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Once insurance companies can accurately predict everyone's risk and then proceed to charge each person accordingly, how is it insurance anymore? The whole poin

Once insurance companies can accurately predict everyone's risk and then proceed to charge each person accordingly, how is it insurance anymore? The whole point of insurance is to distribute risk evenly over a specific population. I think insurers should distinguish between controllable and non-controllable factors, and they should not be permitted to discriminate on the basis of non-controllable factors. For instance, if someone chooses to ride a motorcycle instead of drive a car, then there should be a premium for that policy. However, if someone is born with a genome that predisposes them to dying much sooner from a specific disease, they should be charged no more than anyone else, because you can't control your genetics. I doubt most companies would willingly take the initiative on this though... With regard to the article's point, not everyone is able to exercise effectively to keep themselves in shape. People with disabilities are not necessarily able to go for a run and should not be penalized financially for being unable to do so.

Zarath 8y ago
It is also to distribute cost over time. It may not be positive EV to buy accident insurance (insurance companies make money somehow), but people buy it because they can't handle one time costs that are very large.
adrianN 8y ago
Doing enough sports to make your fitness tracker happy is definitely a controllable risk factor for almost everybody. I'd expect people with disabilities that prevent them from exercising to pay higher life insurance premiums.
herendin 8y ago
>insurers should distinguish between controllable and non-controllable factors, and they should not be permitted to discriminate on the basis of non-controllable factors. For instance, if someone chooses to ride a motorcycle instead of drive a car, then there should be a premium for that policy. However, if someone is born with a genome that predisposes them to dying much sooner from a specific disease, they should be charged no more than anyone else, because you can't control your genetics. Risk-taking behavior, such as choosing to ride a motorcycle, can also be influenced by genetics[1]. How can insurers distinguish 'free will' from genetic disposition? [1]https://www.nature.com/articles/s42003-018-0042-6.pdf https://www.nature.com/articles/s42003-018-0042-6.pdf
- Xcelerate 8y ago
  Haha, I was actually wondering if someone would ask that. I don't know; it gets really complicated and philosophical really quickly.
  - herendin 8y ago
    Yes, it gets really complicated. I also don't know. Maybe there's no nice answer. Regrettably, people who write company policies and federal laws aren't always so ready to admit their own ignorance.
- gbanfalvi 8y ago
  The risk-taking behaviour can't be turned off, but the individual can still choose to ride a motorcycle or not. A "biological bias" might make the choice harder, but they're not suddenly deprived of free will.
  - herendin 8y ago
    Adopting an extreme view to illuminate the argument, perhaps there is no such thing as free will.
  - jhayward 8y ago
    You might need to look very long and hard at the justification for your belief in the existence, biological mechanism, and power, of "free will".
sudhirj 8y ago
> The whole point of insurance is to distribute risk evenly over a specific population. First time I've seen that line, and it doesn't make much sense to me at all - in my mind insurance has always been a hedge against risk. If my family needs a million dollars to live well if I die, and my probability of death this year is 0.1%, $1000 is what I'd pay for life insurance. The art is calculating the probabilities correctly, and maybe adding a small fee for the trouble, but anyone with the capital could offer insurance even for a single customer, no?
- reacweb 8y ago
  If you are insured, your probability of death is probably greatter than when you are not insured. Even not considering murder, you will probably take more risks if you know your family is protected.
  - skate22 8y ago
    What if you can't afford the operation because you're uninsured. Also i have insurance to mitigrate the risk of big loss, not increase it
- zAy0LfpBZLC8mAC 8y ago
  The fact that someone can do that doesn't change the social function of the actual thing. Actually, that is essentially how an insurer gets started. Obviously, you can't start selling insurance to your first customer if you can't pay them out the next day if needed, so you need some capital to get started. And once you have the risks figured out, there really is no reason why you shouldn't keep selling insurance to the next ten customers as well. And the next thousand customers. And the next ... --well, the point being, if you have done your math right, you are now distributing the risk evenly, with some profit margin for you.
kgwgk 8y ago
The point of insurance is pooling the risk of individuals with similar risk profile. If the point was to distribute the risk evenly you would make auto insurance obligatory for people who doesn’t own a car. Giving resources to people according to their needs is not really insurance’s role. It may be done through taxes, it may be done through “insurance” but then it is not insurance anymore.
patricius 8y ago
Mandating that insurance companies must not charge higher premiums for individuals with genetic diseases will raise the overall cost of premiums for all customers or would at least inhibit any potential for decreases in premiums. So in essence you are saying that - through government force - other people should pay involuntarily for these people. I think it's laudable if you have the desire to help them, and even more laudable if you put your good intentions into action. But I think it's immoral to force people to do so.
- GlennS 8y ago
  Immoral? Is this a variant on a "taxation is theft" argument? (Legally enforced coverage for people with disabilities is reasonably close to taxation and redistribution, I would say.) It seems to me that if people don't collectively pay extra for people with disabilities or chronic illnesses, then a lot of those people would suffer and/or die young. Surely contributing to that situation would be far more immoral? Is the freedom for people to spend all of their money as they like really worth more to you?
- raverbashing 8y ago
  > other people should pay involuntarily for these people. I stopped reading here.
- dsr_ 8y ago
  By this argument, it is immoral to force people to pay taxes in order to support a local fire department. Only subscribers to a particular fire department deserve to have fires put out, and the free market will allow different fire departments to compete for your business. This might be arguable if everyone lived in well-separated domains where there is no significant risk of fire spreading from one to another, but that is not the case for the vast majority of people. If your morality doesn't work in the real world, it's not a good one.
  - patricius 8y ago
    It is immoral to force people to pay taxes to finance a local fire department if you believe that it is immoral in general to force people to give up their property. You can argue that in certain special cases, like in the fire department scenario, you personally believe that theft is morally defensible from some perspective. But then you are not really basing your moral standpoint on any principle, but taking things on a case by case basis, and you end up in a situation where you can essentially always argue that using force is right.
jvln 8y ago
Work at insurance company and yesterday had a discusion about it. Conclussions : insurance companies are seeking profits. If it is possible to distinguish bad eggs from good ones they will. The model you described must be regulated by government. Examples: health insurance (by state) and mandatory car inssurance (by every player on the market) in EU. Each inssurance company must insure every car for a fair price - fairness is regulated by the state.
- kgwgk 8y ago
  In many European countries the state provides “health insurance” in the same sense that they provide “education insurance”: they provide a service paid with taxes. “Fairness” is difficult to define. For example, women paid less for auto insurance in many European countries until the EU decided that this was illegal discrimination.
NightMKoder 8y ago
To some extent you’re right. Unfortunately as more data about you becomes available, it becomes easier to discriminate against that data. I don’t believe there’s a life insurance company that currently uses genetic testing, but there’s no reason they can’t - the law allows it. Furthermore insurers definitely want higher prices on those with higher mortality - whether genetic or not. However if you do want to fix this, you can’t do it as an insurance company. Let’s pretend you try - we’re going to charge slightly more than accidental death premiums to everyone. That is - we’re going to blend the health risk into one big number and slather it over all our prices. The problem becomes the free market. Consumers that want life insurance will pick the one with the lowest price. If you’re someone healthy - that means you’re going to skip this new equal opportunity company - it’s more expensive for you! You can get cheaper insurance if someone reviews your medical history and you probably are ok with them doing that. Now on the flip side - if you have a disability, you definitely want this cheap product - it’s cheaper by 10-20x than anything else in the market! So now your pool that you’re spreading risk across is 90-95% high risk and you can’t spread the risk so you can’t even pay out claims - there’s just too much risk for the net premium you are collecting. You’re basically creating a “disability life insurance” and your premiums should have been (to break even) nearly as astronomical as any other company. For reference, you can currently buy accidental life insurance - it explicitly excludes death due to health conditions. It’s a relatively bad product since most companies will dispute claims - if you have a car accident and die while in the hospital with a heart attack, they will try to prove that you had a heart condition. It’s one of the ways regulation works correctly otherwise - after 2 years with a normal life insurance product, the company is required to pay, by law, even if you lied or omitted something when applying. Unfortunately in insurance you need regulators to do things like these. It’s why the ACA was required for health insurance. It’s a race to the bottom that no company can stop. Furthermore currently regulations make it very hard to compete on anything except price so there’s nothing you can do to sweeten the pot for the healthy risk to balance the unhealthy risk. Disclaimer: I’m an engineer at a company that sells life insurance. These are my own opinions though.
- tomjen3 8y ago
  Can you expand on how those regulations prevent you from competing on things other than price?

Zarath 8y ago

It is also to distribute cost over time. It may not be positive EV to buy accident insurance (insurance companies make money somehow), but people buy it because they can't handle one time costs that are very large.

adrianN 8y ago

Doing enough sports to make your fitness tracker happy is definitely a controllable risk factor for almost everybody. I'd expect people with disabilities that prevent them from exercising to pay higher life insurance premiums.

herendin 8y ago

>insurers should distinguish between controllable and non-controllable factors, and they should not be permitted to discriminate on the basis of non-controllable factors. For instance, if someone chooses to ride a motorcycle instead of drive a car, then there should be a premium for that policy. However, if someone is born with a genome that predisposes them to dying much sooner from a specific disease, they should be charged no more than anyone else, because you can't control your genetics. Risk-taking behavior, such as choosing to ride a motorcycle, can also be influenced by genetics[1]. How can insurers distinguish 'free will' from genetic disposition? [1]https://www.nature.com/articles/s42003-018-0042-6.pdf https://www.nature.com/articles/s42003-018-0042-6.pdf

Xcelerate 8y ago
Haha, I was actually wondering if someone would ask that. I don't know; it gets really complicated and philosophical really quickly.
- herendin 8y ago
  Yes, it gets really complicated. I also don't know. Maybe there's no nice answer. Regrettably, people who write company policies and federal laws aren't always so ready to admit their own ignorance.
gbanfalvi 8y ago
The risk-taking behaviour can't be turned off, but the individual can still choose to ride a motorcycle or not. A "biological bias" might make the choice harder, but they're not suddenly deprived of free will.
- herendin 8y ago
  Adopting an extreme view to illuminate the argument, perhaps there is no such thing as free will.
- jhayward 8y ago
  You might need to look very long and hard at the justification for your belief in the existence, biological mechanism, and power, of "free will".

sudhirj 8y ago

> The whole point of insurance is to distribute risk evenly over a specific population. First time I've seen that line, and it doesn't make much sense to me at all - in my mind insurance has always been a hedge against risk. If my family needs a million dollars to live well if I die, and my probability of death this year is 0.1%, $1000 is what I'd pay for life insurance. The art is calculating the probabilities correctly, and maybe adding a small fee for the trouble, but anyone with the capital could offer insurance even for a single customer, no?

reacweb 8y ago
If you are insured, your probability of death is probably greatter than when you are not insured. Even not considering murder, you will probably take more risks if you know your family is protected.
- skate22 8y ago
  What if you can't afford the operation because you're uninsured. Also i have insurance to mitigrate the risk of big loss, not increase it
zAy0LfpBZLC8mAC 8y ago
The fact that someone can do that doesn't change the social function of the actual thing. Actually, that is essentially how an insurer gets started. Obviously, you can't start selling insurance to your first customer if you can't pay them out the next day if needed, so you need some capital to get started. And once you have the risks figured out, there really is no reason why you shouldn't keep selling insurance to the next ten customers as well. And the next thousand customers. And the next ... --well, the point being, if you have done your math right, you are now distributing the risk evenly, with some profit margin for you.

kgwgk 8y ago

The point of insurance is pooling the risk of individuals with similar risk profile. If the point was to distribute the risk evenly you would make auto insurance obligatory for people who doesn’t own a car. Giving resources to people according to their needs is not really insurance’s role. It may be done through taxes, it may be done through “insurance” but then it is not insurance anymore.

patricius 8y ago

Mandating that insurance companies must not charge higher premiums for individuals with genetic diseases will raise the overall cost of premiums for all customers or would at least inhibit any potential for decreases in premiums. So in essence you are saying that - through government force - other people should pay involuntarily for these people. I think it's laudable if you have the desire to help them, and even more laudable if you put your good intentions into action. But I think it's immoral to force people to do so.

GlennS 8y ago
Immoral? Is this a variant on a "taxation is theft" argument? (Legally enforced coverage for people with disabilities is reasonably close to taxation and redistribution, I would say.) It seems to me that if people don't collectively pay extra for people with disabilities or chronic illnesses, then a lot of those people would suffer and/or die young. Surely contributing to that situation would be far more immoral? Is the freedom for people to spend all of their money as they like really worth more to you?
raverbashing 8y ago
> other people should pay involuntarily for these people. I stopped reading here.
dsr_ 8y ago
By this argument, it is immoral to force people to pay taxes in order to support a local fire department. Only subscribers to a particular fire department deserve to have fires put out, and the free market will allow different fire departments to compete for your business. This might be arguable if everyone lived in well-separated domains where there is no significant risk of fire spreading from one to another, but that is not the case for the vast majority of people. If your morality doesn't work in the real world, it's not a good one.
- patricius 8y ago
  It is immoral to force people to pay taxes to finance a local fire department if you believe that it is immoral in general to force people to give up their property. You can argue that in certain special cases, like in the fire department scenario, you personally believe that theft is morally defensible from some perspective. But then you are not really basing your moral standpoint on any principle, but taking things on a case by case basis, and you end up in a situation where you can essentially always argue that using force is right.

jvln 8y ago

Work at insurance company and yesterday had a discusion about it. Conclussions : insurance companies are seeking profits. If it is possible to distinguish bad eggs from good ones they will. The model you described must be regulated by government. Examples: health insurance (by state) and mandatory car inssurance (by every player on the market) in EU. Each inssurance company must insure every car for a fair price - fairness is regulated by the state.

kgwgk 8y ago
In many European countries the state provides “health insurance” in the same sense that they provide “education insurance”: they provide a service paid with taxes. “Fairness” is difficult to define. For example, women paid less for auto insurance in many European countries until the EU decided that this was illegal discrimination.

NightMKoder 8y ago

To some extent you’re right. Unfortunately as more data about you becomes available, it becomes easier to discriminate against that data. I don’t believe there’s a life insurance company that currently uses genetic testing, but there’s no reason they can’t - the law allows it. Furthermore insurers definitely want higher prices on those with higher mortality - whether genetic or not. However if you do want to fix this, you can’t do it as an insurance company. Let’s pretend you try - we’re going to charge slightly more than accidental death premiums to everyone. That is - we’re going to blend the health risk into one big number and slather it over all our prices. The problem becomes the free market. Consumers that want life insurance will pick the one with the lowest price. If you’re someone healthy - that means you’re going to skip this new equal opportunity company - it’s more expensive for you! You can get cheaper insurance if someone reviews your medical history and you probably are ok with them doing that. Now on the flip side - if you have a disability, you definitely want this cheap product - it’s cheaper by 10-20x than anything else in the market! So now your pool that you’re spreading risk across is 90-95% high risk and you can’t spread the risk so you can’t even pay out claims - there’s just too much risk for the net premium you are collecting. You’re basically creating a “disability life insurance” and your premiums should have been (to break even) nearly as astronomical as any other company. For reference, you can currently buy accidental life insurance - it explicitly excludes death due to health conditions. It’s a relatively bad product since most companies will dispute claims - if you have a car accident and die while in the hospital with a heart attack, they will try to prove that you had a heart condition. It’s one of the ways regulation works correctly otherwise - after 2 years with a normal life insurance product, the company is required to pay, by law, even if you lied or omitted something when applying. Unfortunately in insurance you need regulators to do things like these. It’s why the ACA was required for health insurance. It’s a race to the bottom that no company can stop. Furthermore currently regulations make it very hard to compete on anything except price so there’s nothing you can do to sweeten the pot for the healthy risk to balance the unhealthy risk. Disclaimer: I’m an engineer at a company that sells life insurance. These are my own opinions though.

tomjen3 8y ago
Can you expand on how those regulations prevent you from competing on things other than price?