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Insurance incentives would drive them to want to predict as accurately as possible who is going to cost them money, and then deny them coverage. They make money

by gmd63 3y ago

Insurance incentives would drive them to want to predict as accurately as possible who is going to cost them money, and then deny them coverage. They make money from selling to people who are afraid of a calamity but likely won't experience one.

kjkjadksj 3y ago
Why are they in the business of denying coverage? They are insurance. They estimate their payouts from the entire pool and price your premiums accordingly. Paying out should therefore not really affect their bottom line if they price the premiums appropriately.
- gmd63 3y ago
  Home insurance companies are leaving Florida because it's not profitable to operate in an area with so much vulnerability to hurricane damage. Also, the only thing stopping medical insurers from denying coverage or increasing prices for people with pre-existing conditions is the Affordable Care Act.
  - t0mas88 3y ago
    There is an important additional factor, regulators are setting limits on rates / rate increases. Florida is not profitable with those limits. If the insurance companies are free to set any rate, they would happily cover a high hurricane risk area. You can get insurance on very risky things. The way it's done is high rates and "reinsurance" which means the insurance company shares the risk (and premium) with a pool of other insurance companies. For policies with a large possible payout (e.g. a big ship or aircraft) this is always done, to avoid issues for the insurance company that gets unlucky enough to have to pay out.
    - gmd63 3y ago
      Well apparently it's not hurricanes or regulation against accurate pricing, it's rampant fraud fueled by a state supreme court decision to incentivize winning cases for policyholders https://www.iii.org/press-release/triple-i-extreme-fraud-and-litigation-causing-floridas-homeowners-insurance-markets-demise-062322 https://www.iii.org/press-release/triple-i-extreme-fraud-and... "Florida, however, is the site of 79 percent of all homeowners insurance lawsuits over claims filed nationwide while Florida’s insurers receive only 9 percent of all U.S. homeowners insurance claims, according to the Florida governor’s Office."
  - imgabe 3y ago
    The whole point of insurance is that there is a relatively low probability of a relatively high expense event happening. In all likelihood, the thing won't happen to you, but if we all pool our money together and you are the unlucky person then you're covered. A pre-existing condition is not a low probability event. It is a 100% certainty that you have to pay for it. In that case the insurance is just a middleman who is increasing the cost of the thing you definitely have to pay for. You pay the insurance company, they take a cut, and they pay the healthcare provider. Why not just pay the healthcare provider directly?
    - gmd63 3y ago
      I imagine insurers are working very hard to identify which low probability events are likely going to happen for specific people. They might be doing detailed continual examinations of their homes for example.
- theptip 3y ago
  Tail risk / volatility.
imgabe 3y ago
At some point the cost of insurance would approach the cost of simply self insuring. Why should I pay the insurance company to maybe replace the roof if I can just keep $20k in a savings account in case I need to replace the roof?
- mb7733 3y ago
  First of all: the payout you get from insurance does not come only from the premiums you personally pay. If you make a claim, your expenses are covered by the pool of money of all customers, even those that do not make any claims. Second of all: when you take out an insurance policy and pay your first premium, you are immediately covered. If you are "self insuring" by setting aside the same amount monthly, it will take you a long time to even begin to accumulate enough funds to cover yourself in case of catastrophe. (And due to the first point, you may never reach that point.) Finally, yes, of course, there is no need to take out an insurance policy for a risk that you can afford to pay out-of-pocket. It's like how if you have the cash to pay for a house, there is no need to take out a mortgage.

by gmd63 3y ago

kjkjadksj 3y ago

Why are they in the business of denying coverage? They are insurance. They estimate their payouts from the entire pool and price your premiums accordingly. Paying out should therefore not really affect their bottom line if they price the premiums appropriately.

gmd63 3y ago
Home insurance companies are leaving Florida because it's not profitable to operate in an area with so much vulnerability to hurricane damage. Also, the only thing stopping medical insurers from denying coverage or increasing prices for people with pre-existing conditions is the Affordable Care Act.
- t0mas88 3y ago
  There is an important additional factor, regulators are setting limits on rates / rate increases. Florida is not profitable with those limits. If the insurance companies are free to set any rate, they would happily cover a high hurricane risk area. You can get insurance on very risky things. The way it's done is high rates and "reinsurance" which means the insurance company shares the risk (and premium) with a pool of other insurance companies. For policies with a large possible payout (e.g. a big ship or aircraft) this is always done, to avoid issues for the insurance company that gets unlucky enough to have to pay out.
  - gmd63 3y ago
    Well apparently it's not hurricanes or regulation against accurate pricing, it's rampant fraud fueled by a state supreme court decision to incentivize winning cases for policyholders https://www.iii.org/press-release/triple-i-extreme-fraud-and-litigation-causing-floridas-homeowners-insurance-markets-demise-062322 https://www.iii.org/press-release/triple-i-extreme-fraud-and... "Florida, however, is the site of 79 percent of all homeowners insurance lawsuits over claims filed nationwide while Florida’s insurers receive only 9 percent of all U.S. homeowners insurance claims, according to the Florida governor’s Office."
- imgabe 3y ago
  The whole point of insurance is that there is a relatively low probability of a relatively high expense event happening. In all likelihood, the thing won't happen to you, but if we all pool our money together and you are the unlucky person then you're covered. A pre-existing condition is not a low probability event. It is a 100% certainty that you have to pay for it. In that case the insurance is just a middleman who is increasing the cost of the thing you definitely have to pay for. You pay the insurance company, they take a cut, and they pay the healthcare provider. Why not just pay the healthcare provider directly?
  - gmd63 3y ago
    I imagine insurers are working very hard to identify which low probability events are likely going to happen for specific people. They might be doing detailed continual examinations of their homes for example.
theptip 3y ago
Tail risk / volatility.

imgabe 3y ago

At some point the cost of insurance would approach the cost of simply self insuring. Why should I pay the insurance company to maybe replace the roof if I can just keep $20k in a savings account in case I need to replace the roof?

mb7733 3y ago
First of all: the payout you get from insurance does not come only from the premiums you personally pay. If you make a claim, your expenses are covered by the pool of money of all customers, even those that do not make any claims. Second of all: when you take out an insurance policy and pay your first premium, you are immediately covered. If you are "self insuring" by setting aside the same amount monthly, it will take you a long time to even begin to accumulate enough funds to cover yourself in case of catastrophe. (And due to the first point, you may never reach that point.) Finally, yes, of course, there is no need to take out an insurance policy for a risk that you can afford to pay out-of-pocket. It's like how if you have the cash to pay for a house, there is no need to take out a mortgage.