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Insurance only risk-pools by accident. In a world where they had perfect information, they would risk-smooth over your life, but not risk-pool between people.
by jjoonathan 7y ago
Insurance only risk-pools by accident. In a world where they had perfect information, they would risk-smooth over your life, but not risk-pool between people.
Collective plans, like those provided by your employer, would risk-pool, but then should we really attribute the pooling to insurance companies?
- kasey_junk 7y agoWe don’t live in a world with perfect information which is what makes all insurance valuable. So yes? We should give credit to insurance for providing value in the real world.
- jjoonathan 7y agoWhen I was asking "should we really give them credit," I was referring specifically to the imaginary world in which they had perfect information. I agree that we should give insurance companies credit for the value they accidentally create in the world that we live in -- so long as we keep in mind that the value creation was predicated on their inability to find & leverage information. However, going forward in a world of increasingly available information, do you think it is a good idea to rely on their inability to find & leverage information? I sure don't.
- kasey_junk 7y agoI don’t agree with the idea that this is accidental. It’s the specific thing they do, they do it with rigor and engineering. If they get it wrong they go out of business. They are the central agents of information discovery and we all reap the benefits of the massive amount effort they put into those activities. If anything I think we should be endeavoring to make health insurance more like traditional insurance to provide those efficiencies more broadly
- kube-system 7y agoInsurance pools risk by actuarial science, not accident.