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Can anyone help me understand how having this data actually lowers insurance premiums? The same number of cars are being damaged by the same number of hailstorm

• heyflyguy 7y ago
  That's what I am wondering.
• lordnacho 7y ago
  You want to look up adverse selection and moral hazard in an economics text about insurance. Basically if you have some mixed population where some are lower risk and some higher, and they're separable, the low risk people will decide the insurance is not worth the premium. That leaves the higher risk population on the books, which will cause problems for the insurer of they had assumed they'd get a nice sample of the population. So maybe some car dealers are aware of possible hail storms in their region but for some reason their particular shop is protected. Maybe by hills that drop the hail on the other side or something that which gross aggregates might miss. Moral hazard plays in as well. If you're protected maybe you place more cars outdoors than you would otherwise, raising the costs to the insurer.