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Insurance companies are well suited to exaggerate risks and mislead by statistics. And they are very good at it.
by sidlls 5y ago
Insurance companies are well suited to exaggerate risks and mislead by statistics. And they are very good at it.
- Pet_Ant 5y agoI think you are conflating two things. Insurance companies want to know as precisely as possible to determine their liability. It is the essence of their job. Now, what they communicate to customers is another thing. I bet they know very well what they are getting into... but I agree they aren't likely to be transparent with you about it.
- jjk166 5y agoIf one insurance company tries to profit off exaggerated risk, a competing insurance company can offer the same protection at a lower premium and steal their customers. You don't make it in the insurance business by making short term decisions that hurt you in the long run.
- vlovich123 5y agoThat presumes someone takes time to evaluate the claim. Unless you have data already available that the counterfactual is true, it’ll take a while before a competitor appears to test out your claim and existing incumbents might just take your word for it. Additionally, the success of the competitor to eat your padded profits is not controlled solely by the truth.
- j_wtf_all_taken 5y agoIt can work in a well regulated market with healthy competition.
- ajmadesc 5y agoAnd if my grandma had wheels she'd be a bike
- teclordphrack2 5y agoNice reference.
- j_wtf_all_taken 5y agoOnly if grandma works as an insurance agent.
- j_wtf_all_taken 5y agoIt depends. One, two, three or four wheels?
- jjk166 5y agoThe only thing worse for an insurance company than deliberately inaccurate statistics is accidentally inaccurate statistics. Anyone who wanted to make a profit selling solar panel insurance would independently seek to determine the failure rate of solar panels. Even if they believed their competitors were 100% honest, it's a value that is likely to change over time and they'ed want a better level of detail (rates for different manufacturers, detailed timing, weather effects, etc) than would be publicly available. Yes, if they just assumed it was accurate they might get lucky, but insurance is the business of not relying on luck.
- vlovich123 5y agoI think you’re assuming that the cost of paying someone to continually track this and maintain everything is 0. It’s not and therefore the savings would have to justify this cost.
- jjk166 5y agoAnd it costs money for a bakery to bake fresh bread, but it's nevertheless a very safe assumption that they will. Statistics are to insurance what bread is to bakeries.