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I like it when unsafe drivers pay the costs of the way they endanger all of us.
by wbl 2y ago
I like it when unsafe drivers pay the costs of the way they endanger all of us.
- Scoundreller 2y agoOnce insurance companies can charge perfect premiums, there will be no point in buying insurance at all.
- esafak 2y agoOn average you will pay more, but not all at once, which may be prohibitively expensive. There will still be value in insurance.
- airstrike 2y agoThat's the same as putting it in a piggy bank, isn't it? Or even better in a fixed income account.
- cossatot 2y agoNo, because the amount of money you have in a bank account accumulates linearly, so you can only pay up to what you have put in. With insurance, you can get a payout more than what you have contributed up to that point, which is necessary for covering catastrophic damages.
- StackRanker3000 2y agoBut in this hypothetical the insurance company has perfect information, so they won’t sell you that policy that has to be paid out for more than you’ve contributed. It’s just a thought experiment, but the more information they have on us, the more relevant it becomes.
- ses1984 2y agoThey can’t predict the future, they can’t predict exactly when you’ll get in an accident. Perfect information means they know your risk level to the best possible accuracy, which would really only apply to populations. Perfect information means they insure 1000 people and predict they’ll have one bad accident per year. After ten years they covered for ten accidents. All ten could have occurred in the first year and they would still be correct.
- StackRanker3000 2y ago> They can’t predict the future, they can’t predict exactly when you’ll get in an accident. That’s why it’s a thought experiment, and not real life. > Perfect information means… No, that’s not what was meant by perfect information in this instance.
- ses1984 2y agoThen it’s a boring thought experiment. It hardly deserves the name “experiment”.
- StackRanker3000 2y agoSure. I can’t speak for Scoundreller, but I don’t think it was meant to be particularly interesting, just pointing out to wbl that if insurance was to become perfectly fair, it will also have become pointless.
- ses1984 2y agoThere’s a pretty big leap between perfectly fair and having perfect knowledge of the future. You can know that a fair coin gives exactly 50% chance to flip heads or tails without knowing what the outcome of the flip is going to be.
- StackRanker3000 2y ago
- drawkward 2y agoWith interest, the growth is superlinear
- BobaFloutist 2y agoExactly the same, as long as you don't get unlucky and have an accident before you've saved up enough. Which is the entire point of insurance.
- ses1984 2y agoWhat if you have perfect information and conclude that your chance of being in a terrible accident, requiring tens of millions of dollars of medical care and property repair, is 1% for every billion miles of driving, and you’re the unlucky person who happened to be behind the wheel. Will you have enough money in your piggy bank to cover it? Maybe you could argue you shouldn’t have to cover medical expenses if we had a single payer system—the money to mitigate medical risk from driving still has to come from somewhere. Maybe you could argue that damage to property should come from those property owners’ insurance. What if you don’t get into a terrible accident, you just get into a boring accident where you total your car and don’t hurt anyone. You know the odds of this are low, chances are it won’t happen in your life, but it will probably happen to someone you know. What if it happens to you, when you’re very young and have a new car? You haven’t had a chance to put away any money in your piggy bank yet. You need to replace your car now. How does a piggy bank help you?
- orangecat 2y agoNo, because the utility of money isn't linear. It often makes sense to pay a bit more than $1000 to mitigate a 1% chance of losing $100k.
- Scoundreller 2y agoIf insurance pricing is perfect, they’ll charge you $100k+ if you’re going to have a $100k claim.
- s1artibartfast 2y agoUnderrated comment. perfect prediction turns insurance into a payment plan.
- potato3732842 2y agoA really crappy payment plan that has a ton of overhead you pay extra to make up for.
- diogocp 2y agoThat's not how insurance works. You buy insurance if there is an uncertain outcome, e.g. a 1% probability of having a $100k claim. In which case you can expect to be charged around 1% of $100k (plus admin costs and whatnot). Perfect information means you know the exact probability of the event happening. It doesn't mean that you know with certainty whether an event will happen or not. That would require a crystal ball or a time machine.
- bluGill 2y agoIf I'm going to have a $100k claim I'm not going to drive. There is nothing in life worth doing despite it causing a $100k claim. It can wait (or I'll pay for a taxi). However I need to do things and there is a small chance I will do something wrong and thus incure that $100k claim.
- _DeadFred_ 2y agoTime for a credit union version of insurance coverage.
- SoftTalker 2y agoThey exist, they are called mutual insurance companies. https://en.wikipedia.org/wiki/Mutual_insurance https://en.wikipedia.org/wiki/Mutual_insurance
- reaperducer 2y agoThis already exists. I believe State Farm is one of them.
- bradleybuda 2y agoCorrect. As a State Farm policy holder, I get an annual letter reminding me that I am also an owner and have governance rights (basically a proxy vote). More similar to Vanguard than a credit union.
- gruez 2y agoThat sounds... fine? If the prediction algorithm really is perfect, and it predicts my next trip is going to result in a fender bender, I'm certainly going to take uber or public transit. Even if it ends up costing an extra $50 or 2 hours of my time, that's still better than paying for hundreds/thousands of dollars worth of repairs.
- yuliyp 2y agoIf you know the future exactly, then sure. If your knowledge of the future is just in expected values, then it can still make sense. Imagine the radio station doing a "we'll give you a million bucks if X happens" promotion, when X is truly random. The radio station doesn't have a million bucks to front that randomness, but the insurance company can do it.
- wbl 2y agoHanford has low rates and payouts. But their inspections were very demanding. They invented the Hanford Loop that keeps feed water in the boiler in case of a break, etc, etc. Being insured by them meant you'd be safe!
- eptcyka 2y agoOh yeah, I loved paying more than the purchase price of the car per year as a young driver. I have since crashed 0 cars, I am yet to kill anyone. In fact, the car mechanically totaled itself before I got to finish my years worth of insurance. On which I never got a refund on. The pay-as-you-drive model might paint a picture of a more equal playing field, where everyone pays what they are due, but I think it is mostly a sham to squeeze more money out of people.
- hatsunearu 2y agoIf you actually have a tracking system like this (a lot of insurance companies will offer it), you'll find the bar for unsafe driving is ridiculously low. The truth is insurance agencies always want to find a reason to increase your premiums, because the law says you can't just increase the premiums for no reason. Most premiums are lower than what it "needs" to be, so if they find an excuse, they will jack up the premiums.
- StackRanker3000 2y agoHow does that work in practice? Do insurers have to share their models with the regulator?
- bkberry352 2y agoYes, models have to be shared with regulators and the regulators have to be convinced that the premiums insurers wish to charge are actuarially justified (supported by the data).
- bradleybuda 2y agoThese same companies ruthlessly compete on rates in the consumer marketplace
- positr0n 2y ago> The truth is insurance agencies always want to find a reason to increase your premiums, because the law says you can't just increase the premiums for no reason. How does this work? Are you saying all the insurance companies share data and collude to set your rate? Or they just hope you don't price shop every year or two and jump to an offering that is under the legal limit (whatever that is)? My state has over 50 auto insurance companies, so I don't see why they would have to resort to tricks like that to increase your rate in an unfair way.
- likeabatterycar 2y ago'Unsafe' is a subjective label often applied haphazardly. I find people quick to label others as 'unsafe' tend to behave in unsafe ways of their own on the road, such as parking themselves in the left lane at or below the speed limit and refusing to move over.
- gruez 2y ago>'Unsafe' is a subjective label often applied haphazardly. Insurance companies have actuaries to classify risk. They're not asking armchair drivers on hacker news to determine what is dangerous or not.
- rconti 2y agoI like it when people naïvely believe the insurance companies' model of safety has anything to do with actual safety.
- bradleybuda 2y agoThe insurance companies are betting their margins on this. If they are wrong, they will fail in the marketplace.
- josephcsible 2y agoSince having insurance is mandatory, if they all charge too much, they won't fail.
- gruez 2y ago> if they all charge too much, they won't fail. What prevents one company from defecting and taking all the market share?
- bluGill 2y agoThey do not have a monopoly. There is plenty of room for a handful of companies charging too much to fail. there is also plenty of room for companies charging too little to fail.
- drawkward 2y agooh yes, please tell us about this imaginary perfect marketplace. where does it exist?
- s1artibartfast 2y agoa perfect one doesn't, but you would be just as crazy to think that no market place exists either. Insurance companies do in fact compete on rates.
- potato3732842 2y ago
- teeray 2y agoWe all do. However, the false premise here is that this data is able to reliably classify drivers into "safe" and "unsafe". If you brake hard, you might save a pedestrian's life. If you don't brake at all, you will kill them. This data lacks context for driver actions to reliably perform that classification. Also, it is also not subject to any kind of appeal where you can bring such other context and facts to bear on the determination if it determines you are "unsafe".
- gruez 2y agoBy that logic should we stop having red light and speed cameras? After all, it's not hard to come up with plausible sounding reasons why you might be forced to speed or run a red light.
- teeray 2y agoIt is not “by that logic,” since the comment specifically referenced “this data”, meaning inertial and positional telemetry collected by insurers from apps like Gas Buddy, as the article references. Introducing external speed cameras is a strawman.