15 ms·

> An insurance company is not a charity it’s just a profit engine. Odd then that so many forms of insurance are mandated by the government.

by hypeit 3y ago

Invictus0 3y ago
Suppose you are an insurer. You model the risk for your insurance product (suppose it's car insurance) and realize you need to charge $100/mo to make money after paying out all the claims. However, you have a competitor that is bad at modeling risk. They are charging $50/mo for their car insurance, and customers are flocking to them. Should you attempt to stay in this market? If you lower your prices, you will eventually get knocked out; if you keep them high, you will not get any customers. Alternatively, suppose cars become super risky and you need to charge $10,000 a month to insure the car, and reasonably conclude that no one is going to pay that, and after you pay for marketing and overhead and payroll, you will still lose money if you try to sell the insurance product. Do you stay in the market? It's especially funny to see everyone in the comments complaining that the insurance company is "only thinking about the short term".
- hypeit 3y ago
  > after you pay for marketing There should be no marketing if it's mandated. These companies should not be run for profit since having insurance is required by law in many situations.
  - Invictus0 3y ago
    [flagged]
    - pc86 3y ago
      [flagged]
    - hypeit 3y ago
      > Ok so your idea is to have the government be in the insurance business? Yes, I think all insurance should be nationalized. You may not agree, but accusing me of not thinking clearly is an ad hominem.
  - whalesalad 3y ago
    You’re describing socialism and we are operating in a capitalist society. I’m not advocating for or against but it’s naive to make these claims about how this should just be pure, devoid of evil and provided by the state. This debate will go on until the end of days.
    - hypeit 3y ago
      I am describing a socialistic policy, which I think private but mandatory for-profit insurance makes a great case for. We already have government controls in place, if we lived in a "capitalist society", there would be no such thing as a health insurance mandate. We live in a hybrid world designed for regulatory capture and corruption, with our required payments flowing straight to executives and shareholders instead of actually providing a public good.
- Manuel_D 3y ago
  Stay in the market because the competitor will be put out of business once their customers actually start filing claims. Then customers come back to you.
  - pc86 3y ago
    This only works if you can stay profitable enough long enough for it to start to happen. The fewer customers you have, the riskier your pool, and the higher your prices have to be. Suddenly $100 becomes $125 becomes $150 for the same or less profit. It's safer to just get out of the market entirely. You can always go back in but if you stay in too long it could wipe you out entirely.
    - Manuel_D 3y ago
      If all your customers are flocking to the undercharging competitor, you're out of the market anyway and your costs are effectively zero since you don't have anyone filing claims. There's no practical scenario where the competitor, which is losing money on each customer in aggregate, lasts longer than a company with no customers.
      - sokoloff 3y ago
        Picking up nickels in front of a steamroller can appear profitable for a shockingly long time, as the traders using the "I'll just naked short VXX for easy money!" periodically find out.
      - Invictus0 3y ago
        "costs are zero" Payroll? Overhead? Marketing? Rent? This isn't a thought exercise, there are real costs associated with being in a certain business.
        Manuel_D 3y ago
        All of which the competitor also has to pay, on top of losing money on each customer.
selectodude 3y ago
The insurance mandates are for things that impact either your life or other people. I don’t want your judgement proof ass hitting me with your car without the ability to fix it, nor do I want you using emergency medicine as a pediatrician. Thus, mandates.
- hypeit 3y ago
  The problem is when you combine "mandated" with "for profit". The two should never go together. If it's mandated, I want exactly zero of my dollars going toward executive compensation, dividends, stock buybacks, advertising, sales... You're currently paying for that neat little 3d animated gecko under threat of US law.
  - sokoloff 3y ago
    In 32 of the 50 states, you can post a surety bond instead of buying the otherwise state-mandated auto insurance. That list includes my state. I buy auto insurance because it's more convenient (and cost-effective) than going through the bond posting process, arranging my own claims-handling and legal representation in the event of a loss, etc. I pay $1220/yr for insurance for two cars and two drivers (and for coverage well above the state minimums and excellent customer and claims service). IMO, it would be crazy for me to turn down that deal.
    - pc86 3y ago
      Especially when the alternative is half a million dollars cash sitting in an account you can't legally access for anything else, or use as collateral for anything else, and you won't realistically have half a million dollars cash ever. I looked into a surety bond specifically for auto insurance thinking I might be able to earn a bit of interest on $100-200k cash, get a small dividend, and "break even" in half a dozen years or so. The reality was pretty grim, basically if you're not already actively searching for things to do with 6 or 7 figure sums, it's not worth the time, and that's ignoring the logistics of having someone available for the claims processing side.
  - ejb999 3y ago
Tangurena2 3y ago
It is not odd. It is lobbying - have the government force people to pay you. In the case of autos, they're dangerous and deadly. Too many people should not be allowed to drive. But due to other lobbying, public transit is unavailable in the US, so you must drive in order to have a job, or reach grocery stores. https://en.wikipedia.org/wiki/Motor_vehicle_fatality_rate_in_U.S._by_year https://en.wikipedia.org/wiki/Motor_vehicle_fatality_rate_in...

> An insurance company is not a charity it’s just a profit engine. Odd then that so many forms of insurance are mandated by the government.

by hypeit 3y ago

> An insurance company is not a charity it’s just a profit engine. Odd then that so many forms of insurance are mandated by the government.

Invictus0 3y ago

Suppose you are an insurer. You model the risk for your insurance product (suppose it's car insurance) and realize you need to charge $100/mo to make money after paying out all the claims. However, you have a competitor that is bad at modeling risk. They are charging $50/mo for their car insurance, and customers are flocking to them. Should you attempt to stay in this market? If you lower your prices, you will eventually get knocked out; if you keep them high, you will not get any customers. Alternatively, suppose cars become super risky and you need to charge $10,000 a month to insure the car, and reasonably conclude that no one is going to pay that, and after you pay for marketing and overhead and payroll, you will still lose money if you try to sell the insurance product. Do you stay in the market? It's especially funny to see everyone in the comments complaining that the insurance company is "only thinking about the short term".

hypeit 3y ago
> after you pay for marketing There should be no marketing if it's mandated. These companies should not be run for profit since having insurance is required by law in many situations.
- Invictus0 3y ago
  [flagged]
  - pc86 3y ago
    [flagged]
  - hypeit 3y ago
    > Ok so your idea is to have the government be in the insurance business? Yes, I think all insurance should be nationalized. You may not agree, but accusing me of not thinking clearly is an ad hominem.
- whalesalad 3y ago
  You’re describing socialism and we are operating in a capitalist society. I’m not advocating for or against but it’s naive to make these claims about how this should just be pure, devoid of evil and provided by the state. This debate will go on until the end of days.
  - hypeit 3y ago
    I am describing a socialistic policy, which I think private but mandatory for-profit insurance makes a great case for. We already have government controls in place, if we lived in a "capitalist society", there would be no such thing as a health insurance mandate. We live in a hybrid world designed for regulatory capture and corruption, with our required payments flowing straight to executives and shareholders instead of actually providing a public good.
Manuel_D 3y ago
Stay in the market because the competitor will be put out of business once their customers actually start filing claims. Then customers come back to you.
- pc86 3y ago
  This only works if you can stay profitable enough long enough for it to start to happen. The fewer customers you have, the riskier your pool, and the higher your prices have to be. Suddenly $100 becomes $125 becomes $150 for the same or less profit. It's safer to just get out of the market entirely. You can always go back in but if you stay in too long it could wipe you out entirely.
  - Manuel_D 3y ago
    If all your customers are flocking to the undercharging competitor, you're out of the market anyway and your costs are effectively zero since you don't have anyone filing claims. There's no practical scenario where the competitor, which is losing money on each customer in aggregate, lasts longer than a company with no customers.
    - sokoloff 3y ago
      Picking up nickels in front of a steamroller can appear profitable for a shockingly long time, as the traders using the "I'll just naked short VXX for easy money!" periodically find out.
    - Invictus0 3y ago
      "costs are zero" Payroll? Overhead? Marketing? Rent? This isn't a thought exercise, there are real costs associated with being in a certain business.
      - Manuel_D 3y ago
        All of which the competitor also has to pay, on top of losing money on each customer.

selectodude 3y ago

The insurance mandates are for things that impact either your life or other people. I don’t want your judgement proof ass hitting me with your car without the ability to fix it, nor do I want you using emergency medicine as a pediatrician. Thus, mandates.

hypeit 3y ago
The problem is when you combine "mandated" with "for profit". The two should never go together. If it's mandated, I want exactly zero of my dollars going toward executive compensation, dividends, stock buybacks, advertising, sales... You're currently paying for that neat little 3d animated gecko under threat of US law.
- sokoloff 3y ago
  In 32 of the 50 states, you can post a surety bond instead of buying the otherwise state-mandated auto insurance. That list includes my state. I buy auto insurance because it's more convenient (and cost-effective) than going through the bond posting process, arranging my own claims-handling and legal representation in the event of a loss, etc. I pay $1220/yr for insurance for two cars and two drivers (and for coverage well above the state minimums and excellent customer and claims service). IMO, it would be crazy for me to turn down that deal.
  - pc86 3y ago
    Especially when the alternative is half a million dollars cash sitting in an account you can't legally access for anything else, or use as collateral for anything else, and you won't realistically have half a million dollars cash ever. I looked into a surety bond specifically for auto insurance thinking I might be able to earn a bit of interest on $100-200k cash, get a small dividend, and "break even" in half a dozen years or so. The reality was pretty grim, basically if you're not already actively searching for things to do with 6 or 7 figure sums, it's not worth the time, and that's ignoring the logistics of having someone available for the claims processing side.
- ejb999 3y ago

Tangurena2 3y ago

It is not odd. It is lobbying - have the government force people to pay you. In the case of autos, they're dangerous and deadly. Too many people should not be allowed to drive. But due to other lobbying, public transit is unavailable in the US, so you must drive in order to have a job, or reach grocery stores. https://en.wikipedia.org/wiki/Motor_vehicle_fatality_rate_in_U.S._by_year https://en.wikipedia.org/wiki/Motor_vehicle_fatality_rate_in...