11 ms·

I really don't like this trend of considering every facet of my life when making an insurance offer. All these systems seem to lack the nuance to take into acco

• Filligree 7y ago
  On average yes, because it doesn't consider that facet of your life. You can't have it both ways, I suppose. I generally agree. The whole point of insurance is to pool risk -- so cutting the population into ever-smaller pools seems missing the point. In the infinite limit we'd get seven billion single-person pools, each of which has that person pay in the exact same amount of money they get back out. This is also known as "not having insurance".
  • unpopular42 7y ago
    Quite the opposite. The point of insurance is to replace a high variance distribution of potential losses with a low variance distribution, but with a similar expected loss. In other words, on average you pay a bit more, but you never pay a huge amount. Now, in a perfect world, everyone would pay exactly what their expected loss is, plus a small premium. Since it's impossible to measure the expected loss exactly, in reality some people pay a bit more and some pay a bit less. Getting a better risk estimate doesn't get you closer to "not having insurance", but rather closer to "perfect insurance" where everyone gets a distribution that exactly matches their risk profile.
    • jtbayly 7y ago
      How is perfect insurance different from everybody paying their own losses directly? If I correctly understand what you said, then perfect insurance would lead to nobody buying it, so they could avoid paying the useless additional “small premium.”
      • virgilp 7y ago
        It's basically "no insurance, plus a credit to pay for the losses". Except that you start paying the rate before you incur the loss itself. I still think this form of "perfect insurance" is bad - part of what I like about the insurance is exactly the dispersion of cost in the larger population. Should a chronically-ill person pay a very high insurance, or should the society cover the costs? I'm in the second camp, even though I'm not chronically-ill. It's part of the benefits of having an actual society - we don't need to stand alone.
        • unpopular42 7y ago
          That is indeed part of what people call insurance these days, but in fact it isn't one. It's just a social solidarity scheme, and no one has the balls to call it that way, so it gets mingled into insurance. Without getting into whether it's good or bad, it's just not the true meaning of the term "insurance."
          • izacus 7y ago
            If "everyone" uses a word for something, then that is de facto the "true meaning" of a term.
            • torstenvl 7y ago
              No. Even for vernacular natural language, it only matters what native speakers think. Wéijī will never quite mean "danger and opportunity," no matter how many people view it that way, because native Mandarin speakers don't view it that way.
            • leetcrew 7y ago
              constantly having the prescriptivism vs descriptivism debate is tiresome and pedantic. what we call "health insurance" clearly works very differently than any other kind of insurance I'm familiar with. it's not wrong to try and maintain the distinction between two different concepts.
          • 7y ago
    • sideshowb 7y ago
      So if for example health insurance is based on genetic screening and only those with certain genetic markers get a huge premium would you consider that a step towards perfection?
    • croon 7y ago
      > Getting a better risk estimate doesn't get you closer to "not having insurance", but rather closer to "perfect insurance" where everyone gets a distribution that exactly matches their risk profile. You say "Quite the opposite", and proceed to rephrase the same thing as GP said, except for the conclusion, which also is the same thing, yet you claim it isn't. Not having insurance IS "perfect insurance", in that you pay exactly your own costs, with the added benefit of having no overhead. Most of us don't want that though, in the same way as we don't want children to have to pay their own healthcare, or chronically debilitated people to die to darwinism (whether we succeed here is another point). But a perfect "risk estimate" also happens to be the same thing as prescience, and if we had that we wouldn't need insurance for other reasons. Not having insurance = paying for yourself = distribution by exact risk profile.
      • unpopular42 7y ago
        No, you miss the point. Not having insurance means losses follow your exact risk distribution, with a non-zero risk of a catastrophic loss. Having a perfect insurance means your losses follow a distribution with the same average as your risk profile suggests (+premium), but much lower variance and with zero density on the higher end, meaning you never have a catastrophic loss.
        • zAy0LfpBZLC8mAC 7y ago
          > No, you miss the point. Quite the contrary. > average And that right there is where you are hiding all your assumptions. There is no such thing as "your risk profile", there is only your risk profile according to some risk model, which approaches what actually will happen to you individually the more detailed you make it and the better your predictive capabilities get, because as you do that, you are shrinking the pool of individuals that this average is calculcated over, approaching only you as one individual in the limit, at which point the average is the same as the actual thing. > and with zero density on the higher end, meaning you never have a catastrophic loss. Also, that's not a thing.
          • leetcrew 7y ago
    • madsbuch 7y ago
      This is the view of an insurance as the reversed loan, where you pay the loan before you get the principal paid out. It guess the "perfect insurance" could be obtained by reversing the reversed loan? In case of something catastrophically happening, you are simply guaranteed a loan (with fair interest rates). To me, the aspect of redistribution is important in insurance. The acceptance that the world is chaotic and we can not predict all the bad luck that might happen to us. Hence, I pay for yours bad luck, if you pay for mine.
    • boomlinde 7y ago
      > Getting a better risk estimate doesn't get you closer to "not having insurance", but rather closer to "perfect insurance" where everyone gets a distribution that exactly matches their risk profile. That is the same thing if you have produced a perfect risk profile. The perfect risk profile completely predicts reality, and all costs can be accounted for. If it doesn't completely predict reality, it's not perfect. So with the perfect risk profile, insurance is a zero sum game. Instead of paying a small premium you can put your money in a bank account and instead have them pay you "a small premium" in the form of interest. And no, I don't believe that there can ever be a perfect risk profile, but as risk assessment gets more fine grained, insurance approaches that zero sum game.
      • taffer 7y ago
        > So with the perfect risk profile, insurance is a zero sum game. The utility of insurance is to reduce variance, it is not a zero-sum game.
        • boomlinde 7y ago
          Yes, that's the point. By using more fine grained risk assessment, you attain less useful insurance. If the utility of insurance is to reduce variance, and utility increases as variance is reduced, the insurance with the highest utility is one that completely ignores individual and demographical circumstances. Perhaps you understand the word "perfect" in a different sense than I do. A better risk estimate to me is (to me) one that is more accurate. A perfect risk estimate is one that can not be more accurate. If a better risk estimate brings you closer to perfect insurance (which the GP concludes), a perfect risk estimate should leave you as close to perfect insurance as is possible. It would be cool if you could address my reasoning instead because now I have no idea what exactly you disagree with other than the conclusion.
          • taffer 7y ago
            We probably disagree on definitions, because the term risk can sometimes refer to the expected damage and sometimes to the variance of the damage. So I will try to express myself more clearly: Let's say you have a house worth $100,000 and statistically it burns down once in 1000 years. This means that the expected damage is $100 per year, but the variance is very high because once the house burns down, the damage is 1000 times greater than the expected damage. With insurance, however, the variance is zero because you pay the same amount every year, whether your house burns down that year or not. I would argue that with a perfect insurance you would only pay the expected loss, i.e. $100 per year, and not more or less, because ideally the insurance has accurately assessed the expected loss and diversified the variance away. However, with less ideal risk assessment, you could pay more or less because other houses burn more or less often.
    • Frost1x 7y ago
      That's not at all the purpose of having insurance. Essentially, in that world, you're just outsourcing the cost of estimating what to set aside to self-insure so you know how much to save and when. Shared risk pools are exactly the original point of insurance. Now that insurance is a lucrative business, the point of insurance as described by those profiting from it will forever morph into whatever is most profitable. If the intent described were truly the case, explain Medicare and Medicaid.
      • taffer 7y ago
        You're missing the point. Risk pools are there to reduce variance through diversification, not to reduce your expected loss.
  • lordnacho 7y ago
    The problem with pooling risk is if the risks (ie people) are seperable, there's an adverse selection problem. People who can see they are a lower risk will evaporate from the pool, leaving the higher risk people who then would have to pay a higher premium for the pool to break even.
    • interactivecode 7y ago
      so making law that keeps everyone in the pool will fix that right?
      • MagnumOpus 7y ago
        Theoretically yes, practically no. If coverage is universal and mandatory, companies will invent all sorts of ways to market themselves to a low-risk subset of clients -- car insurers marketing themselves as women's insurers, health insurers advertising their online capabilities to attract younger clientele. The clean way to do it is to separate insurance (can be very efficient if privately provided) from redistribution (will lead to bad distortion unless done by the state).
    • perl4ever 7y ago
      You're presenting a very cliched argument, but there's something that I don't get about it. You seem to be saying insurance companies must discriminate unfairly by saying that if insurance companies discriminate unfairly, they will lose customers. Say I am male, and I pay more for car insurance because of that. Your argument is that if sex discrimination is illegal, then the market will collapse because women will stop buying insurance. But isn't it equally true that men who are low risk should "evaporate from the pool" in the present system? There doesn't seem to me a fundamental distinction between these two examples of discrimination. Now, there may be a quantitative difference, a difference in economic impact, but if it's only quantitative, then why should one automatically be manageable and the other not, which is the assumption I think people implicitly make.
      • lordnacho 7y ago
• darkerside 7y ago
  You're taking an ill conditioned and personally owning the responsibility of building it back to market condition. Seems like you're relatively comfortable taking risks relative to the general population. This doesn't seem less wrong than generalizing based on something like age or gender. I would attack it on privacy grounds, not accuracy.
• izacus 7y ago
  The whole point of the insurance is to pool the risk - a perfectly operating insurance company is essentially a rent seeking parasite on society, because they will practically never pay out the fees and continue collecting premiums. As such we really need to reassess the usefulness of such organisations in our society - they're useful because they blunt the monetary pain of rare life events and pool the costs of chronic issues. If they stop covering people who need them the most, they stop being useful for us.
  • leetcrew 7y ago
    no, insurance is great. it's just not a good match for healthcare. someone who can't afford their sky high car insurance premiums isn't someone who "needs it the most". they are someone who should be priced out of driving.
• amelius 7y ago
  Phrased differently, it is just plain discrimination. If they applied this to "black people are more likely to cost us X" then everybody would be against it. But if they apply it to different discriminators (age, gender, neighborhood), then suddenly it is ok?