is paying for it that they wouldn't when paying out of pocket, which significantly increases costs. And it's easy not to have much sympathy for Those Dirty Drunks About To Get What They Deserve, but it's really the person the drunk hits who suffers when the drunk was driving without insurance because it was prohibitively expensive. Or the hospital who has to treat a bankrupt patient with no medical insurance. And being high risk isn't always a result of some moral failing on your part. Doing genetic testing for medical conditions would certainly allow people without high risk markers to pay less for insurance, but what happens to the people who have them? In the limit where the predictions become extremely accurate there is no point in even having insurance because your net lifetime insurance premiums will be so close to your net lifetime insurance claims that the only thing the insurance company is providing you with is overhead. But if any insurance companies do this then it doesn't even matter whether all of them do, because the ones who do will get all the low risk customers and the other insurers will de facto end up with a high risk pool with high premiums. So we really need to decide if we actually want this as a matter of legislation.
- rent_seeker 10y ago
  Insurance is already regulated at the state level, although it varies from one state to the next. One possible solution to your scenario is risk pooling like North Carolina does with NCRF.
- Houshalter 10y ago
  The purpose of insurance is to protect you from unpredictable or unlikely risks. If a risk is predictable and likely, what's the point? If you want to distribute risks fairly, that's more a job of government subsidization. It is unfair that someone born with a genetic disease has to pay large medical bills, and I'm ok with the government subsidizing that. On the other hand, I don't want to subsidize the risk of serial drunk drivers. It's totally fair they have to pay higher premiums or not be allowed to drive. Ideally there could be a compromise. Like insurance companies agree to insure bad drivers if they take remedial driving lessons. It's theoretically possible we could use insurance as a free market solution to government regulation. Instead of building codes, require building insurance. And the insurance companies will do their best to actually predict the risk of various disasters and what things actually work to reduce them.
  - AnthonyMouse 10y ago
    > The purpose of insurance is to protect you from unpredictable or unlikely risks. If a risk is predictable and likely, what's the point? That's the problem. The more accurately we can predict insurance claims the less reason there is for anybody to buy insurance because there is less uncertainty to insure against. And one of the things existing insurance does unintentionally is to spread the cost of misfortune across more people. If the misfortune becomes more accurately predictable then the people not likely to suffer it are spared the cost but that only moves more of it to the people who do. But you make an interesting point in the sense that it isn't enough to prevent insurance companies from using the information. If insurance customers can accurately learn their own risk, the same result will obtain regardless because the low risk customers will opt out of insurance until the premiums are high enough that the high risk customers do too. > And the insurance companies will do their best to actually predict the risk of various disasters and what things actually work to reduce them. Unfortunately that is completely the opposite of how insurance actually works. The insurance company has little control or involvement in such things because it isn't cost effective for them to micromanage everything. So what actually happens is that if you require insurance, people buy it and then take more risks because they have insurance. The fundamental tenet of insurance is to buy predictability at the cost of inefficiency. If you independently improve predictability the only thing left is the inefficiency.

lucaspiller 10y ago

Until they decide that as you don't have an active social profile you are a 'high risk' client :-)

mee_too 10y ago
That until won't last long. I know for a fact FB was negotiating last year with a few big insurance companies. Many individual metrics correlated to insurance risk are already available to FB customers, but the FB standard terms limit their use currently.

AnthonyMouse 10y ago

> since with more analysis it will become a lot easier to determine when those big loses are coming and exactly who from rather than guessing/averaging like they do now. This is kind of going to break insurance. When you create more risk pools, you increase the number of low risk people and decrease the number of high risk people who buy insurance. But it isn't clear that having more uninsured high risk people is a societal win -- especially if it means replacing insurance claims with bankruptcies. Meanwhile "more [low risk] people with insurance" is not an unmitigated good, because people will buy things when the insurance is paying for it that they wouldn't when paying out of pocket, which significantly increases costs. And it's easy not to have much sympathy for Those Dirty Drunks About To Get What They Deserve, but it's really the person the drunk hits who suffers when the drunk was driving without insurance because it was prohibitively expensive. Or the hospital who has to treat a bankrupt patient with no medical insurance. And being high risk isn't always a result of some moral failing on your part. Doing genetic testing for medical conditions would certainly allow people without high risk markers to pay less for insurance, but what happens to the people who have them? In the limit where the predictions become extremely accurate there is no point in even having insurance because your net lifetime insurance premiums will be so close to your net lifetime insurance claims that the only thing the insurance company is providing you with is overhead. But if any insurance companies do this then it doesn't even matter whether all of them do, because the ones who do will get all the low risk customers and the other insurers will de facto end up with a high risk pool with high premiums. So we really need to decide if we actually want this as a matter of legislation.

rent_seeker 10y ago
Insurance is already regulated at the state level, although it varies from one state to the next. One possible solution to your scenario is risk pooling like North Carolina does with NCRF.
Houshalter 10y ago
The purpose of insurance is to protect you from unpredictable or unlikely risks. If a risk is predictable and likely, what's the point? If you want to distribute risks fairly, that's more a job of government subsidization. It is unfair that someone born with a genetic disease has to pay large medical bills, and I'm ok with the government subsidizing that. On the other hand, I don't want to subsidize the risk of serial drunk drivers. It's totally fair they have to pay higher premiums or not be allowed to drive. Ideally there could be a compromise. Like insurance companies agree to insure bad drivers if they take remedial driving lessons. It's theoretically possible we could use insurance as a free market solution to government regulation. Instead of building codes, require building insurance. And the insurance companies will do their best to actually predict the risk of various disasters and what things actually work to reduce them.
- AnthonyMouse 10y ago
  > The purpose of insurance is to protect you from unpredictable or unlikely risks. If a risk is predictable and likely, what's the point? That's the problem. The more accurately we can predict insurance claims the less reason there is for anybody to buy insurance because there is less uncertainty to insure against. And one of the things existing insurance does unintentionally is to spread the cost of misfortune across more people. If the misfortune becomes more accurately predictable then the people not likely to suffer it are spared the cost but that only moves more of it to the people who do. But you make an interesting point in the sense that it isn't enough to prevent insurance companies from using the information. If insurance customers can accurately learn their own risk, the same result will obtain regardless because the low risk customers will opt out of insurance until the premiums are high enough that the high risk customers do too. > And the insurance companies will do their best to actually predict the risk of various disasters and what things actually work to reduce them. Unfortunately that is completely the opposite of how insurance actually works. The insurance company has little control or involvement in such things because it isn't cost effective for them to micromanage everything. So what actually happens is that if you require insurance, people buy it and then take more risks because they have insurance. The fundamental tenet of insurance is to buy predictability at the cost of inefficiency. If you independently improve predictability the only thing left is the inefficiency.