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I'm going to assume that nobody's insurance premiums or deductibles are going down from this data. No analysis is making the insurer say "Oh, that roof is in mu

I'm going to assume that nobody's insurance premiums or deductibles are going down from this data. No analysis is making the insurer say "Oh, that roof is in much better condition despite its age." Insurance feels like the biggest scam in the history of the world. You are legally obligated to pay us for nothing, most of the time.

woopsn 3y ago
The insurance scam is, classically, someone getting a policy on an asset they know is worthless, going to catch fire, suddenly die, etc. -- and you do pay higher rates as a result.
mb7733 3y ago
This doesn't make sense. If an insurance company wanted to charge higher premiums, they would just do so. They wouldn't need to spy on customers. The point of them trying to quantify risk as accurately as possible is to be able to extract profit while also offering competitive rates. It's the same as with any other company. They try and operate as efficiently as possible (ie. reduce costs) to try and make more profit, while competing on price.
- lokar 3y ago
  My insurance company sent an inspector to check the house. As a result he adjusted some details of the policy that reduced the rate slightly.
- currymj 3y ago
  from reading this article, it seems like there may be some odd short-term pressures, or incentives internal to the companies, that mean policies are getting cancelled based on clearly inaccurate information.
- VHRanger 3y ago
  Ah, classic mistake here. If bargaining power is asymmetric between the insurer and the buyer, then the extra information is used for additional price discrimination (eg. Its better for you if the picture is never taken regardless who you are). So the question is: does the insurer or the insured have the bargaining power here? Competition helps, but is only one part of it. Seeing that insurers seem very profitable in the US, a decent proxy for bargaining power, I'd argue this is a bad thing for the consumer.
  - bvan 3y ago
    If insurance was very profitable ‘in the US’, top-tier insurers would not be leaving states like Florida and California. There is a reason why they decide to no longer cover wildfire losses or hurricane losses. In the case of Florida, rampant fraud has turned the market into a basket-case.
- tfehring 3y ago
  > * If an insurance company wanted to charge higher premiums, they would just do so.* That’s not an option in many cases. The first homeowner featured in the article is in rural Northern California. CA’s insurance regulator has been extremely restrictive about letting insurers raise rates, especially in that area, so her insurance premium was probably a fraction of the expected cost of insurance claims.
ozr 3y ago
Insurance carriers have an incentive to compete on price like any other business. There are plenty of options. The margins are generally pretty small, and there is a lot of regulation around what portion of payments must be used for claims. There's a few obvious exceptions, but plenty of insurance isn't required.
- sneed_chucker 3y ago
  They might have an incentive to compete, but I think they also have an incentive to collude. Last time I shopped around for insurance it seemed like the latter was taking place. You're required to get homeowner's insurance if you have a mortgage, and you're required to have car insurance if you want to drive a car on public roads. So the majority of Americans are forced to purchase at least one of these in order to live their normal lives, which makes demand inelastic.
  - lokar 3y ago
    For the car, you only need liability, and you can generally post a bond instead.
  - overstay8930 3y ago
    Collusion is nearly impossible in commodity insurance (i.e. policies you can buy on a website), it’s just way too easy to detect and whistleblowers know they can make a fortune by reporting it. It’s mostly your own governments fault if you can’t find a cheap policy, there are millions of people who will probably never have to file an insurance claim in their life making up for government decisions to insure people who wouldn’t normally be able to be insured because of poor decision making skills.
  - ozr 3y ago
    You aren't required to purchase a home or drive a car. If you chose to, as most Americans do, then yes: the demand is inelastic. But that doesn't imply what you're saying unless the supplier has monopoly power, which they, by law, do not.
overstay8930 3y ago
> No analysis is making the insurer say "Oh, that roof is in much better condition despite its age." That’s exactly what they do. There are people getting paid millions of dollars to create software that does this. Do you know how much money an insurance company can print if they can undercut the competition by selling a bunch of policies to people who won’t file a claim? People pick insurance based on price, and if someone is selling you a cheaper policy because they know your roof is better, you’re going to buy it from them. They win because you’ll pay a premium without filing a claim, and you win because you can have a cheaper policy. That’s how it works in the real world.
tptacek 3y ago
You're not legally obligated to pay for homeowners insurance.
- hilux 3y ago
  It is probably required if you have a mortgage. And of course it's a practical requirement for anyone whose net worth is primarily in their home.
  - tptacek 3y ago
    That's not a legal requirement, that's people with money being unwilling to give it to you if you're reckless enough not to insure your collateral.
ska 3y ago
> I'm going to assume that nobody's insurance premiums or deductibles are going down That's exactly backwards. If you have better information than a competitor, you have an effective strategy to steal their lower-risk customers and still make a ton of money. This absolutely will happen. And the rates for the higher-risk customers they are left with will absolutely go up.

woopsn 3y ago

The insurance scam is, classically, someone getting a policy on an asset they know is worthless, going to catch fire, suddenly die, etc. -- and you do pay higher rates as a result.

mb7733 3y ago

This doesn't make sense. If an insurance company wanted to charge higher premiums, they would just do so. They wouldn't need to spy on customers. The point of them trying to quantify risk as accurately as possible is to be able to extract profit while also offering competitive rates. It's the same as with any other company. They try and operate as efficiently as possible (ie. reduce costs) to try and make more profit, while competing on price.

lokar 3y ago
My insurance company sent an inspector to check the house. As a result he adjusted some details of the policy that reduced the rate slightly.
currymj 3y ago
from reading this article, it seems like there may be some odd short-term pressures, or incentives internal to the companies, that mean policies are getting cancelled based on clearly inaccurate information.
VHRanger 3y ago
Ah, classic mistake here. If bargaining power is asymmetric between the insurer and the buyer, then the extra information is used for additional price discrimination (eg. Its better for you if the picture is never taken regardless who you are). So the question is: does the insurer or the insured have the bargaining power here? Competition helps, but is only one part of it. Seeing that insurers seem very profitable in the US, a decent proxy for bargaining power, I'd argue this is a bad thing for the consumer.
- bvan 3y ago
  If insurance was very profitable ‘in the US’, top-tier insurers would not be leaving states like Florida and California. There is a reason why they decide to no longer cover wildfire losses or hurricane losses. In the case of Florida, rampant fraud has turned the market into a basket-case.
tfehring 3y ago
> * If an insurance company wanted to charge higher premiums, they would just do so.* That’s not an option in many cases. The first homeowner featured in the article is in rural Northern California. CA’s insurance regulator has been extremely restrictive about letting insurers raise rates, especially in that area, so her insurance premium was probably a fraction of the expected cost of insurance claims.

ozr 3y ago

Insurance carriers have an incentive to compete on price like any other business. There are plenty of options. The margins are generally pretty small, and there is a lot of regulation around what portion of payments must be used for claims. There's a few obvious exceptions, but plenty of insurance isn't required.

sneed_chucker 3y ago
They might have an incentive to compete, but I think they also have an incentive to collude. Last time I shopped around for insurance it seemed like the latter was taking place. You're required to get homeowner's insurance if you have a mortgage, and you're required to have car insurance if you want to drive a car on public roads. So the majority of Americans are forced to purchase at least one of these in order to live their normal lives, which makes demand inelastic.
- lokar 3y ago
  For the car, you only need liability, and you can generally post a bond instead.
- overstay8930 3y ago
  Collusion is nearly impossible in commodity insurance (i.e. policies you can buy on a website), it’s just way too easy to detect and whistleblowers know they can make a fortune by reporting it. It’s mostly your own governments fault if you can’t find a cheap policy, there are millions of people who will probably never have to file an insurance claim in their life making up for government decisions to insure people who wouldn’t normally be able to be insured because of poor decision making skills.
- ozr 3y ago
  You aren't required to purchase a home or drive a car. If you chose to, as most Americans do, then yes: the demand is inelastic. But that doesn't imply what you're saying unless the supplier has monopoly power, which they, by law, do not.

overstay8930 3y ago

> No analysis is making the insurer say "Oh, that roof is in much better condition despite its age." That’s exactly what they do. There are people getting paid millions of dollars to create software that does this. Do you know how much money an insurance company can print if they can undercut the competition by selling a bunch of policies to people who won’t file a claim? People pick insurance based on price, and if someone is selling you a cheaper policy because they know your roof is better, you’re going to buy it from them. They win because you’ll pay a premium without filing a claim, and you win because you can have a cheaper policy. That’s how it works in the real world.

tptacek 3y ago

You're not legally obligated to pay for homeowners insurance.

hilux 3y ago
It is probably required if you have a mortgage. And of course it's a practical requirement for anyone whose net worth is primarily in their home.
- tptacek 3y ago
  That's not a legal requirement, that's people with money being unwilling to give it to you if you're reckless enough not to insure your collateral.

ska 3y ago

> I'm going to assume that nobody's insurance premiums or deductibles are going down That's exactly backwards. If you have better information than a competitor, you have an effective strategy to steal their lower-risk customers and still make a ton of money. This absolutely will happen. And the rates for the higher-risk customers they are left with will absolutely go up.