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From the perspective of a private insurer, you do not want as diverse a risk pool as you can get. There are groups that you can reasonably anticipate are at hig

• matheusmoreira 3y ago
  > Telematics often makes it easier to figure out who those people are. Surveillance capitalism, insurance price hike edition. That's just great.
  • Kalium 3y ago
    In a great many cases, insurance rates drop. Sometimes quite sharply. I've seen as much as a 50% drop. Auto insurance is inevitably surveillance capitalism. Insurers always look at aspects of life your life and behavior to establish your risk profile. Age, employment, the kind of car you drive, your driving record, and more all have a measurable impact on your risk. Telematics mostly makes things cheaper for good drivers. It also sometimes gives insurers a chance to try to nudge drivers towards safer behaviors, both through direct messaging and through higher prices for drivers with higher-risk behavior. Whether this is a good idea or not is a personal question, though for my own part I tend to think that underpriced insurance for operators of heavy machinery is not a human right.
  • mint2 3y ago
    Driving risk is in a large part driving by driving behavior which is a characteristic that is under control of the individual. Monitoring that directly and pricing on it is far more fair than pricing on correlated hard to change attributes like being male or being young or being poor (credit score) Also it’s a lot creepier for companies to run a file on people and get all that and more info sent over rather than just getting sent over how the person drives.
• hakfoo 3y ago
  The appeal of diversity is to avoid systemic risks. For example, I recall talk about some automakers offering insurance (often as part of an all-inclusive subscription model) You'd have some very distinct systemic risks with that pool. If you had a Toyota-style sudden-acceleration crisis, or a Hyundai/Kia style theft crisis, you'd have a lot more exposure than a conventional insurer who accepted a broad range of models. I'd expect there are other obvious systemic risks, like geographic limits (if you cover a wildfire area, you're paying more damage/loss claims), or restricting to some specific professions (which might track with specific damage patterns or vehicle choices)
  • Kalium 3y ago
    Naively, yes, diversity avoids systemic risks. However, from working in auto insurance it was my experience that insurers reason about risk in considerably more sophisticated ways. For one thing, in the US auto insurance is entirely a state-by-state market. This means that geographic diversity is inherently severely limited. Any auto insurance operation in California is going to be exposed to a lot of wildfire risk without the ability to geographically diversify. This is priced in. For another, there some groups of people - remember auto insurance is really mostly about insuring people - who are statistically more expensive risks than other groups. Young men are measurably less safe drivers than middle-aged women, to pick an anodyne example. Individual premiums reflect this as well. I have no idea what kind of systemic risk would uniquely affect all middle-aged women across an entire state, but presumably you can think of one. Most insurers have groups of customers they would prefer not to have. This is usually because the insurer cannot cover them at cost, never mind profitably. There's a series of ways they encourage those customers to find other carriers. This is where the idea of maximizing diversity breaks down most clearly - the overall risk pool is not improved by including these customers.