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You just described exactly how insurance actually works. I don’t really want to live in a world where the higher risk people are MORE disincentivized from being

You just described exactly how insurance actually works. I don’t really want to live in a world where the higher risk people are MORE disincentivized from being able to secure insurance by eliminating “subsidies” because of their behavior. Insurers need more of lower risk people to subsidize higher risk people (or events) otherwise the whole thing simply doesn’t work.

lotsofpulp 6y ago
As an insured, insurance is to protect yourself from an unknown randomly distributed loss that you can’t afford. As an insurer, you can afford to insure if the losses occur within the assumed probability distribution and loss magnitude parameters. In the case of auto (or driving) insurance, it is known that driving aggressively will cause more collisions hence more losses. Therefore, any insurance company not taking this knowledge into account will have uncompetitive premiums compared to another insurance company that is. Insurance only doesn’t work in this case for people who choose to drive aggressively. A more contentious point would be people living in poor areas having to pay more for insurance due to more property crime in poorer areas. It’s easy to say someone who drives recklessly chooses to and should suffer the consequences, but what about someone who happened to be born to poorer parents? In the case of healthcare, there are a few known factors that make many chronic health events not random, such as bad diet, lack of excercise, and bad genes. A broken arm might be a sufficiently random event, but what should society do about the non random health losses? What if you were born to poor parents and never had much of a chance to make it so you had a job schedule that allowed you a routine to workout regularly? Or time to cook healthy foods? Or you don’t make enough money to live near grocery stores that sell nutritious foods? But then at least 70% of Americans are fat. And I see them voluntarily buying large containers of sugar water multiple times a week. Why should I have to pay for their diabetes? Same for a smoker or an alcohol drinker? It’s a nuanced topic that makes me wonder what freedom is and how much freedom can cost. Am I restricting freedom by not wanting to pay for others’ actions known to cause certain losses? Should people be restricted from certain actions if they can’t afford the losses, therefore restricting their freedom? Can they even be restricted, logistically?
- rconti 6y ago
  How do you know that more aggressive driving causes more collisions? How do you know which accelerometer-measured[1] parameters correlate with aggressive driving? High speeds? Abrupt acceleration? Hard acceleration? Abrupt braking? Hard braking? Late braking (how do you know the difference?) High lateral cornering loads? How are these differentiated from abrupt lane changes? Does the dongle know if you used your signal or not? Studies show that driving late at night is far riskier than driving during daytime; due to visibility, alcohol, etc. Lots of late night trips? Time to punish that graveyard shift ER doctor for driving her car at such risky times! 1. Presumably most of these OBD-II dongles really only use accelerometer data to report back, even though they have access to more data if they want it, and if they're programmed to understand every model of vehicle
  - lotsofpulp 6y ago
    > How do you know that more aggressive driving causes more collisions? I don’t, but insurance companies employ some pretty smart people who can figure that out. If they offer discounts for certain driving characteristics, I’m willing to bet that they reduce the insurer’s expenses. Otherwise they won’t be in business for long.
    - rconti 6y ago
      Most insurers that offer a tracking-based discount also offer policies without. It seems to me, all that matters is, on average, they don't offer a discount to tracker users that is larger than those users, as a pool, save them in claims. The only incentive to get it "right" is that, if they do a really poor job at this, they will lose business to insurance companies that do a better job at it -- again, to the extent that the differences between insurers are significant, that customers are price sensitive, aware enough to shop around and compare the actual rates they pay, etc. We already know that your non-tracker-based insurance premiums may vary wildly from one insurer to another. One may penalize you heavily for being 18. One may offer a larger discount to those who complete driver's ed courses, or own a car with airbags. Maybe you'll be penalized for that first accident or ticket, or maybe your insurance company will give you some leeway (and, presumably, double down on the surcharge after your second accident). I don't see how it's inherently obvious that an insurer that gets their tracker-based metrics 'wrong' will go out of business in short order. Again, all they have to do is charge more than they pay out in claims and overhead.

lotsofpulp 6y ago

As an insured, insurance is to protect yourself from an unknown randomly distributed loss that you can’t afford. As an insurer, you can afford to insure if the losses occur within the assumed probability distribution and loss magnitude parameters. In the case of auto (or driving) insurance, it is known that driving aggressively will cause more collisions hence more losses. Therefore, any insurance company not taking this knowledge into account will have uncompetitive premiums compared to another insurance company that is. Insurance only doesn’t work in this case for people who choose to drive aggressively. A more contentious point would be people living in poor areas having to pay more for insurance due to more property crime in poorer areas. It’s easy to say someone who drives recklessly chooses to and should suffer the consequences, but what about someone who happened to be born to poorer parents? In the case of healthcare, there are a few known factors that make many chronic health events not random, such as bad diet, lack of excercise, and bad genes. A broken arm might be a sufficiently random event, but what should society do about the non random health losses? What if you were born to poor parents and never had much of a chance to make it so you had a job schedule that allowed you a routine to workout regularly? Or time to cook healthy foods? Or you don’t make enough money to live near grocery stores that sell nutritious foods? But then at least 70% of Americans are fat. And I see them voluntarily buying large containers of sugar water multiple times a week. Why should I have to pay for their diabetes? Same for a smoker or an alcohol drinker? It’s a nuanced topic that makes me wonder what freedom is and how much freedom can cost. Am I restricting freedom by not wanting to pay for others’ actions known to cause certain losses? Should people be restricted from certain actions if they can’t afford the losses, therefore restricting their freedom? Can they even be restricted, logistically?

rconti 6y ago
How do you know that more aggressive driving causes more collisions? How do you know which accelerometer-measured[1] parameters correlate with aggressive driving? High speeds? Abrupt acceleration? Hard acceleration? Abrupt braking? Hard braking? Late braking (how do you know the difference?) High lateral cornering loads? How are these differentiated from abrupt lane changes? Does the dongle know if you used your signal or not? Studies show that driving late at night is far riskier than driving during daytime; due to visibility, alcohol, etc. Lots of late night trips? Time to punish that graveyard shift ER doctor for driving her car at such risky times! 1. Presumably most of these OBD-II dongles really only use accelerometer data to report back, even though they have access to more data if they want it, and if they're programmed to understand every model of vehicle
- lotsofpulp 6y ago
  > How do you know that more aggressive driving causes more collisions? I don’t, but insurance companies employ some pretty smart people who can figure that out. If they offer discounts for certain driving characteristics, I’m willing to bet that they reduce the insurer’s expenses. Otherwise they won’t be in business for long.
  - rconti 6y ago
    Most insurers that offer a tracking-based discount also offer policies without. It seems to me, all that matters is, on average, they don't offer a discount to tracker users that is larger than those users, as a pool, save them in claims. The only incentive to get it "right" is that, if they do a really poor job at this, they will lose business to insurance companies that do a better job at it -- again, to the extent that the differences between insurers are significant, that customers are price sensitive, aware enough to shop around and compare the actual rates they pay, etc. We already know that your non-tracker-based insurance premiums may vary wildly from one insurer to another. One may penalize you heavily for being 18. One may offer a larger discount to those who complete driver's ed courses, or own a car with airbags. Maybe you'll be penalized for that first accident or ticket, or maybe your insurance company will give you some leeway (and, presumably, double down on the surcharge after your second accident). I don't see how it's inherently obvious that an insurer that gets their tracker-based metrics 'wrong' will go out of business in short order. Again, all they have to do is charge more than they pay out in claims and overhead.