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What if Paul built his house somewhere less flammable? I see options here where Peter doesn't need to be robbed, he could pay a fair rate and Paul could make le

by roenxi 2y ago

What if Paul built his house somewhere less flammable? I see options here where Peter doesn't need to be robbed, he could pay a fair rate and Paul could make less risky decisions. If one pool of people are taking a bad deal vs the market rate when buying insurance then it isn't really insurance any more. It is a transfer payment a.k.a. welfare. Which is cool and all in the sense that welfare is a social tool that exists. But calling it 'insurance' is needlessly polluting the language. If people expect to hoover money off others then they should be charged more until the expected return of everyone in the insured pool is equal. If the payouts are going to be held equal in the event of a disaster then that means the price of insurance has to vary depending on the risk profile of the customers.

snacksmcgee 2y ago
The tricky thing about global climate change is the "global" part. Funny how that works.
- fakedang 2y ago
  The LA fires aren't a climate fire though. For other disasters, while climate change is "global", the effects are pretty much localized and to various degrees. Some places have had adapted construction to those kinds of blue moon disasters since centuries, so why should they part with more money?
throwawayqqq11 2y ago
> It is a transfer payment a.k.a. welfare Its called solidarity and yes, it means some people NOT have to pay more but others recieve more. Paul AND Peter get the security of disaster coverage in exchange. This is what you pay for. A big risk pool and not your individual disaster recovery.
- JoshTriplett 2y ago
  If you want "solidarity" you need a government service. Private insurance has every incentive to price things accurately and not subsidize higher-risk people. If you tell insurance companies what they have to charge, they have every reason to say "nope, I don't want to offer that service at that price, that doesn't make economic sense".
  - oytis 2y ago
    Insurance that is able to quantify risks precisely and set prices individually based on that is useless. If it has to make any profits - or at least pay salaries - it's guaranteed to be a bad deal for everyone. Whereas solidarity can bring a better society - which even those who have to occasionally pay more benefit from in the end.
    - roenxi 2y ago
      > If it has to make any profits - or at least pay salaries - it's guaranteed to be a bad deal for everyone. It is insurance. You pay money, the company takes away the risk. That doesn't make it a bad deal, that makes it a service. That is like complaining about a hypothetical garbage company that charges for taking away trash even though the trash might have some notional value. Insurance isn't an investment scheme. If you want to pay money for a positive-expected-value deal, go buy stocks and bonds.
    - purple_turtle 2y ago
      whole point of insurance is that you pay for avoiding risk in other words, you pay more than you would on average loss from bad events - but you avoid catastrophic losses that would break your life that is why insuring your phone is likely a bad idea (as you can pay for a new one) but liability insurance or insuring your home/flat may make sense > If it has to make any profits - or at least pay salaries - it's guaranteed to be a bad deal for everyone. paying 3k per year, to avoid 1% risk of 250k losses may be a good idea, especially if 3k loss is survivable without trouble and 250k loss would be more than 90 times worse.
      - oytis 2y ago
        > paying 3k per year, to avoid 1% risk of 250k losses may be a good idea You are basically guaranteed to pay 3k to avoid financial risk with a mean value of 2,5k. That sounds like a fallacy to me (isn't it the same as saying that paying 3k for 1% chance of winning 250k is a good idea?), may make sense psychologically though.
- kalkin 2y ago
  Incentivizing people to build homes that are likely enough to burn down as to be economically uninsurable is an absolutely wild abuse of the term "solidarity". Solidarity is the idea that an injury to one is an injury to all, not the idea that choices should have no consequences and the environment shouldn't constrain humans; the only way you can possibly sustain a world in which people actually treat an injury to one as an injury to all, is together with some effort to avoid people from gratuitously exposing themselves to injury.

by roenxi 2y ago

snacksmcgee 2y ago

The tricky thing about global climate change is the "global" part. Funny how that works.

fakedang 2y ago
The LA fires aren't a climate fire though. For other disasters, while climate change is "global", the effects are pretty much localized and to various degrees. Some places have had adapted construction to those kinds of blue moon disasters since centuries, so why should they part with more money?

throwawayqqq11 2y ago

> It is a transfer payment a.k.a. welfare Its called solidarity and yes, it means some people NOT have to pay more but others recieve more. Paul AND Peter get the security of disaster coverage in exchange. This is what you pay for. A big risk pool and not your individual disaster recovery.

JoshTriplett 2y ago
If you want "solidarity" you need a government service. Private insurance has every incentive to price things accurately and not subsidize higher-risk people. If you tell insurance companies what they have to charge, they have every reason to say "nope, I don't want to offer that service at that price, that doesn't make economic sense".
- oytis 2y ago
  Insurance that is able to quantify risks precisely and set prices individually based on that is useless. If it has to make any profits - or at least pay salaries - it's guaranteed to be a bad deal for everyone. Whereas solidarity can bring a better society - which even those who have to occasionally pay more benefit from in the end.
  - roenxi 2y ago
    > If it has to make any profits - or at least pay salaries - it's guaranteed to be a bad deal for everyone. It is insurance. You pay money, the company takes away the risk. That doesn't make it a bad deal, that makes it a service. That is like complaining about a hypothetical garbage company that charges for taking away trash even though the trash might have some notional value. Insurance isn't an investment scheme. If you want to pay money for a positive-expected-value deal, go buy stocks and bonds.
  - purple_turtle 2y ago
    whole point of insurance is that you pay for avoiding risk in other words, you pay more than you would on average loss from bad events - but you avoid catastrophic losses that would break your life that is why insuring your phone is likely a bad idea (as you can pay for a new one) but liability insurance or insuring your home/flat may make sense > If it has to make any profits - or at least pay salaries - it's guaranteed to be a bad deal for everyone. paying 3k per year, to avoid 1% risk of 250k losses may be a good idea, especially if 3k loss is survivable without trouble and 250k loss would be more than 90 times worse.
    - oytis 2y ago
      > paying 3k per year, to avoid 1% risk of 250k losses may be a good idea You are basically guaranteed to pay 3k to avoid financial risk with a mean value of 2,5k. That sounds like a fallacy to me (isn't it the same as saying that paying 3k for 1% chance of winning 250k is a good idea?), may make sense psychologically though.
kalkin 2y ago
Incentivizing people to build homes that are likely enough to burn down as to be economically uninsurable is an absolutely wild abuse of the term "solidarity". Solidarity is the idea that an injury to one is an injury to all, not the idea that choices should have no consequences and the environment shouldn't constrain humans; the only way you can possibly sustain a world in which people actually treat an injury to one as an injury to all, is together with some effort to avoid people from gratuitously exposing themselves to injury.