7 ms·

> Buying insurance on something you already know is going to happen or not is fraud, plain and simple. Is it though? Isn't this just arbitrage based on asymme

> Buying insurance on something you already know is going to happen or not is fraud, plain and simple. Is it though? Isn't this just arbitrage based on asymmetrical information (i.e. exactly what insurance companies do)? If she caused the flight to be delayed somehow, that would certainly be fraud, but so would anything the insurance company did to make the delay less likely without adjusting premiums.

Voloskaya 6y ago
> Is it though? She had to use 20 different identities do to this. That should answer your question.
- throwawaygh 6y ago
  That doesn't really answer the original question at all. The question wasn't "is this particular case fraudulent for any reason what-so-ever". The question was "is buying insurance on something you already know is going to happen" plain and simple fraud? The identity fraud isn't really relevant to that question at all. FWIW I'm not aware of any law in the USA that makes it illegal to buy insurance when you know the policy will pay. Knowing more than the insurance company's actuaries is not fraud. Making false statements is fraud. Intentionally causing damage to collect insurance payments is fraud. But the hypothetical oracle who knows when the next flood/fire/car accident will hit due to divine inspiration is free to buy a relevant insurance policy the day before. AFAIK.
  - smithza 6y ago
    Novemberwhiskey (above) makes the solid point about entering into the contract in good faith. It is a sound counterpoint and appeals to the more important "spirit of the law" vs "letter of the law". I am not sure how this would stand up to a court ruling.
    - throwawaygh 6y ago
      I don't think uberrima fides is super helpful here: a) I have a really, really, REALLY hard time understanding how hiring an army of PhDs to build highly proprietary risk models based on extremely expensive (or not-even-for-sale) datasets does not run a foul of uberrima fides. The doctrine only makes sense if it forbids both parties, not just the insured, from concealing information. If I were on a jury and the entire case hung on a reasonable man's interpretation of uberrima fides, I would have a hard time ever finding in favor of a modern insurer who's unwilling to share their models and data with the world. I mean, I might agree that the insured hid information. But I'd be nearly 100% confident that the insurer hid information. Maybe in 1766 this principle made sense. It aint 1766 anymore. b) In this case specifically, it would be quite hard to convince me that using publicly available information (e.g., weather reports and history of on time / delayed / cancelled flights) runs a foul of uberrima fides. You can't honestly expect me to believe the insurance company didn't have access to that information. It's equally hard for me to believe that an army of PhD actuaries didn't think to use that information to build their pricing models. c) In the case of travel insurance, the doctrine has a really big bright-line problem. When I buy any ticket into or out of Boston during the winter months, I tend to buy travel insurance. I never buy travel insurance for flights into or out of Boston in the summer. That is clearly not fraud (or, if it is, that insurance product needs to be regulated out of existence). Now, what if I choose particular weeks? days? Where's the bright line? d) Even supposing some obligation to share information, how in God's name am I supposed to inform the insurer that I estimate a flight will be almost surely be cancelled/delayed? Call up the 1-800 number? Because I know exactly how that would go: you'd get a first-line support person who's incentivized to sell policies. If I were running a similar scheme, I would definitely record myself calling up the insurance provider and point-blank stating "I think this flight will be cancelled, should I buy your insurance?" I guarantee the answer from the T1 support folks would be "yes, that's what it's for!". It seems totally unreasonable to assume bad faith of anyone who buys an insurance product with large positive expected value, especially when the insurance company is consistently making 10 figures in net income and is unwilling to engage in individual dialogs about "who knows what and when". If I can't get on the phone and talk to the actuary who built the pricing model to figure out if X is shared information, and if there's no list of check-boxes for me to look through in order to determine the same, and if the only company representative I can get access to is probably going to explicitly tell me to buy the policy, then... what the hell? All of these things taken together: if I were on a jury and uberrima fides was the only reason to find in favor of the insurer, I would certainly do everything I could to sway my fellow jurors toward favoring the insured. It seems like the right solution here is either a) more sophisticated pricing models, or b) some very clear and well-dilineated bounds on what information is/is not allowed to be used when purchasing travel insurance. TL;DR: uberrima fides as a fuzzy legal doctrine seems... just... utterly impossible to apply to consumers. The relationship is fundamentally asymmetric, so the insurer should have a burden to explicitly ask about any relevant information (as is done for, e.g., health and life products). As a fuzzy doctrine for deciding on a case-by-case basis, this doctrine seems more relevant when the insurer and insured are more symmetric (e.g., insurance products aimed at large corporations, reinsurance, etc.). (Of course identity fraud is a problem and this happened in China which doesn't use the same legal system, so this is all just a hypothetical conversation.)
NovemberWhiskey 6y ago
Insurance contracts are contracts of utmost good faith (uberrimae fidei) in most of the common law world (I have no idea about the law in China). Failure to disclose material facts renders the contract voidable. Insurance is not supposed to be a method for exploiting information arbitrage, and the law is formed explicitly on that basis.
- AllegedAlec 6y ago
  If that were to be the case, why does my insurer try to wiggle out of paying me based on shit like bogus claims of 'preexisting conditions'? That doesn't sound like something dome in good faith.
  - NovemberWhiskey 6y ago
    Good faith means that if you have a pre-existing condition then you disclose it, and it means that if your insurance company doesn't insure pre-existing conditions then they disclose that. This is all before signing the contract. It doesn't mean there can't be robust discussions about what the contract covers when particularly unexpected sets of facts come up.
    - AllegedAlec 6y ago
      When I break a tooth, that's not due to a preexisting condition though, and them arguing that it is is bad faith.

Voloskaya 6y ago

> Is it though? She had to use 20 different identities do to this. That should answer your question.

throwawaygh 6y ago
That doesn't really answer the original question at all. The question wasn't "is this particular case fraudulent for any reason what-so-ever". The question was "is buying insurance on something you already know is going to happen" plain and simple fraud? The identity fraud isn't really relevant to that question at all. FWIW I'm not aware of any law in the USA that makes it illegal to buy insurance when you know the policy will pay. Knowing more than the insurance company's actuaries is not fraud. Making false statements is fraud. Intentionally causing damage to collect insurance payments is fraud. But the hypothetical oracle who knows when the next flood/fire/car accident will hit due to divine inspiration is free to buy a relevant insurance policy the day before. AFAIK.
- smithza 6y ago
  Novemberwhiskey (above) makes the solid point about entering into the contract in good faith. It is a sound counterpoint and appeals to the more important "spirit of the law" vs "letter of the law". I am not sure how this would stand up to a court ruling.
  - throwawaygh 6y ago
    I don't think uberrima fides is super helpful here: a) I have a really, really, REALLY hard time understanding how hiring an army of PhDs to build highly proprietary risk models based on extremely expensive (or not-even-for-sale) datasets does not run a foul of uberrima fides. The doctrine only makes sense if it forbids both parties, not just the insured, from concealing information. If I were on a jury and the entire case hung on a reasonable man's interpretation of uberrima fides, I would have a hard time ever finding in favor of a modern insurer who's unwilling to share their models and data with the world. I mean, I might agree that the insured hid information. But I'd be nearly 100% confident that the insurer hid information. Maybe in 1766 this principle made sense. It aint 1766 anymore. b) In this case specifically, it would be quite hard to convince me that using publicly available information (e.g., weather reports and history of on time / delayed / cancelled flights) runs a foul of uberrima fides. You can't honestly expect me to believe the insurance company didn't have access to that information. It's equally hard for me to believe that an army of PhD actuaries didn't think to use that information to build their pricing models. c) In the case of travel insurance, the doctrine has a really big bright-line problem. When I buy any ticket into or out of Boston during the winter months, I tend to buy travel insurance. I never buy travel insurance for flights into or out of Boston in the summer. That is clearly not fraud (or, if it is, that insurance product needs to be regulated out of existence). Now, what if I choose particular weeks? days? Where's the bright line? d) Even supposing some obligation to share information, how in God's name am I supposed to inform the insurer that I estimate a flight will be almost surely be cancelled/delayed? Call up the 1-800 number? Because I know exactly how that would go: you'd get a first-line support person who's incentivized to sell policies. If I were running a similar scheme, I would definitely record myself calling up the insurance provider and point-blank stating "I think this flight will be cancelled, should I buy your insurance?" I guarantee the answer from the T1 support folks would be "yes, that's what it's for!". It seems totally unreasonable to assume bad faith of anyone who buys an insurance product with large positive expected value, especially when the insurance company is consistently making 10 figures in net income and is unwilling to engage in individual dialogs about "who knows what and when". If I can't get on the phone and talk to the actuary who built the pricing model to figure out if X is shared information, and if there's no list of check-boxes for me to look through in order to determine the same, and if the only company representative I can get access to is probably going to explicitly tell me to buy the policy, then... what the hell? All of these things taken together: if I were on a jury and uberrima fides was the only reason to find in favor of the insurer, I would certainly do everything I could to sway my fellow jurors toward favoring the insured. It seems like the right solution here is either a) more sophisticated pricing models, or b) some very clear and well-dilineated bounds on what information is/is not allowed to be used when purchasing travel insurance. TL;DR: uberrima fides as a fuzzy legal doctrine seems... just... utterly impossible to apply to consumers. The relationship is fundamentally asymmetric, so the insurer should have a burden to explicitly ask about any relevant information (as is done for, e.g., health and life products). As a fuzzy doctrine for deciding on a case-by-case basis, this doctrine seems more relevant when the insurer and insured are more symmetric (e.g., insurance products aimed at large corporations, reinsurance, etc.). (Of course identity fraud is a problem and this happened in China which doesn't use the same legal system, so this is all just a hypothetical conversation.)

NovemberWhiskey 6y ago

Insurance contracts are contracts of utmost good faith (uberrimae fidei) in most of the common law world (I have no idea about the law in China). Failure to disclose material facts renders the contract voidable. Insurance is not supposed to be a method for exploiting information arbitrage, and the law is formed explicitly on that basis.

AllegedAlec 6y ago
If that were to be the case, why does my insurer try to wiggle out of paying me based on shit like bogus claims of 'preexisting conditions'? That doesn't sound like something dome in good faith.
- NovemberWhiskey 6y ago
  Good faith means that if you have a pre-existing condition then you disclose it, and it means that if your insurance company doesn't insure pre-existing conditions then they disclose that. This is all before signing the contract. It doesn't mean there can't be robust discussions about what the contract covers when particularly unexpected sets of facts come up.
  - AllegedAlec 6y ago
    When I break a tooth, that's not due to a preexisting condition though, and them arguing that it is is bad faith.