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I don’t believe I can come up with accurate numbers like that. I have no chance against a big company with a bunch of actuaries who do that for a living. I thi

I don’t believe I can come up with accurate numbers like that. I have no chance against a big company with a bunch of actuaries who do that for a living. I think I really can sometimes tell if I’m riskier or safer than the average person. I can observe other people’s behavior and compare it to mine. But even then, my impressions will be subject to a lot of biases (eg. everyone thinks they are an above-average driver). If I assume the insurance company has done the math so they make a decent margin, and if I’m confident I’m a better or worse risk, it’s possible I can use that reasoning to guess whether insurance is a good value for me.

kqr 2y ago
It seems like you're assuming a zero-sum game here where you are hoping to earn more from insurance claims than you paid in premium. This is not how insurance is supposed to be evaluated, as TFA points out. You're not against the insurance company. Your decision is relatively separate from theirs.
- aoanevdus 2y ago
  If I believe insurance is well-priced, the cost ought to be pretty close to the value it’s providing me, maybe cheaper if the insurance industry has some advantage like good rate of return or higher if they are uncompetitive. That makes me indifferent to whether I have insurance in a lot of areas. Therefore, I’m not spending a lot of time purchasing insurance. Nothing against the industry. Given I’m unable to produce the probabilities necessary to compute the Kelly criterion, I can’t use that to make the decision. Instead, I have to use dumb heuristics like “I need liability insurance to get rid of my risk of ruin” or “I can easily afford to replace my car, but my passion is parking underneath dead trees during storms, so I should pay for comprehensive coverage.” In either case I have no idea how to compute the probabilities, but I’m still pretty sure I made the right decision.
  - kqr 2y ago
    > If I believe insurance is well-priced, the cost ought to be pretty close to the value it’s providing me The value of insurance to the buyer depends on the buyer's wealth. The insurance the electronics store offers on the tablet I buy is well-priced for their target audience but not for someone with my emergency expense buffer.
    - aoanevdus 2y ago
      But how do I evaluate how the magnitude of effect of my income on the value I get from the insurance (relative to the average buyer who sets the market price) if I’m lacking the figures to compute the Kelly criterion? Is it useful to me at all as a consumer? Is there version of the formula I can use if I want to implicitly accept the work of the insurance company’s actuaries, but skew the result to account for how I differ from the average customer?
      - kqr 2y ago
        That's an interesting question! The actual risk assessments thr insurer does are obviously confidential, but you're asking whether we can reverse engineer their premiums into underlying probability estimations? So we'd still be estimating probabilities, but based on information leaked from insurers instead of first principles. Could work! I don't know how, though.

kqr 2y ago

It seems like you're assuming a zero-sum game here where you are hoping to earn more from insurance claims than you paid in premium. This is not how insurance is supposed to be evaluated, as TFA points out. You're not against the insurance company. Your decision is relatively separate from theirs.

aoanevdus 2y ago
If I believe insurance is well-priced, the cost ought to be pretty close to the value it’s providing me, maybe cheaper if the insurance industry has some advantage like good rate of return or higher if they are uncompetitive. That makes me indifferent to whether I have insurance in a lot of areas. Therefore, I’m not spending a lot of time purchasing insurance. Nothing against the industry. Given I’m unable to produce the probabilities necessary to compute the Kelly criterion, I can’t use that to make the decision. Instead, I have to use dumb heuristics like “I need liability insurance to get rid of my risk of ruin” or “I can easily afford to replace my car, but my passion is parking underneath dead trees during storms, so I should pay for comprehensive coverage.” In either case I have no idea how to compute the probabilities, but I’m still pretty sure I made the right decision.
- kqr 2y ago
  > If I believe insurance is well-priced, the cost ought to be pretty close to the value it’s providing me The value of insurance to the buyer depends on the buyer's wealth. The insurance the electronics store offers on the tablet I buy is well-priced for their target audience but not for someone with my emergency expense buffer.
  - aoanevdus 2y ago
    But how do I evaluate how the magnitude of effect of my income on the value I get from the insurance (relative to the average buyer who sets the market price) if I’m lacking the figures to compute the Kelly criterion? Is it useful to me at all as a consumer? Is there version of the formula I can use if I want to implicitly accept the work of the insurance company’s actuaries, but skew the result to account for how I differ from the average customer?
    - kqr 2y ago
      That's an interesting question! The actual risk assessments thr insurer does are obviously confidential, but you're asking whether we can reverse engineer their premiums into underlying probability estimations? So we'd still be estimating probabilities, but based on information leaked from insurers instead of first principles. Could work! I don't know how, though.