4 ms·

Why is the government in the business of disapproving prices in the first place?

by ikeboy 7y ago

Doingmything123 7y ago
The government should be in the business of fighting predatory pricing. Based on the other comments that people have a very hard time figuring out how much they would be paying(significant legal jargon obfuscation) it seems like people are being "forced"(as in no alternative) into contracts where they don't have a full understanding of what they are signing/paying. That seems pretty predatory to me
- ikeboy 7y ago
  Predatory pricing is pricing too low so competition is forced out. https://en.wikipedia.org/wiki/Predatory_pricing https://en.wikipedia.org/wiki/Predatory_pricing That's not alleged here at all. "People have a very hard time figuring out how much they would be paying" no, what's being said is people are having a hard time reading the documents submitted to the regulator. If you want to know how much you'll pay, just get a quote from the insurer directly.
hderms 7y ago
would you want an insurance company to be able to price your policy on socially discriminatory characteristics without regulation to stop it? or possibly worse, without anyone even knowing?
- ikeboy 7y ago
  If those characteristics are higher risk, then they should be priced higher. And if they aren't higher risk, then a company using them to discriminate will be outcompeted by a company that is not. You realize that, say, age is a protected class and yet an obvious risk factor, right? Do you think all ages should have the same rates for car insurance? Mandating everyone pay the same price when their risks are different distorts incentives and makes us all worse off on average. Some may benefit in the short term by being subsidized by others, sure. Even if subsidies were socially desirable, price regulation is one of the least efficient ways to implement such subsidies. If the concern is that some people can't afford insurance because they're higher risk, then you can have subsidies targeted to them that pay for their insurance. That's far better than forcing an insurance company to take a loss on them.
Edman274 7y ago
Almost all state governments made it so that you can't drive a car unless you have insurance. The reason they did this is so that if you hit someone and cause physical injury to them or to their property, it's possible to pay them for the damage you did to them. The government has decided that it is a good idea to make sure that people generally have a way of getting money from people that have caused accidents. We've also decided that it's in our collective best interest to allow people that don't have hundreds of thousands of dollars of cash on hand to be able to drive to the supermarket. However, because of these two conflicting goals, we need a third party that can pay in these cases. Since it's a legal requirement to give money to a third-party when someone wants to drive, state governments have also determined that it's in our collective best interest to not allow for bad behavior by insurers in overcharging drivers for things not directly related to risk. The reason for this is that making car insurance generally unaffordable to classes of people tends to exacerbate divisions in society, at least in the United States. Further, members of minority communities do vote in elections, and will generally not support candidates whose position on insurance companies engaging in price gouging is "the free market will figure it out, sorry you can't afford insurance." Finally, it cannot be taken for granted that companies always discriminate fairly when there are no laws to prevent them from not doing so. The example we see here is evidence of this. If Allstate is making pricing decisions not based on risk but based on willingness to shop, then that means that people are being unfairly overcharged; it just so happens that it's not as immediately offensive to our morals when it's "willingness to shop" vs. "being a member of a historically discriminated group of people".
- ikeboy 7y ago
  1. I'm perfectly fine with mandatory liability insurance. Requiring assurance that someone can pay for any damage they do before granting them access to our roads is fine. 2. "state governments have also determined that it's in our collective best interest to not allow for bad behavior by insurers in overcharging drivers for things not directly related to risk." This doesn't follow. You need to argue for a market failure of some sort to justify regulation. Seatbelts are mandatory, but it doesn't follow from there that the government must regulate the pricing structure of seatbelt manufacturers. 3. "The reason for this is that making car insurance generally unaffordable to classes of people tends to exacerbate divisions in society, at least in the United States." This is properly handled with subsidies, not mandates, as I already mentioned in other comments. 4. "Finally, it cannot be taken for granted that companies always discriminate fairly when there are no laws to prevent them from not doing so." We don't need to take that for granted. The only relevant question is whether there is competition. If there's a monopoly, perhaps created by onerous government regulations, then there might not be sufficient competition. Again, you need to argue for a market failure, which you have not.

Why is the government in the business of disapproving prices in the first place?

by ikeboy 7y ago

Why is the government in the business of disapproving prices in the first place?

The government should be in the business of fighting predatory pricing. Based on the other comments that people have a very hard time figuring out how much they would be paying(significant legal jargon obfuscation) it seems like people are being "forced"(as in no alternative) into contracts where they don't have a full understanding of what they are signing/paying. That seems pretty predatory to me

ikeboy 7y ago
Predatory pricing is pricing too low so competition is forced out. https://en.wikipedia.org/wiki/Predatory_pricing https://en.wikipedia.org/wiki/Predatory_pricing That's not alleged here at all. "People have a very hard time figuring out how much they would be paying" no, what's being said is people are having a hard time reading the documents submitted to the regulator. If you want to know how much you'll pay, just get a quote from the insurer directly.

hderms 7y ago

would you want an insurance company to be able to price your policy on socially discriminatory characteristics without regulation to stop it? or possibly worse, without anyone even knowing?

ikeboy 7y ago
If those characteristics are higher risk, then they should be priced higher. And if they aren't higher risk, then a company using them to discriminate will be outcompeted by a company that is not. You realize that, say, age is a protected class and yet an obvious risk factor, right? Do you think all ages should have the same rates for car insurance? Mandating everyone pay the same price when their risks are different distorts incentives and makes us all worse off on average. Some may benefit in the short term by being subsidized by others, sure. Even if subsidies were socially desirable, price regulation is one of the least efficient ways to implement such subsidies. If the concern is that some people can't afford insurance because they're higher risk, then you can have subsidies targeted to them that pay for their insurance. That's far better than forcing an insurance company to take a loss on them.

Edman274 7y ago

Almost all state governments made it so that you can't drive a car unless you have insurance. The reason they did this is so that if you hit someone and cause physical injury to them or to their property, it's possible to pay them for the damage you did to them. The government has decided that it is a good idea to make sure that people generally have a way of getting money from people that have caused accidents. We've also decided that it's in our collective best interest to allow people that don't have hundreds of thousands of dollars of cash on hand to be able to drive to the supermarket. However, because of these two conflicting goals, we need a third party that can pay in these cases. Since it's a legal requirement to give money to a third-party when someone wants to drive, state governments have also determined that it's in our collective best interest to not allow for bad behavior by insurers in overcharging drivers for things not directly related to risk. The reason for this is that making car insurance generally unaffordable to classes of people tends to exacerbate divisions in society, at least in the United States. Further, members of minority communities do vote in elections, and will generally not support candidates whose position on insurance companies engaging in price gouging is "the free market will figure it out, sorry you can't afford insurance." Finally, it cannot be taken for granted that companies always discriminate fairly when there are no laws to prevent them from not doing so. The example we see here is evidence of this. If Allstate is making pricing decisions not based on risk but based on willingness to shop, then that means that people are being unfairly overcharged; it just so happens that it's not as immediately offensive to our morals when it's "willingness to shop" vs. "being a member of a historically discriminated group of people".

ikeboy 7y ago
1. I'm perfectly fine with mandatory liability insurance. Requiring assurance that someone can pay for any damage they do before granting them access to our roads is fine. 2. "state governments have also determined that it's in our collective best interest to not allow for bad behavior by insurers in overcharging drivers for things not directly related to risk." This doesn't follow. You need to argue for a market failure of some sort to justify regulation. Seatbelts are mandatory, but it doesn't follow from there that the government must regulate the pricing structure of seatbelt manufacturers. 3. "The reason for this is that making car insurance generally unaffordable to classes of people tends to exacerbate divisions in society, at least in the United States." This is properly handled with subsidies, not mandates, as I already mentioned in other comments. 4. "Finally, it cannot be taken for granted that companies always discriminate fairly when there are no laws to prevent them from not doing so." We don't need to take that for granted. The only relevant question is whether there is competition. If there's a monopoly, perhaps created by onerous government regulations, then there might not be sufficient competition. Again, you need to argue for a market failure, which you have not.