8 ms·

It came in very handy for a parent. I’m an insurance skeptic, but if they were too it could have bankrupted both of us. (Yes - one anecdote doesn’t translate

It came in very handy for a parent. I’m an insurance skeptic, but if they were too it could have bankrupted both of us. (Yes - one anecdote doesn’t translate into data)

daveFNbuck 9y ago
Are you still an insurance skeptic? What does that mean?
- cmurf 9y ago
  Insurance skepticism is when the product seems more like gambling or an expensive savings plan, than it is about high cost risk management. The more inevitable some costly event is perceived, then why not just save for that event, rather than pay a premium for only partial coverage, etc. This is my complaint with referring to health insurance, a huge amount of which is b.s. What we have is an aging payment plan. We're all gonna get old, and it's gonna suck, and be expensive, might as well start paying now: oh guess what, you are, it's called Medicare payroll tax.
  - chimeracoder 9y ago
    You're right that health insurance isn't insurance at all. But to clarify: > What we have is an aging payment plan. We're all gonna get old, and it's gonna suck, and be expensive, might as well start paying now: oh guess what, you are, it's called Medicare payroll tax That would be the case if the following were true: * If Medicare's operations were purely funded by tax money, and * If the taxes people paid were proportional to their expected lifetime costs-of-care However, neither of these are true. Medicare's reimbursement rates are indirectly subsidized by private insurers (who then pass those costs on to privately-insured patients in the form of higher monthly premiums and copays). And of course, the taxes are based on income, not risk profiles.
- defen 9y ago
  Insurance works best for rare, randomly distributed events that have a high cost. Fundamentally, for insurance to work as a business, it has to cost more than the expected payout. The reason it's still worthwhile is that money has non-linear utility. To use a made-up example from the car insurance world (numbers are made-up but I hope it conveys the general idea): a guaranteed "loss" (cost of premium) of $100/month over the course of 30 years (total cost: $36,000) is far preferable to having a 1% chance of losing $500,000 over that same time period if you seriously injure yourself or someone else in an accident (expected value: -$5,000). So, the average person is paying $36,000 to avoid an expected loss of $5,000, which doesn't seem to make sense in a naive analysis. But the issue is that the average person can plan/budget for a $100/month expenditure, whereas a $500,000 loss could mean that they lose their house and life savings and more, which is far too high of a risk for most people. Things that insurance doesn't work well for: common events (e.g. routine medical care); non-randomly distributed events (that's why e.g. earthquake insurance in San Francisco is extremely expensive and has very high deductibles - if the Big One™ happens, it's going to affect everyone at the same time); inexpensive events (e.g. why insure a phone?)
  - chimeracoder 9y ago
    > Things that insurance doesn't work well for: common events (e.g. routine medical care); non-randomly distributed events (that's why e.g. earthquake insurance in San Francisco is extremely expensive and has very high deductibles - if the Big One™ happens, it's going to affect everyone at the same time); inexpensive events (e.g. why insure a phone?) I agree with this, but I want to clarify your language: insurance works very well for common events - what it doesn't work well for are predictable events (which is why insurance is a terrible model to apply to routine medical care). The entire value proposition of insurance is to reduce (but not eliminate) uncertainty. If an event is perfectly predictable on a regular cadence, there's no value to insuring it. Events that are common but have high variance are potentially worth insuring, for the same reason that a person whose earnings are highly variable (contractor, or tip-based work) might choose to use a service that evens outs those payments, even though it lowers their total take-home earnings (by charging a fee).
    - 9y ago
- mathattack 9y ago
  I'm a skeptic because I've seen first hand that insurance companies and/or salespeople: 1 - Sell people policies that they don't need, or are inappropriate to their situation. 2 - Charging wildly different pricing for similar policies. 3 - Invest insurance premiums completely inappropriately. So I become skeptical, and (like many other things) believe I have to really dig in on the policies before buying one. Which means the sleaziness of the business has scared me enough that I'm probably underinsured now.
  - daveFNbuck 9y ago
    So insurance skepticism means you do your best to understand policies before buying them? What's the alternative to that? Before witnessing sketchy practices, did you just buy whatever the salesperson recommended?

It came in very handy for a parent. I’m an insurance skeptic, but if they were too it could have bankrupted both of us. (Yes - one anecdote doesn’t translate into data)

daveFNbuck 9y ago

Are you still an insurance skeptic? What does that mean?

cmurf 9y ago
Insurance skepticism is when the product seems more like gambling or an expensive savings plan, than it is about high cost risk management. The more inevitable some costly event is perceived, then why not just save for that event, rather than pay a premium for only partial coverage, etc. This is my complaint with referring to health insurance, a huge amount of which is b.s. What we have is an aging payment plan. We're all gonna get old, and it's gonna suck, and be expensive, might as well start paying now: oh guess what, you are, it's called Medicare payroll tax.
- chimeracoder 9y ago
  You're right that health insurance isn't insurance at all. But to clarify: > What we have is an aging payment plan. We're all gonna get old, and it's gonna suck, and be expensive, might as well start paying now: oh guess what, you are, it's called Medicare payroll tax That would be the case if the following were true: * If Medicare's operations were purely funded by tax money, and * If the taxes people paid were proportional to their expected lifetime costs-of-care However, neither of these are true. Medicare's reimbursement rates are indirectly subsidized by private insurers (who then pass those costs on to privately-insured patients in the form of higher monthly premiums and copays). And of course, the taxes are based on income, not risk profiles.
defen 9y ago
Insurance works best for rare, randomly distributed events that have a high cost. Fundamentally, for insurance to work as a business, it has to cost more than the expected payout. The reason it's still worthwhile is that money has non-linear utility. To use a made-up example from the car insurance world (numbers are made-up but I hope it conveys the general idea): a guaranteed "loss" (cost of premium) of $100/month over the course of 30 years (total cost: $36,000) is far preferable to having a 1% chance of losing $500,000 over that same time period if you seriously injure yourself or someone else in an accident (expected value: -$5,000). So, the average person is paying $36,000 to avoid an expected loss of $5,000, which doesn't seem to make sense in a naive analysis. But the issue is that the average person can plan/budget for a $100/month expenditure, whereas a $500,000 loss could mean that they lose their house and life savings and more, which is far too high of a risk for most people. Things that insurance doesn't work well for: common events (e.g. routine medical care); non-randomly distributed events (that's why e.g. earthquake insurance in San Francisco is extremely expensive and has very high deductibles - if the Big One™ happens, it's going to affect everyone at the same time); inexpensive events (e.g. why insure a phone?)
- chimeracoder 9y ago
  > Things that insurance doesn't work well for: common events (e.g. routine medical care); non-randomly distributed events (that's why e.g. earthquake insurance in San Francisco is extremely expensive and has very high deductibles - if the Big One™ happens, it's going to affect everyone at the same time); inexpensive events (e.g. why insure a phone?) I agree with this, but I want to clarify your language: insurance works very well for common events - what it doesn't work well for are predictable events (which is why insurance is a terrible model to apply to routine medical care). The entire value proposition of insurance is to reduce (but not eliminate) uncertainty. If an event is perfectly predictable on a regular cadence, there's no value to insuring it. Events that are common but have high variance are potentially worth insuring, for the same reason that a person whose earnings are highly variable (contractor, or tip-based work) might choose to use a service that evens outs those payments, even though it lowers their total take-home earnings (by charging a fee).
  - 9y ago
mathattack 9y ago
I'm a skeptic because I've seen first hand that insurance companies and/or salespeople: 1 - Sell people policies that they don't need, or are inappropriate to their situation. 2 - Charging wildly different pricing for similar policies. 3 - Invest insurance premiums completely inappropriately. So I become skeptical, and (like many other things) believe I have to really dig in on the policies before buying one. Which means the sleaziness of the business has scared me enough that I'm probably underinsured now.
- daveFNbuck 9y ago
  So insurance skepticism means you do your best to understand policies before buying them? What's the alternative to that? Before witnessing sketchy practices, did you just buy whatever the salesperson recommended?