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Thoughts on Insurance

• honestoHeminway 9y ago
  Denial of Service by Obfuscation, Denial of Service after exceeding a certain amount, Denial of Service by Way-Lawyering, these is all information that needs to be compiled from anecdata into solid numbers, that anyone can instantly acess and that allow for a metric on insurance quality.
• 6stringmerc 9y ago
  Disclosure: I've worked in both P&C and Reinsurance for several years. Also on Wall Street for a couple years. Also in Healthcare for a couple years. Overall I think this is a nice briefing on the state of the insurance market in the modern economic landscape. It is extensively regulated with rates set and various nuances. All of this, of course, comprises part of a grand "data set" that looks quite appealing to modernization. Unfortunately, I think there should be a strong expectation that the market (industry) will both be openly hostile to "disruption" oriented attitudes a la Uber, but laugh at any ability to raise capital to compete at any meangingful level. I applaud your interest in perhaps improving a legally sanctioned form of graft (I prefer Mutual Organizations myself). Conversely, my experience leads me to laugh a little because I've seen the numbers and the complexity behind the scenes. I've got no interest in the industry beyond the paycheck it provided, but it is quite fascinating in numerous respects. Just the naming conventions alone once you get to Bermuda is a trip. Good luck.
  • akharris 9y ago
    I agree with you that there are going to be challenges in building these companies, but not all of existing players aren't as openly hostile as I think you expect. I've spoken with a lot of P&C folks at different companies, and they know things will have to change, they're just trying to figure out how. Some of the more forward thinking companies are actively investing in new models and companies. I think that's going to accelerate. Even without that, over time, new models and companies will succeed. Some of these are going to look like stock insurance, some will look like Mutuals and reciprocals, and some will solve insurance like problems in new ways.
    • 6stringmerc 9y ago
      The ones who aren't openly hostile already have the notion of disruption in development. This summary is, for lack of a better term, a day late and a dollar short.
  • SmellTheGlove 9y ago
    We certainly agree on the bulk of your points (see my top-level post elsewhere in this thread). There is opportunity, though in my opinion, a really good way to get there is to work with an incumbent on a "modern" strategy. That's really hand-wavy, I know, but you gotta find the guy who's willing to piss off its brokers and start there.
    • jon-wood 9y ago
      We're doing much that at Neos at the moment. We've taken a series A mostly funded by a couple of big insurance companies who are interested in what we can introduce to the market.
      • SmellTheGlove 9y ago
        Are you the guys using smart home (is that the right word?) devices to try and mitigate homeowners claims by preventing or catching problems as they occur (presumably to respond quickly and limit the extent of damage)? If so, that's a pretty good idea. Carriers already give discounts for things like alarms, sprinklers, etc, but virtually none partner directly with a company that can better assure the quality of monitoring. I'm sure there's a privacy hurdle to work on, but it has to do something to loss activity, right? Best of luck!
        • jon-wood 9y ago
          We are indeed. Out philosophy is that its better for everyone to prevent a claim before it escalates into one. To that end we provide smoke, flood, motion, and door sensors, along with an (optional) camera. We've got some other cool things in the pipeline capable of not only detecting problems but also responding to them before they become a crisis. You're definitely right that there are privacy issues to be answered but we try to be as transparent as possible about what we're doing with customer's data, and by being stringent about who has access to sensor data.
          • SmellTheGlove 9y ago
  • jessaustin 9y ago
    Since you should know, is TFA's description: "Reinsurer – There are companies that purchase insurance risk from carriers." a conventional way to put this? ISTM a reinsurer is paid to take risk, which is the opposite of how one thinks of purchasing.
    • jon-wood 9y ago
      The relationship between a carrier and the reinsurer is a bit of an odd one, with the relationship in my experience being more symbiotic than the description gives the impression of. At least in the case of the company I'm at the details of the policies we write, and what feeds into the pricing, is worked out in conjunction with the reinsurer. They then agree to buy any risk we take based on that model. It is definitely a case of the reinsurer buying that risk from us though, the best way to think of it is that if a reinsurer believes the model is correct they also believe that on average they'll end up making a profit on the risks they buy, and indeed that if we didn't sell the risk to them that we would make that profit directly.
    • bcgraham 9y ago
      You're correct. They sell a product.
• wyager 9y ago
  > Insurance carriers set their rates based on actuarial models designed to predict the likelihood of future events. Sure, until the government says that you are no longer allowed to set rates based on actuarial data; maybe you aren't allowed to charge people appropriately if they have some expensive "pre-existing condition", or because of certain "protected" but statistically relevant characteristics. This throws a big fat spanner into the whole expectation value thing, because you're no longer an insurance company but a weird privatized subsidy pool that isn't allowed to make expectimax decisions anymore. Your clients aren't allowed to expectimax anymore either; if they catch on to the fact that they're actually subsidizing someone else, they're not allowed to form their own rational insurance pool (because it would violate restrictions on "discrimination", e.g. ACA section 1557) and if they choose to opt out of the irrational "insurance"/subsidy market you hit them with a hefty fine. I encourage everyone to look up expectation values for payin/payout of medical insurance for different customer types under current regulations (start with https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1361028/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1361028/ ). TL;DR If you're a reasonably healthy man below retirement age, you're getting screwed hard. Maybe society can collectively agree that this is a good idea, but we should at least be honest and stop referring to it as "insurance". Actual insurance markets without coercion are a net positive for all participants, rather than a convoluted scheme to (effectively) transfer money from one demographic to another.
  • Danihan 9y ago
    Government regulations: the cause of, and solution to, all of our problems.
  • frgtpsswrdlame 9y ago
    You believe that insurance companies should be able to charge different rates on the basis of race?
    • wyager 9y ago
      As far as I know, there is no strong relationship between race and lifetime insurance expenditures. Hypothetically though, yes, insurance companies should be allowed to make optimal decisions based on full actuarial information. Anything else, besides being sub-optimal and confounding the effectiveness of market mechanisms, would amount to the effective intentional transfer of wealth based on race, which is morally much worse than rational actuarial pricing that incidentally involves race as a predictor.
• kozikow 9y ago
  Unless you start with covering something completely new, I think it makes sense to start as analytics provider for insurance. Becoming a carrier is expensive, and MGA can only sell existing policies already created by a carrier. If you sell existing policy you are at severe data disadvantage comparing to existing insurance companies, even with superior tech. Shameless plug: At https://tensorflight.com https://tensorflight.com we are working on P&C insurance and we focus on analytics for commercial properties mentioned in the article. Please get in touch at ( kozikow [at] tensorflight.com ) if you are interested in the subject.
  • SmellTheGlove 9y ago
    This is not really related to your post, but you mentioned MGAs, which reminded me of something - If you are getting into this business and are looking to write in most/all 50 states, one of the more cost-effective ways to acquire the licensing and company structure is to purchase a struggling/defunct carrier or MGA (depending on what your needs are). I didn't say cheap, but it's often cheaper than structuring and licensing yourself from nothing.
    • asmithmd1 9y ago
      A NYC insurance startup is doing the slog of rolling out one state at a time: https://www.lemonade.com/lemonade_goes_nationwide https://www.lemonade.com/lemonade_goes_nationwide
      • SmellTheGlove 9y ago
        Lemonade probably should ramp up slowly until they have more experience data to look at (my opinion only of course), so it's probably not too disadvantageous. Plus, if you're going the route of getting licenses via acquisition, you need the money to make that investment. It can be cost effective to go that way, but not cheap, so if you're not trying to blow all of your cash at once and can benefit from a slow roll to 50 states, the traditional route will be fine.
• gwintrob 9y ago
  We're working on the modern commercial insurance brokerage at Abe (https://www.hiabe.com/ https://www.hiabe.com/). Aaron's right that too much of the industry runs on pen and paper. It's confusing for the buyer and a massive headache for brokers. Most of what we're building is behind the scenes to make the brokerage way more efficient. If you're an insurance expert with ideas to leverage tech or engineer interested in man+machine symbiosis, I'd love to chat (gordon [at] hiabe.com)!
  • firloop 9y ago
    FYI, your landing page breaks on Safari with uBlock.
    • gwintrob 9y ago
      Whoops, will fix that. Thanks!
  • SmellTheGlove 9y ago
    Best of luck to you - I'm pulling for every startup trying to make a dent in this space. Give me a shout if you're ever so inclined.
• wyldfire 9y ago
  I've always wondered about US health insurance -- why can't the physician give me quotes about my personal obligation for various treatment options? It's frustrating that as soon as it's time to come up with a bill, poof there it is but prior to the bill being generated all I get is shrugs? Is it because the insurance coverage algorithms are too complicated? Because the different entities involved in a single treatment plan is too complicated to navigate? Because physicians feel that cost is orthogonal to medicine and they prefer not to be involved/prefer to recommend the ideal treatment based on a predicted outcome? All of the above? It feels like if there were a particular hospital group / physician group that had this feature, they would attract a lot of attention. Just imagine, "Your initial differential diagnosis will not exceed $150 and we'll discuss treatment options or more conclusive diagnostic tests afterwards." All I've heard so far are physicians who don't accept insurance but instead have a straightforward "menu" for common items, which is interesting but not what I think most people want.
  • dannysu 9y ago
    I think what's happening is that your doctor will attempt to get as much money from the insurance company as he/she can. My wife has experience of the doctor's office asking insurance company for $X, and the insurance company comes back and say "no, max $Y". So then the final "cost" all of a sudden becomes $Y. Pay attention to the claims that your doctors send to insurance company and you might be able to see that. So instead of telling you, yes, whatever procedure is definitely just going to cost $Y. They can't tell you how much things are. It depends on maneuvers with other players in the industry. This is very different than say in Canada. If I want to get a teeth filling in Canada, my dentist straight up tells me how much before the procedure. If I want to price shop that, I can. In the US, nobody is willing to say how much, because "it depends". It's not because intrinsically there can't be price transparency. It's because of all the messed up incentives that the industry has that causes US health care to be as such.
    • youdontknowtho 9y ago
      That's actually a response to the insurance company performing a type of information arbitrage with multiple other parties. You could have health insurance with transparency, but there is too much profit potential in forcing information asymmetry between all of the parties involved in the system. Every time that you think...doctors...hospitals...nurses...are up to something, most of the time it can be tracked back to insurance companies and the sway that they hold over congress with their money. I'm not saying that there aren't doctors, nurses, hospitals trying to gouge people. I'm just saying that insurance companies are worse. (With some very rare and egregious exceptions.)
• pcunite 9y ago
  Disclaimer: You may not agree with this. A downvote does not change that. A comment and intellectual conversation goes much further, however. A quote from the article: The insurance industry is built on mitigating downside risk. Maybe they should have everyone agree to use computers with sensors which can create accurate maps of everything people have ever done, might do, or should do. Citizens will be so much better off with this new system of fairness. We'll call it insurance instead of goverment.
  • mindslight 9y ago
    I don't know why you're getting downvoted, but for there being a lot of money to be made by not understanding where commercial surveillance is ultimately headed. The threat of government surveillance pales in comparison to the means of control that "private" industry will eventually "innovate" for the goal of "reducing risk". Drinks at dinner in the middle of the week, paid for with your surveillance card -> higher auto insurance. Not enough physical activity recorded on your wrist/chest surveillance device -> higher health "insurance". Fixing something around your house instead of hiring a manufacturer approved service company -> higher homeowners insurance. Taking a job with a startup instead of sticking with your predictable job at bigco -> higher mortgage insurance. Which could be fine if such risks were priced accurately, but the centralizers' prescriptive models of the world can never actually capture reality (eg the difference between a qualified/uncredentialed repairman and a credentialed/unqualified one). Instead, it will mainly be used for price discrimination to gouge those who'd like to deviate. As more people fall into line (eg sign up for the current ruse of adding a driving surveillance device to save on auto insurance), the ability to even opt out of the surveillance ("no signal") will vanish! Throw in the fact that many insurances are de facto or even de jure mandatory, and we've bootstrapped a system of mandatory restrictions (ie "laws") which are not even token-responsive to the governed. And similar to all teeth of the totalitarian ratchet, such developments will be cheered on by moralizing useful idiots gleeful that the "other" will get their comeuppance - blissfully ignorant that after the initial discount period, their rates will go right back up.
• kapsteur 9y ago
  In France some new players come like https://blog.alan.eu/alan-the-first-digital-health-insurance-company-in-france-59351fe3a411 https://blog.alan.eu/alan-the-first-digital-health-insurance...
  • lucaspiller 9y ago
    What does private health insurance in France give you over what the state provides?
• mooneater 9y ago
  Insurance can be a catalyst for a million other things. Amazing how often the answer to "why cant we do innovation X" is: because insurance.
  • harryh 9y ago
    What are some examples of X? I've never gotten the "because insurance" response so you've raised my curiosity!
    • tabeth 9y ago
      Effectively if you take any kind of risk it involves insurance. A concrete example is starting a company and quitting your job. Health insurance is currently heavily tied to employment, so the incentive is not to start a company under those circumstances.
    • akharris 9y ago
      One example - startups that are looking to sign large enterprise contracts are often prevented from doing so because they don't carry a sufficient level of errors and commissions (E&O) insurance to satisfy customer requirements. Getting that level of coverage can be difficult because the few people on the insurance side really understand how to price software/security risk, and because the size of contract isn't meaningful to the seller of the policy, though it is critical to the startup in question.
      • FLUX-YOU 9y ago
        That seems straight-forward to do (although difficult finding great developers to assess this stuff): - Development process (Agile, Scrum, Waterfall, Panic, etc.) - Architecture - Testing processes - Pentesting - Credentials of all of the developers - Credentials of the managers - Even the presence of physical security There's already "cybersecurity" insurance and surely someone from that industry could join and tell you how to price security features and processes: https://www.dhs.gov/cybersecurity-insurance https://www.dhs.gov/cybersecurity-insurance I can't really speak against it not being worth it for the insurance company though. How do you build a cheap but high coverage insurance product for startups that have limited cash?
• deleted 9y ago
  [deleted]
• youdontknowtho 9y ago
  Health insurance is just broken. The only way it gets better is if something forces them to view the entire country as one actuarial pool.
  • splintercell 9y ago
    That is not a solution. That's like saying "Prices of McDonalds burgers are really high, the solution to that is to give a fixed $15 tax credit for every burger people buy". A single actuarial pool is like not having a pool at all. If you want to support a single payer healthcare system, then say so, don't call it a 'single actuarial pool' because then the word 'actuarial' doesn't mean anything and at that point it stops being an 'insurance'.
    • kgwgk 9y ago
      Having a single pool doesn't kill the 'actuarial' part. Fixing premiums by law does. As does the fact that health insurance is more "prepaid medical care" than "insurance".
    • youdontknowtho 9y ago
      Was your problem with the term or with socialized healthcare?
• togasystems 9y ago
  After having spent the last 3 years in insurance with Allay trying to take on employer health insurance costs by making it easier for smaller groups to become self insured, I have found that the regulations are cumbersome but not huge blockers. The regulations are there to protect people and for the most part do that job correctly. The hard part about this industry is that there is no single incumbent to disrupt, but thousand of very small businesses who have personal relationships with their clients. Also whereever you jump into the process, you have to deal with companies who do not value technology as much as the HN crowd would. These companies still print out PDFs and have automated very little of their business. No matter how fast you make your software, you are the behest of the companies below and above you in the chain. If anybody wants to nerd out on the insurance industry, my contact is in my profile.
  • pnathan 9y ago
    > The hard part about this industry is that there is no single incumbent to disrupt, but thousand of very small businesses who have personal relationships with their clients. Also whereever you jump into the process, you have to deal with companies who do not value technology as much as the HN crowd would. These companies still print out PDFs and have automated very little of their business. No matter how fast you make your software, you are the behest of the companies below and above you in the chain. Quoted for truth, as we used to say in forums long ago. This represents a non-trivial issue in delivering solutions.
• billylo 9y ago
  Insurance is essential. They are like brakes in your car. You incorporate them not because you want to go slow, but because it enables you to go fast.
• bitJericho 9y ago
  The best solution is the complete outlawing of health insurance. It'll take riots for that to happen.
• toddwprice 9y ago
  Healthcare needs to be funded through a non-profit community trust whose first priority is to secure the highest overall health for the population. Insurance is motivated by profit which will always seek to squeeze more money from the system as its first priority.
• sbarre 9y ago
  > After paying for broker commissions, fronting costs, reinsurance, customer service, claims processing, there’s often around 50% of the original premium dollar left to pay claims – which is the primary purpose of an insurance company. What about shareholders? One of the biggest problem I have with insurance companies as for-profit enterprises is the inherent conflict of interest that comes from trying to service claims and customers as best as possible and turning a profit for shareholders. I've always felt that insurance companies should be run as not-for-profits, or at the very least co-ops.. Don't get me wrong here, still pay the employees and the executives competitively (you want things to run efficiently and by talented teams so you need to attract top talent), but otherwise the whole enterprise should be working hard to make sure every other dollar goes to helping the customers who pay the premiums, and that's it.
  • kilroy123 9y ago
    I feel like this is the case for a lot of big industries in the US. Insurance, especially health insurance. Personal banking with credit unions. Maybe even pharmaceutical companies.
  • grok2 9y ago
    Aren't car-insurances sort of co-op's? Atleast I've read verbiage in my California car insurance policy from Farmer's that indicates that the insurance policy is really owned by the pool of users taking insurance and Farmer's is just a manager taking a government controlled percentage for their operating costs + profit.
    • akharris 9y ago
      In your case, that's true. Farmers is a reciprocal, meaning that the policyholders own it. Not all car insurance companies work this way.
      • occamrazor 9y ago
        I believe that Farmers is owned by Zurich Insurance.
• zstiefler 9y ago
  While much of what Aaron wrote is spot on, one thing missing is the importance of distribution. This a challenge for any startup, but is more pronounced in a regulated industry like insurance with largely homogenized products and with serious restrictions on how you can legally distribute your product (see Zenefits). If you consider how most people and small businesses buy insurance, they typically make purchasing decisions one a year at most. As such, you need to get in front of them at the exact moment they want to purchase. GEICO and Progressive have done this really well, but have effectively bid up the cost of online advertising to make it prohibitively expensive. This is also why agents are such a powerful force in the industry (and because they effectively provide carriers with an initial underwriting screen which they don't need to file publicly). It's important to get the product right, and there are many flaws with most P&C insurance today (chief among them that the forms haven't really changed in the past few decades), but I'd encourage any entrepreneurs to make sure they have an answer on distribution before spending time on product. Disclosure: I've spent a lot of time looking at this as founder of a P&C insurance startup a few years ago.
  • ssharp 9y ago
    I work in marketing for a specialty P&C MGA and can attest to distribution challenges, at least compared to other industries, but Zenefits could have (and currently does) operate legally, they just chose not to. Zenefits was allowing unlicensed agents sell insurance and for those in the company that were licensed, they found a browser hack that allowed them to not sit through the training required by the state (I'm assuming California) to be licensed. In the first case, you should know better but there can be gray areas. In the second case, it's 100% clear they knew they shouldn't be doing it, which makes the first case more likely to have been done knowingly and purposefully. Yes, having to license people is a pain and presents onboarding and scaling issues, but they could have survived if they didn't "need" to grow at such an insane pace.
    • zstiefler 9y ago
      Agree 100%. I suspect a lot of this came back to their investors demanding exponential growth.
• SmellTheGlove 9y ago
  Nice writeup. Certainly scratches the surface a bit (and I think that was the intent). I've spent the bulk of my career in the industry, both in P&C and A&H, and there is a ton of opportunity. You correctly conclude that it's not because we're idiots, even though some days I'm kind of an idiot. Again, tons of opportunity, with some barriers that aren't unique to the industry but maybe unique to what the tech community might encounter (and this is by no means an exhaustive list) - 1. Capital requirements: You need a dumptruck full of money to do much in this industry, at least if your intent is to write or reinsure business, but even to a lesser degree if you're working in ancillary services. 2. Regulatory environment: Assuming US operations, 50 states with 50 different sets of regs need to be okay with what you're doing. In addition, federal law comes into play in certain spaces (GLB, HIPAA, etc). 3. Distribution: The current model compensates every layer of the distribution model very well. It's not as easy as you might imagine to disrupt when entrenched interests are all making a ton of money AND are interdependent upon their neighbors in the value chain to continue to do that. You can't just hack a piece off because that bothers their neighbor, who in other circumstances might otherwise be a competitor, but has a shared interest. The relationships get complex. None of this is fatal, but you must navigate it and play by many of the rules, particularly with #2. As Zenefits learned very publicly, the insurance industry and its regulators weren't going to let someone do what Uber did to the taxi industry - which was essentially to operate in the grey/black and just ignore the calls to stop. Insurance is a subset of financial services, and financial services is a powerful industry. For any startup, my advice is to build compliance and regulatory relations in from day 1. It's the least exciting thing you'll ever do, but is extremely important. Anyhow, I'm rambling. By no means do I want to discourage anyone from trying, I'm just trying to highlight some of the big things that are "different" in our space. I'm particularly interested in the data piece because that's what I've done and built a career on in this industry, but it never struck me as sexy enough for YC. Appreciate the article.
• osullivj 9y ago
  The article spends many paragraphs on the complexities of the B2B and B2C players in insurance, their distribution channels, and how they get paid. It spends one sentence on noting how the pricing of risk is based on actuarial models, and then moves on. The pricing of risk is absolutely key to the entire industry, and it is stone age! It's all done in spreadsheets.
  • SmellTheGlove 9y ago
    > The article spends many paragraphs on the complexities of the B2B and B2C players in insurance, their distribution channels, and how they get paid. The article is primarily focused on commercial lines - primarily P&C, but there are similarities in A&H. The distribution stack is complex and is a natural starting point to start looking at opportunities. The general tech community probably isn't going to look at risk pricing and the ancillary services associated with that - there's a whole discipline built around it and I don't know how many in YC's catchment would be FSA/ASAs or excited by that particular aspect. Plus, for traditional products in P&C and the Disability side of A&H, the industry is pretty good at pricing the risk. Nobody's squeezing growth from their underwriting ratio, they're doing it through products and distribution. Anyhow, not trying to give you a hard time, just another angle. > It's all done in spreadsheets. No it isn't!
  • x0x0 9y ago
    Not everywhere. At a previous employer, I sold ML tools to State Farm. They were very heavy users of SAS and R.
• sharemywin 9y ago
  The biggest thing I can say is don't underestimate underwriting. There's a reason a lot of carriers focus on specific areas. There's a hidden customer acquisition cost in that a group of new customers that has a bunch of bad business that needs to be weeded out. If you think about it a customer knows their own risk better than anyone. So, you're betting that you can judge their risk better than them and your competitors over and above your cost to manage paperwork, regulations, money and fraud.
  • zstiefler 9y ago
    This is also why carriers like agents so much. Agents effectively act as a first screen for carriers that allows carriers to turn away customers in a way that they can't legally do through their policies. Ie "encouraging" agents to send business from certain neighborhoods to other carriers or agents. This is a discriminatory practice but every carrier does it because it's a way to circumvent the public nature of their filings, and it's another hurdle that startups will need to overcome, particularly if they're doing online distribution where adverse selection is a more pronounced risk.
    • sharemywin 9y ago
      neural nets. I wasn't redlining, my neural net said we shouldn't go to that neighborhood.
• Mz 9y ago
  Re the comments on Data in this piece: Yes, insurance is an industry suffering from perpetual information overload. I worked at a large insurance company for 5.25 years. I processed claims and we relied heavily on systems for looking up endless information. They would totally overhaul the system for doing that every few years. I think it occurred two or three times in the time I was there and I heard from other people that, yes, this seemed to happen every two to three years. It had all kinds of problems. What was supposed to be a new and improved, more user-friendly system meant that all the old timers who had figured out how to find everything were now lost, even with training. It also meant that some things were not compatible and not findable anymore. It was truly bad. I have a certificate in GIS. As a claims processor, I worked with multiple databases all day long. This included such things as looking up names and addresses for providers (doctors, hospitals, etc -- the people providing medical care). I suggested we create a GIS based system to make this easier. The idea did not fly. But if you want an area of opportunity in insurance tech, try finding solutions to some of their back end problems. Managing information overload is a serious and ongoing problem in the insurance world. I was there 5.25 years and I only know a thimbleful of information about the industry. Laws and regulations vary by state. In order to sell in all 50 states, you need to get licensed in every state individually and we had to be able to look up "state exceptions" which were laws that impacted how claims were paid in each state and on and on. People in insurance are absolutely not stupid. It is just overwhelmingly complicated and no one can keep up with all of it. And, yes, it is very fragmented. But if you want a good business opportunity in this space, consider trying to build back end solutions to help them better manage the information in which insurance companies are simply drowning.
• aaroninsf 9y ago
  Some context: Americans pay 2.5x more than the average first-world single-payer system. 2.5x... This funds demonstrably and starkly worse outcomes on the metrics we should collectively care about: life expectancy. Incidence of chronic disease. Infant morality. The reason we pay much more for much less is simple: for-profit health care optimizes for profits, not outcomes. That is exactly what it has done; exactly what it will do. The public sector already does single-payer in this country with an order of magnitude less overhead cost than the private sector. When I discuss these facts with conservatives and libertarians, I usually discover that most of this is decreed "fine," because we disagree about whether or not health care is a right. For that reason, I've stopped suggesting that it is, and focused on another stark fact: Failure to provide basic health care to all, through straightforward means, merely means that it is provided through partially hidden means (like ER rooms) at vastly greater cost, not least because emergency care cannot perform preventive and chronic care, which in many cases would provide better outcomes for two orders of magnitude less cost. Morality is a matter of instinct and choice. The costs of the existing broken system are however obvious, and render any defense IMO irrational.
  • refurb 9y ago
    The reason we pay much more for much less is simple: for-profit health care optimizes for profits, not outcomes. Over 50% of healthcare in the US is paid for by the gov't and those costs are still higher than other systems that are single payer and non-profit. Doesn't quite align with your theory though.
    • notahacker 9y ago
      The healthcare services paid for by the government is (i) provided by profit-motivated companies with all the private sector incentives to overdiagnose and (ii) typically performed at lower rates than those paid by private insurers, and much lower rates than those paid by individuals without the relevant insurance cover.
      • refurb 9y ago
        But even at Medicaid rates, the cost of healthcare in the US is higher than other countries. Are you suggesting that the gov't is swayed by the demands of for-profit companies?
• ksar 9y ago
  > For most of the insurance world, the hardest and most important thing to find is effective distribution and customer acquisition. This is absolutely true. If you look at how regional, family-owned P&C carriers got their start, you'll find they started as brokers. These brokers found a profitable niche (call it motorcycles in California, or non-standard auto in Texas) that they wanted to own, moved on to become MGAs, and then admitted carriers offering multiple lines of business. If you can find a way to own the customer as a distributor, you own the life-blood of the entire business downstream. As a result, P&C insurance companies are huge spenders on marketing (GEICO, spends $1.7B/year). It would be game-changing if this cash was used to provide utility to their customers above and beyond the insurance transaction. I'm of the opinion that insurance premiums could be the new ad dollars - used to create products that promote lock-in, and much more consumer-centric insurance companies.
  • stillsut 9y ago
    > If you can find a way to own the customer as a distributor, you own the life-blood of the entire business downstream. Very interesting thought. Like how I buy clothes from Nike, then advertise them. I had some thoughts on this a while back if you're interested: https://docs.google.com/presentation/d/1XvXVlzZULoRSfmCsPEKfOcblig-kBR83CnRgKlsj02I/edit#slide=id.p14 https://docs.google.com/presentation/d/1XvXVlzZULoRSfmCsPEKf...
• sharemywin 9y ago
  You also might want to check out guidewire. They're the company that's basically taking over the software side of P&C for carriers. https://www.guidewire.com/ https://www.guidewire.com/ If you're going to innovate on the software side in P&C you would need to figure out what they're not doing or could not do that would allow you to get ahead of them.
  • sharemywin 9y ago
    doesn't mean their isn't business model innovation or some kind of niche or not being a carrier.
• elihu 9y ago
  It seems like for health insurance at least, the problem of trying to optimize insurance premiums based on any risk factor you're legally allowed to discriminate on is a problem that just sort of goes away in a medicare-for-all style single-payer insurance system. Everyone pays taxes and receives health care services -- you just have to make sure your taxes rate is set properly to cover the costs incurred. (I think governments are sometimes unfairly criticized for inefficiency because they incur higher costs simply by not having the option to cherry-pick their customers the way private companies usually can. There are of course cases where the criticism is justified.)
• pkamb 9y ago
  Any options for renting vintage furniture by owner? I'd like to pick up more nice mid-century pieces when I see them cheap at estate sales, but won't have the space for them for a while...
• Entangled 9y ago
  What if a thousand people get together and put $100 each in the blockchain in order to cover emergencies for the unlucky 10% that may need aid in times of distress? A society can't function if more than 10% of the population is in distress and that's exactly the purpose of insurance, the many helping the few, not the other way around. But since insurance moves a lot of money (just like banking) and there is propensity to fraud and corruption, then it is highly regulated making it hard for newcomers to disrupt the market. Start from the beginning again using technology, allow tech insurers to take from 100 and serve 10, that's it. Who to serve? That's the easy part, those in need.
  • soared 9y ago
    Interesting idea. But wouldn't the value of the coin just drop when a disaster occurred, so those who need the money wouldn't have nearly as much as they expected? EDIT: Realized you never said coin. I just assumed blockchain + money = coin.
    • Entangled 9y ago
      No, not a coin, it would be dollars, euros or whatever local currency. The blockchain is to keep track of the books in the public eye. The pool of money is there until its depleted for the month with a cap of 10% per user, or it would rollover for the next month so more emergencies can be covered. A healthy society can build up a huge chest for when big emergencies hit. If you want more coverage then you acquire a second tier risk insurance which has a bigger pool and different coverages so practically the market allocates resources more wisely.
      • notahacker 9y ago
        But the blockchain doesn't actually deal with either of the problems the insurance industry aims to solve (assessing the legitimacy of claims, and keeping amounts paid in premiums in line with amounts paid in claims) If people use your system honestly, it's likely more expensive than an insurance scheme, because your maximum claim in a given time period is a low multiple of your premium. If people don't use your system honestly and claim what they want when they want (because who cares if the permanent record says they made three maximum claims in consecutive months when there's no central authority to object) it's less stable than a Ponzi scheme.
• socrates1998 9y ago
  The biggest problem I have with insurance is the inherent disproportionate power relationship between the company and their customer. Essentially, the moment a customer becomes more trouble than they are worth, they are dropped. This is true with other types of industries, but if your health insurance drops you when you get cancer, you can't get more health insurance, and you die. Same with house insurance, car insurance, ect... And it causes death or financial disaster all too often. Some would argue that "this doesn't happen" or "it's illegal". 1) It happens ALL THE TIME. 2) It's illegal, but if you don't have the means or education to fight it. You are pretty much done. It's the fundamental nature of insurance companies to milk healthy customers while dropping unhealthy customers. It's just too tempting and they are too protected by our legal system for them to not do it. I know this is pessimistic, but as long as you realize this fundamental imbalance in the relationship with you and your insurance companies, you can mitigate it to a certain extent. But, really, the only way to completely mitigate it is to be so rich that you don't even need insurance.
  • debacle 9y ago
    > the moment a customer becomes more trouble than they are worth, they are dropped. Insurance is a business. I don't think any business would want customers that are more trouble than they are worth. > they are too protected by our legal system for them to not do it. Solving the risk issue with patients who will never be able to afford their healthcare is not an insurance problem. These people are uninsurable. There's a known cost to pharmaceuticals associated with being a hemophiliac. There's a known cost to the outpatient care associated with kidney disease. There's no "risk" associated with those costs. We need to re-frame the discussion around socialized healthcare, not health insurance. Health insurance, apart from high-deductible, low-cost plans, doesn't exist. The US already has socialized healthcare, the problem is that it is a split private/public model.
    • FabHK 9y ago
      > Insurance is a business. I don't think any business would want customers that are more trouble than they are worth. But insurance is precisely the business of taking money from everyone that's exposed to a potential loss (namely the expected value of that loss, plus some more to cover administration cost and profit), and then distributing it to those actually suffering the loss. If the insurance then turns around and kicks those affected out, it is reneging not only on the spirit of the contract, but on its entire raison d'être. Agreed, though, on your later point that in the health domain, certain risks, once they've occurred, are so massive that traditional (private market) insurance structures might not be really suited to them, which is why nearly the entire developed world has some sort of public health insurance, fortunately.
• CptJamesCook 9y ago
  It's surprising to see an article about insurance without references to black swan risks.
• jpswade 9y ago
  My favourite article on Insurance is one by the BBC[1], which questions what makes gambling wrong but insurance right? It also points out how it's history is steeped in shipowners and traders meet in shipping agency Lloyd's of London's coffeehouse in 1863. 1. http://www.bbc.co.uk/news/business-38905963 http://www.bbc.co.uk/news/business-38905963
  • Mz 9y ago
    Good piece. I often liken insurance to gambling.
  • plafl 9y ago
    In insurance you would rather not win the bet: https://en.wikipedia.org/wiki/Insurable_interest https://en.wikipedia.org/wiki/Insurable_interest
• sonink 9y ago
  I might not know too much about the topic, but imo American healthcare system has a lot of learn from the Indian healthcare system. My guess is that America should simply copy-paste India's model and it should be good to go. For the resources that it spends on healthcare, the Indian healthcare systems offers perhaps the most efficient system in the world. There is insurance if you want, but you can choose your health providers in the free market too. Hospitals, Doctors, Medicines, Tests, Procedures, Post-op care/services - everything can be comparison shopped. And if you have more time than money, you can show up at any one of the almost-free govt. funded hospitals to get treated by who is often a very good doctor. The inefficiency of the American system might as well be a result of extensive litigation around healthcare, but I suspect that its simply an oligopoly defended by pocketed politicians. I would guess that for any hospital expense above a few thousand dollars, and for someone who cant afford, it might make a lot of sense to just hop on a plane to India.
  • chimeracoder 9y ago
    While I agree that the US could learn a lot from India's billion-payer system, the big drivers in cost differences wouldn't apply. India's system is cheaper specifically because it doesn't have the complexity of the billing system that the US has (and, for that matter, European countries as well). But in addition, India explicitly does not recognize a wide range of drug patents that the US does. By paying more for prescription medication, the US market funds a huge amount of medical research (50% of the medical research in the entire world) which countries like India are able to access essentially for free.
    • sonink 9y ago
      I guess, the complexity of the billing system in the US is the outcome of an insurance driven market which has kept a status quo due to vested interests. India also has a complicated insurance system, but it is kept in check by a parallel free-market and state funded system. There is competition not just between carriers, but also pressure on them to keep their policies simple, lest customers circumvent and pay themselves. You are right about enforcements about drug patent, but if I am not wrong this is true only for a small set of medicines which are marked essential. My guess is that vast majority of drugs sold are generic copies of off-patent drugs.
• geggam 9y ago
  Insurance is Socialism for Profit
• asr 9y ago
  Before you go thinking about how this applies to healthcare... health insurance in the U.S. is different from other types of insurance and personally I think we'd all be better off it were not even called "insurance." Health insurance is a mix of pre-paying for predictable and certain expenses with tax-free dollars, a transfer/entitlement system to ensure that more people can afford insurance (by design, your premium does not match your expected risk--either you are pooled with others at your employer, or your exchange account is subject to rating band requirements which means, for example, that in many states old people can only be charged 3X more than young people even though old people are likely to be much more than 3x more expensive to insure), and actual insurance. I'm not sure what percentage of your premium reflects the cost of actually insuring you against uncertain future health events, but it's far from 100%. This is an interesting article, and some of it applies to healthcare in the U.S., but much of it does not.
  • joshfraser 9y ago
    If your insurance covers pre-existing conditions, it's not insurance anymore.
    • klipt 9y ago
      The problem is that every condition becomes a "pre-existing condition" when you change insurer. And because insurance is tied to jobs, people are forced to change insurers frequently (whenever they change jobs, or whenever their employer changes providers). So you're on insurance A with no pre-existing conditions and get cancer. Next year your employer switches to insurance B. Now you have a "pre-existing condition" - is it fair to suddenly refuse to treat you? If that's the case, what's the point of having "insurance" at all?
      • dfabulich 9y ago
        If this were an "insurance" market, when you get diagnosed with a problem (cancer, say), the old insurance A would have to pay for the cancer treatment, and keep paying even if you leave the insurer. Any "new" conditions would be covered by your new insurer B (or not covered, if you didn't get new insurance), and insurer B would have the right to refuse to pay for pre-existing conditions because those would be covered by your old insurance A. But that isn't to say that if we had "insurance" life would be altogether better. Insurers would increase the premiums of people who beat cancer, because cancer has a habit of coming back. Quite likely anybody who beat cancer would be unable to afford insurance in the future.
• grizzles 9y ago
  Nice article & loved Kyle's article about the thorny issues surrounding customer acquisition. I grew up around the industry because my father worked his entire career in it. I've always found it fascinating. Actuarial science is so underrated. I'm also an entrepreneur and I've previously thought about entering it to disrupt it. If there is one thing I'd add to the main article it's this: If you look at the data vs all other industries, Insurance is the most profitable industry out there. That's not bad considering the product is manufactured out of thin air. This is perpetually interesting because to me it kind of destroys one of the central tenets of capitalism. It's a very old industry. If anyone can conjure stuff out of thin air, you would expect there would be much more competition / lower margins in it by now. But there isn't. So the industry is really effective at erecting moats to keep innovators at bay, In my opinion, this is main "value" (cough) that the regulators play in the market. The industry gets away with so much, and it needs reform, but I'd bet against it ever happening. This situation in replicated in every country around the world. That's why it's hard to be a true entrepreneur in the industry. You need an investor with deep pockets to enter the market. You need to verify your brilliant customer acquisition strategy works. Then you need to wage war vs the incumbents. Bonus content for actuarial nerds looking for a good chuckle: http://reactionwheel.net/2017/06/venture-follow-on-and-the-kelly-criterion.html http://reactionwheel.net/2017/06/venture-follow-on-and-the-k...
• chasely 9y ago
  If you had domain-level expertise that would be relevant to providing analytics for P&C (re)insurance providers/consumers, but didn't know how the insurance market works, where would be a good place to start?
• asmithmd1 9y ago
  I am surprised no one has mentioned: https://www.lemonade.com/ https://www.lemonade.com/ They are doing three things: 1. Innovating on customer acquisition with a mobile app 2. Building out a for-benefit corporation insurance carrier one US state at a time. 3. Innovating on the business model. The conventional, for-profit side of the business takes a flat 10% of premiums and "buy" insurance from their captive for-benefit carrier. Any money left over in the for-benefit insurance carrier is donated to the charity of your choice.
• chiph 9y ago
  The article mentions "Personal Cyber Insurance" Many insurance companies will insure against data loss as part of your homeowner's policy (with lots of exclusions..) and I've been wondering why they don't partner with one of the online backup services (SpiderOak, Backblaze, etc) in order to preserve their customer's data to reduce the risk of a payout, or at least how much they have to pay on a claim.
• incan1275 9y ago
  Yonatan Zunger posted a really awesome piece about the origins of insurance, that complements this nicely. https://healthcareinamerica.us/how-to-ask-good-questions-about-health-reform-725887002c03 https://healthcareinamerica.us/how-to-ask-good-questions-abo...
• gilsadis 9y ago
  It's an excellent article and spot on. Insurance has remained fundamentally unchanged for centuries. In order to really change it, a complete re-architecture is needed. Insurance should be fully digital, hassle free, transparent and fair. It's hard to really change it when you're not a fully licensed and regulated carrier. An MGA can create a beautiful UI on top of an old insurance product, but eventually, consumers will meet face to face with this old insurance product (for example in claims), and it's going to be the same old experience again. As many of you stated here, there's an inherent conflict between the insurance company and the insured. Until that changes, the experience will stay the same. In Lemonade, we are changing that. Will love to get your feedback. Here's how it works - https://www.youtube.com/watch?v=6U08uhV8c6Y&t=9s https://www.youtube.com/watch?v=6U08uhV8c6Y&t=9s Disclaimer: I'm head of product at Lemonade (lemonade.com)
• Animats 9y ago
  Insurance companies have been into information processing in a big way since paper and pencil days. The first company to buy a commercial computer was Metropolitan Life. In commercial insurance, there's a question of how intrusive the insurance company should be. My favorite insurance company, The Hartford Steam Boiler Insurance Company, established in 1866, was finally bought out by Munich Re a few years ago. Hartford Steam Boiler insures boilers and equipment in industrial plants. Most of their employees are inspectors. If you want to buy a policy from them, they come out and inspect the equipment. They give you a list of what you have to fix. Then they come back to inspect after everything is fixed. Then they sell you a policy. They also inspect again, randomly and unannounced. Cut corners on maintenance, and HSB cancels your policy. The premiums are low, because boilers inspected by Hartford Steam Boiler don't blow up. Most companies hate that, even though the premiums are lower.
  • shostack 9y ago
    It's actually creepy how invasive they are and this is often where the customer-hostile relationship comes from. "Install this overly invasive tracking device to let us make sure you are an ok risk and we'll give you this immaterial discount that is really a price hike for everyone in disguise." I got an electric toothbrush from my dental insurance provider that has WiFi to transmit data on my brushing habits back to them. I can guarantee this thing will never have network access.
  • rmac 9y ago
    what you're getting at might explain why The Hartford Steam Boiler has one of the best cyber security insurance products (save maybe Chubb)...
• frabcus 9y ago
  Surprised not to see mention of the fundamental modern tech problem with regard to insurance. As soon as you have big enough data, and artificially intelligent enough algorithms, the insurance becomes too predictive. The whole point of insurance is to pay people when rare, bad events happen to them. If an insurer can predict well enough who will be the victims, it can refuse them insurance, and hence remove the entire purpose and benefit of the insurance. This is the flip side to moral hazard. What does it even mean to offer commercial insurance, if it is only offered to the people who least need it? This is least bad, for example, with a car predicting you're a bad driver as you can improve behaviour. It is really problematic with data such as gene sequencing, which you can't do anything about. Only way out I can see is compulsory insurance, levied as a tax. Or maybe non-profit or Government AIs, trained to find a sweet spot between moral hazard and its opposite?
  • xyzzyz 9y ago
    Only way out I can see is compulsory insurance, levied as a tax. I cannot help but notice that you basically reinvented welfare state.
    • Kluny 9y ago
      Only if it's applied as a blanket policy that insures everything and everyone has to pay it. In a more limited way, you can look at British Columbia's Autoplan insurance. It's a crown corporation that provides insurance to everyone in BC. Everyone is required by law to carry insurance on their vehicle, and they have to buy it from ICBC. It's not the cheapest in the world, as they have no competitors, but they are legally required to keep costs fairly low. So everyone in BC can get car insurance and it ends up costing something like $50-150 per month per car. No one gets denied, no one goes without coverage, and they have a big enough customer base to cover their costs.
• joshfraser 9y ago
  My issue with insurance companies is that they're conflicted by design. As typically publicly traded companies, they have a fiduciary responsibility to their shareholders to maximize profits. And the only way to maximize profits is to deny coverage. The purpose and value of insurance is amortizing risk. There are very few things that I think should be controlled by the federal government, but a single payer health care system is one of the few that actually makes sense from an incentives perspective. In the words of Charlie Munger who's spent more time thinking about insurance than almost anyone: "Show me the incentive and I will show you the outcome." Why does the US pay the highest prices for mediocre health care? Perverse incentives.
  • zerni 9y ago
    Very good point. Conflict of interest is the real flaw in the insurance business model. What other industry makes more money when their customers slip up?! Insurers try to protect their margin by finding ways to reject claims. I am actually working on a company changing that by making money when settling claims instead of losing it. http://insureathing.com/insurance/wanted-an-insurance-partner-in-crime-part-ii-01-2017 http://insureathing.com/insurance/wanted-an-insurance-partne...
    • joshfraser 9y ago
      Let me see if I understand correctly. When there's a claim, you send all members a bill for their share of the claim plus your fee. If there are no claims, you don't get paid. You're incentivized to pay out so you get your fees. But not too often or premiums will sky-rocket and you'll lose customers. Is that right? What happens if there is a spike in claims and everyone leaves at once?
      • zerni 9y ago
        That's exactly what it is. You benefit on the upside but if there are outliers and the premium would skyrocket we cap your premium at market rate through an agreement with a reinsurer. It's a standard financial tool insurers are using as well.
• pasbesoin 9y ago
  Two comments from me (amongst many I might make): 1. A while ago, as a somewhat pointed quip, I started pointing out that in the U.S., for health insurance we pay "whole insurance" rates (yes, that term applies to life insurance, but is an apt comparison in terms of pricing) for what is essentially "term insurance" (which, in the life insurance segment, is quite a bit less expensive, because after the term, you're uninsured). 2. I tried to do eveything "right". Carried insurance when I could, when I was younger. Carried it with the best company and policy I could get. Didn't resent that I was paying it much more than I was getting out: It's "insurance", and if I'm healthy, I've already "won". I'm glad the money can go to those who need it (patients, I was assuming). Despite doing everything "right", my last corporate job got off-shored. At a time when the individual insurance market was going from ridiculous to impossible. I managed to hold onto some form of insurance by dint of personal connections, to watch exclusions slapped onto my individual policy (for things the doctor had said he wouldn't treat -- too minor, risk/benefit not worth it -- while I was still on the corporate group policy). To watch my premium rates triple in three years. The ACA came along just in time to rescue me from the looming vast pool of the uninsured. Which, once you entered, you had a very hard time exiting. I never received a subsidy from the ACA. It simply allowed me to participate. And by the way, the biggest injury to it? It was written to make insurers whole for their losses, until they had a handle on their demographics. Well, under Congress, funding is always a separate exercise -- the budget process -- from the laws and activities that that funding in turn enables. And the Republicans simply refused to produce the funding mandated in the ACA. The numbers I heard from and expert in the field is that insurers were getting about 17 cents on the dollar for losses the ACA law told them would be reimbursed. In other word, it wasn't simply imperfect and in need of improvement. A starting point, per those who negotiated and accepted some pretty terrible compromises in order to get it passed and some improvement in coverage started. It was actively sabotaged. Ok, I find I have a third point to make right now: 3. When the ACA was proposed, I believe it was not at all a "left" initiative. It was meant to be pretty middle of the road. Around that time, 2007-8, and for some years prior, businesses were crying bloody murder at the year over year increases in health care costs they were facing. Often well into the double digits, year after year. And they were saying, 'We can't compete with foreign competition from societies that have universal health care, where their costs are perhaps half ours and are increasing at single digit percentage rates.' The ACA was meant to address "conservative" business problems as much as "social" individual and community problems. All that was sabotaged, dealt with in bad faith, for the sake of the political and power agendas of the selfish. By the way, the ACA has produced substantial improvements on the group insurance side of things. For individuals, and for businesses, by holding cost increases down. And insurers have made good profits on these changes and their group policy business. Money they don't include in their accounting when they turn around and describe all the losses they've faced under the ACA marketplace plans (which are classified as "individual" insurance plans, not part of the traditional group policies/business).
• hardtke 9y ago
  I'm surprised he didn't call out title insurance as a place for potential innovation. This insurance pays out at something like 1% of premiums collected. Historically, the customer acquisition was handled by making a large kick back to the real estate agent. The research involved (look for contractors liens and such) seems like something that could be automated using NLP.
• deleted 9y ago
  [deleted]
• TimPC 9y ago
  Attempted tl;dr version: Insurance is a horrendous industry and someone should reform it because it sucks and could do so much better. Insurance exists in a horrendous sales market where connections are required to multiple providers across multiple roles in a complex sales process. Insurance is subject to highly fragmented regulatory complexity making it difficult for any company to scale to multiple markets. This not only affects you, but it affects many of the providers you build partnerships with, making each new market often require new relationships. So my takeaway is don't do insurance unless you have something so overwhelming that you can't do it no matter what. Also expect that Idea & Working Technology gets you 1% of the way there and 99% will be building relationships, sales channels and regulatory compliance.
• corford 9y ago
  Would be interesting to know how many of these points map over to the insurance landscape in Europe? I know next to nothing about either but, from talking with Stateside friends, have the (possibly wrong!) impression that the insurance market in Europe is less sclerotic and a little more modern/competitive/innovative.
  • zerni 9y ago
    Regulation is based on country instead of changing from state to state. The EU helped to streamline most of it for all European countries so you can float freely by passporting across regions.
• jarsin 9y ago
  - Cyber Insurance - Lifetime offer: 99% discount if you switch to Linux.
• cmurf 9y ago
  There's a substantial difference between something like automobile, homeowners, or renter's insurance; and health care "insurance" which is arguably wrongly named. Automobile insurance is mandated by law in all 50 states (Maine lets you self insure but you have to stipulate you can do this, in effect it's still a mandate). Homeowner's insurance isn't required by law but might be required by the mortgage company. And renter's insurance may be required by a landlord. All of these only protect you against almost random events, or at least pretty much unpredictable events. Health care insurance is weighted by being one part warranty and two parts aging payment plan. How many people use their health insurance every single year in some form or another? Dental? Eye doctor? Cold or flu? That's not insurance. It's a payment plan for predictable services. Even pregnancy is predictable. Something like cancer, congenital disease, are not predictable. So we've conflated a bunch of things into a giant payment plan, with nearly a dozen layers of middle men, every one of whom expects a profit cut. And so in the U.S. we have the most expensive per capita health care cost in the industrialized world, and yet not everyone is covered. Basically we are so stupid, that we are willing to pay more for health care services to deny other people being covered, and to jack ourselves off proudly that this is the best health care system in the world and it's (mostly) free market. It's a big fat stupid hand job. So I would not consider health care insurance in the same category as other insurance types. It's a sick care payment plan, and if it weren't for the government making it illegal now, you'd still see lifetime maximum caps. Get too sick? Go fuck yourself. Die, don't die, go to the ER, charge it to a credit card, declare bankruptcy, we do not care about you. We don't care. We don't give a fuck about you. That is the American healthcare and insurance system.
• nafizh 9y ago
  Is there any startup focusing on the healthcare insurance industry?
• jheriko 9y ago
  > Insurance is fundamentally a data problem. this is a special sentence. it reads roughly as "i am ignorant of reality" to me. :( very american.
• EGreg 9y ago
  There's one cool thing about insurance providers, whether private or public: They are the ones most aligned with YOUR well being. They pay when something happens. They get more money if things stay good or get better. In fact, I would argue that public option / single payer insurance is MORE interested because of lack of competition (induced supply, as it were) that will destroy the profits if costs are driven down. In other words, a public insurance program actively would try to improve public health, not to beat competitors but to lower its costs and reinvest that into MORE public health innovation. Want to help the world? Make startups that improve public health (diet apps, exercise apps, whatever with measurable results) and have the insurance companies fund it.
• sytelus 9y ago
  When you go to clinic for a simple injection for allergy response they charge you $1500. The whole process takes 2 hours of stay in a clinic and doctor spends about 15 minutes with you. When a healthy women goes to deliver normal baby in hospital, she typically gets charged $2000 per night while doctor spends less than 1 hour with patient and cost of material is almost nothing. Does this feels data or technology problem to anyone? In USA, private entities who owns clinics and hospitals have recognized that they can charge virtually anything in the name of providing "gold plated" care. All the while insurers have recognized that they can charge person $1500 premiums a month without anyone noticing because premiums are directly taken of out people's paycheck by employers. Vast majority of employed people have no clue that they are actually paying for their premiums which are almost same as what they would have paid as an unemployed person. Instead people assume that they get low cost insurance because their employers has some sort of great "group deals". So neither party has any incentive to reduce cost. Its neither a data nor technology problem, its how markets are completely eliminated out of equation by creating a law that employer needs to provide insurance even though employers are simply transferring cost to end consumers. If government creates a law that employers must not provide insurance and everyone must buy their own insurance on open market according to their preferences and budgets, I believe cost of insurance would fall dramatically in very short amount of time. This is how lot of developed countries operate and cost of equivalent quality care there is usually 10X lower precisely because of this.
• blazespin 9y ago
  Insurance is fundamentally a 'data' problem, if you can numerically analyze human interaction. I know insurance brokers, they definitely set up their book based on what they know about their customers.
• iamnotlarry 9y ago
  I have come to believe that the insurance industry in the U.S. has become part of the cause of expensive medical care. I am not opposed to the idea of insurance, but here are some of the problems I see in how it works today. I do not believe that insurance companies actually negotiate the price down. I have seen too often that the price goes up when I produce proof of insurance. While it may seem counter-intuitive, insurance companies have perverse incentives to push prices up. Even the most well-meaning insurance company will opt for certainty over potentially inexpensive. But I don't think they are well-meaning to begin with and I think that it isn't even structurally beneficial to them to reduce costs. For an example of when lower costs benefit insurers, see the price of identical healthcare purchases outside the U.S. Products manufactured inside the U.S. magically become cheaper in Belgium and Nigeria. The insurance industry has worked with the medical industry to obfuscate the cost and price of healthcare. This is in both industries' interests. If I pay $100 for a doctor to splint a broken finger, I'm happy I had insurance to make it so cheap. I'll let my insurance company pay the other $1700 and I may never even look at the bill that shows a total cost of $1800. I won't see that they charged $25 for the popsicle stick, $25 for the tape, $5 for the pen used to fill out the medical chart, $30 for the receptionist, $75 for the nurse, $300 for the PA, $200 for the xray, $200 for the radiologist, $50 for the ibuprofen, etc. If I actually had to pay that bill, I would argue it line by line. I would absolutely refuse to pay large portions of the bill. $5 pens that they reuse for the next patient are obviously an unethical ripoff. But I don't have to pay those line items, so I don't fight it. I just have to pay a $1500 premium every month. And I'd be crazy to refuse to pay that. We all know that insurance premiums are high because healthcare costs so much. This is because of lawsuits and freeloaders. This is how price obfuscation shifts the battle. We don't question anybody's integrity over the $5 pen because the discussion is all about lawsuits and freeloaders. If I had to pay the bill myself, I'd ask why I got billed for 4 x-rays, but only received 3. That 4th one that didn't turn out because the radiologist put the cartridge in backwards? I'm not paying for that. I'd ask why the receptionist seems to be making $500/hr. I'd ask what the lab fee was for. I'd comb my bill and question everything. $1800 is a lot of unplanned expense for me. $100? Not so much. If I had to pay my medical bill in full then file for reimbursement, I'd fire a company with 90 day turn arounds and switch to the insurance company with 5 day turn arounds. And the next time I got stung by a bee, I'd maybe not run to the emergency room. Yes, that could lead to bad outcomes. But the current practice has its own bad outcomes. If I had to keep fighting an insurance company for timely reimbursement and started noticing that I pay $1500x12 every year to cover 80% of my ~$6000 medical expenses, I'd start getting all kinds of ideas. I would think about putting $1000 a month into an HSA and look for a $40000 deductible policy. I'd think about pooling my HSA with 100 of my closest friends to start a healthcare co-op where I could borrow up to 1x my balance for 1 year at low interest to pay for big medical bills and then get a $60k deductible policy instead. Then, in five or six years, when I've built up $30k, I'd drop my monthly payment into my HSA to $500, and just let the balance earn interest. Then, when the unthinkable happens, I drain the account, borrow another $30k, file a claim on everything else and spend the next year paying back the $30k and lining up contingencies for any event that will happen before I can build my HSA back up. I'd start daydreaming about pooling my $12k/year with others to build and staff a very small clinic that could take xrays and treat bee stings. Just 100 founders paying the same $1000/month could generate $1.2M per year. That could secure a 15-year $3M bond to build the clinic. It could pay a long way into supplies and staffing, too. One could even imagine that members get free services (ignoring the $1000/month) while non-members could pay $1800 for a broken finger. In other words, I'd figure out how to rely as little as possible on insurance companies. And the money I now spend to fund their paperwork and profit would stay in my account.
• Spearchucker 9y ago
  I've done a lot of systems design and development in the insurance industry, and it's a vast space with opportunities not just for insurers. The most recent thing I worked on was a pricing and activation engine that sat behind a web site that acted as a broker for a number of insurers. That isn't new, but it was new for this market - life insurance. As such my employer was a single provider on a panel of providers. The web site that provided the panel brought a number of innovations - one of them being an underwriting SaaS. Panel participants are able to enter their underwriting crown jewels into a 3rd party web site, secure in the knowledge that their IP wasn't going to be leaked or shared with others on the panel. There were many more efficiencies that the model enabled, which were never realised (well, not by the time I left) because the SaaS provider couldn't reach financial agreements with some of the providers. Greed was (is?) something that risked torpedoing the most innovative thing I've seen in life insurance, ever. All that to say I agree that this market is brimming with opportunity. The market is so incredibly broad, and deep, and so complex... Regulation is definitely a thing, but hardly an impediment. I have, for example, spent many years in this industry, but never worked for (or with) reinsurers. I have a long-standing suspicion though, that that market is so convoluted that the front-line insurer can conceivable be it's own reinsurer, after having passed through like, 15 other reinsurers...
• johnobrien1010 9y ago
  One thing I'd add is that the potential for new technology to better identify risks also is the potential to nullify the need for insurance. It is fundamentally the uncertainty over which house will burn down that leads to the need for insurance; if anyone had a 100% accurate model, the folks who were definitely not going to have their house burn down would not need insurance.
• artur_makly 9y ago
  really dumb idea but.. What if the insurer and healthcare provider were one and the same? Wouldn't that remove the fraud 'game' , increase transparency, and lower premiums? or will it actually make it 2x worse for the patient?
  • ens 9y ago
    Not dumb, it's called integrated care! Kaiser Permanente and the Mayo Clinic do just that.
• creeble 9y ago
  > Each of the players in the structure needs to get paid. No, they don't. They exist merely as a means for insurance companies to extract more profit out of their customers because they believe they are "overexposed" to certain risks -- despite the fact that exposure to risk is _exactly_ their business. You may make the argument that reinsurers, ILS buyers, and fronting carriers are all essential to the insurance business because they lower overall costs by spreading risk. But if this is so, then they don't "need to get paid", they are a cost _savings_. Which is it?
• nappy 9y ago
  I'd suggest to the mods that all threads about health insurance be removed and perhaps moved to a new post. Though an interesting discussion, Aaron's article explicitly does not address healthcare. The dynamics of healthcare are so different than P&C, it is a wildly off-topic discussion.