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I...bought...twenty shares of Augury Insurance (which sells auto insurance — a good bet, considering all the cars I've been wrecking) I'd argue the opposite, n

by nlh 13y ago

I...bought...twenty shares of Augury Insurance (which sells auto insurance — a good bet, considering all the cars I've been wrecking) I'd argue the opposite, no? The 100-year-storm of destruction that we, as Player 1, unleash upon the poor Liberty City automotive world would probably make any insurance company run screaming and crying in the opposite direction of profitability. "We had HOW MANY claims yesterday afternoon??" :)

coob 13y ago
That's what reinsurance is for :)
petercooper 13y ago
I'm naive on this topic, but wouldn't a high number of claims be either neutral or positive if said level is anticipated or consistent (as in the crime-ridden metropolis of LS or LC)? Ultimately, all policyholders will pay through higher premiums, and it'd be easier to make a profit (in absolute amounts) on high premiums since bumping up $1000 to $1030 looks a lot less onerous than $300 vs $330. As I said though, I'm naive on this, but I'm guessing only unanticipated high levels of claims would hit insurers hard.
- boomzilla 13y ago
  Assuming efficient market, insurance industry will do best in more volatile conditions. The reason is insurance is essentially risk trading and they have the advantage of having access to more information and therefore can come up with more optimal risk trading strategies.
6cxs2hd6 13y ago
To stay in business, casinos need to be a bad deal for customers _as a group_. Did I say casinos? I meant insurance companies. Seriously, insurance is a bet on something bad happening. Usually it only makes sense to buy insurance for the equivalent of long-shot "lottery jackpots". Like a catastrophic health problem. Or like the damage you might do to other people and their property in an auto accident --- but probably _not_ the damage to your own car. i.e. Insure for personal liability calamities, but not collision damage if you could pay for it out of savings.
- aninhumer 13y ago
  Insurance is the opposite of gambling. You take a guaranteed loss instead of risking a huge one. Not having insurance is a bet that nothing bad will happen. If you can afford to replace everything you own out of savings, good for you, but most people can't.
  - roc 13y ago
    Beyond that, given the perverse 'market' for health care in the US, even if you can (theoretically) afford to self-insure, the pricing mechanisms and negotiating power of insurance companies practically ensures that they can offer you premiums for less than your out-of-pocket cost for even fairly pedestrian services.
    - mcdougle 13y ago
      There are (or at least were when I sold insurance) products that costed very little (compared to an actual plan) that provided you with the negotiated price the insurance company would pay if something happens. If you can afford to self-insure, the best bet would be to buy one of these products and store the rest in the bank. No clue if those things exist anymore with everything going on in the world of health insurance, though.
      - tanzam75 13y ago
        But you really can't afford to self-insure, even if you're young and healthy. There's always the small but real chance of getting a catastrophic illness and running up a million dollar bill. Therefore, you really need to buy at least catastrophic coverage. And that's real insurance, not self-insurance.
        tedunangst 13y ago
        Health insurance is complicated because for most people, it's so much more than just insurance. It's prepaying $300 a month so you don't have to pay $200 to visit the doctor once per year. No, I don't know why people do that. You're right that paying $100 a month for "please reattach my severed limbs" insurance is more affordable. Terminology be damned, that's possibly what people mean by "self-insured". They pay day to day expenses out of pocket.
hackula1 13y ago
I used to work in insurance in a hurricane zone. Yes, claims hurt an insurance company, but right after the storm is also when everyone calls up and upgrades their policies. I would say its a wash, if not actually a positive. If 5 homes get knocked over by a tornado, it is pretty much free advertising to millions of homes in the region as it makes the news rounds.
- patio11 13y ago
  Plus, if you're an insurance company in a hurricane zone, you carry a "megacat" (a catastrophic event insurance which is rather larger than most consumer grade policies, to put it mildly) policy underwritten by, most of the time, Berkshire Hathaway. If you sustain $1 billion in claims then you call up Warren Buffet and say "Sorry Warren, we just won our bet and will be needing those premiums back, and quite a bit more." and he'll say "Ah, shucks, guess I don't crush the market quite so thoroughly this year. Oh well, I still get to keep all of my winnings from investing the float in good years."
a-priori 13y ago
It doesn't matter to an insurance company how likely car crashes are -- that just determines what the company charges in premiums. All that matters is that the likelihood is well understood and that the company has enough customers to stay solvent. Insurance companies essentially work by the Law of Large Numbers: that in a large enough number of trials, the average value should approach the expected value. In real world terms, if the chance of a house burning down in a fire is 1 per year per 1000 homes at an average cost of $200k each to repair (totally bogus numbers), then an insurance company can break even by charging a homeowner $200/year to insure the home against fire. Over a large enough number of homes, that should be reasonably close to the actual amount they have to pay out. Tack on a profit margin, and you have a business model. Edit: Fixed numbers a bit. Thank goodness I'm not an actuary.
- gohrt 13y ago
  I think you overlooked that in GTA we have a > 100-year-storm of destruction In the game world, insurance companies wouldn't have predicted the level of claims.
  - a-priori 13y ago
    I haven't played the game. If the game's premise is that there's a one-of-a-kind rampage going on that's causing all sorts of mayhem that couldn't have been predicted, then I agree that buying shares in an insurance company would be a bad idea. But if the game's premise is that the mayhem is normal within the world, then insurance would be stupid expensive. But, assuming the market can bear those prices, insurance would be a good business to be in.
    - jlgreco 13y ago
      It's a game where getting into a fender bender with a cop car often results in hundreds of blown up cars, numerous car-jackings, and several crashed helicopters an hour or two later, but only if your character is involved.
- drbaskin 13y ago
baddox 13y ago
What scenario would be good for a car insurance company? If cars never have any problems, then no one would buy car insurance (perhaps other than the government-mandated minimum). So is there some happy medium where the insurance industry would thrive?
- aninhumer 13y ago
  The ideal scenario is that the public hugely overestimate the risk of car accidents.
  - eru 13y ago
    So a few high profile incidents like the ones caused by the protagonist are exactly what you need.

by nlh 13y ago

coob 13y ago

That's what reinsurance is for :)

petercooper 13y ago

I'm naive on this topic, but wouldn't a high number of claims be either neutral or positive if said level is anticipated or consistent (as in the crime-ridden metropolis of LS or LC)? Ultimately, all policyholders will pay through higher premiums, and it'd be easier to make a profit (in absolute amounts) on high premiums since bumping up $1000 to $1030 looks a lot less onerous than $300 vs $330. As I said though, I'm naive on this, but I'm guessing only unanticipated high levels of claims would hit insurers hard.

boomzilla 13y ago
Assuming efficient market, insurance industry will do best in more volatile conditions. The reason is insurance is essentially risk trading and they have the advantage of having access to more information and therefore can come up with more optimal risk trading strategies.

6cxs2hd6 13y ago

To stay in business, casinos need to be a bad deal for customers _as a group_. Did I say casinos? I meant insurance companies. Seriously, insurance is a bet on something bad happening. Usually it only makes sense to buy insurance for the equivalent of long-shot "lottery jackpots". Like a catastrophic health problem. Or like the damage you might do to other people and their property in an auto accident --- but probably _not_ the damage to your own car. i.e. Insure for personal liability calamities, but not collision damage if you could pay for it out of savings.

aninhumer 13y ago
Insurance is the opposite of gambling. You take a guaranteed loss instead of risking a huge one. Not having insurance is a bet that nothing bad will happen. If you can afford to replace everything you own out of savings, good for you, but most people can't.
- roc 13y ago
  Beyond that, given the perverse 'market' for health care in the US, even if you can (theoretically) afford to self-insure, the pricing mechanisms and negotiating power of insurance companies practically ensures that they can offer you premiums for less than your out-of-pocket cost for even fairly pedestrian services.
  - mcdougle 13y ago
    There are (or at least were when I sold insurance) products that costed very little (compared to an actual plan) that provided you with the negotiated price the insurance company would pay if something happens. If you can afford to self-insure, the best bet would be to buy one of these products and store the rest in the bank. No clue if those things exist anymore with everything going on in the world of health insurance, though.
    - tanzam75 13y ago
      But you really can't afford to self-insure, even if you're young and healthy. There's always the small but real chance of getting a catastrophic illness and running up a million dollar bill. Therefore, you really need to buy at least catastrophic coverage. And that's real insurance, not self-insurance.
      - tedunangst 13y ago
        Health insurance is complicated because for most people, it's so much more than just insurance. It's prepaying $300 a month so you don't have to pay $200 to visit the doctor once per year. No, I don't know why people do that. You're right that paying $100 a month for "please reattach my severed limbs" insurance is more affordable. Terminology be damned, that's possibly what people mean by "self-insured". They pay day to day expenses out of pocket.

hackula1 13y ago

I used to work in insurance in a hurricane zone. Yes, claims hurt an insurance company, but right after the storm is also when everyone calls up and upgrades their policies. I would say its a wash, if not actually a positive. If 5 homes get knocked over by a tornado, it is pretty much free advertising to millions of homes in the region as it makes the news rounds.

patio11 13y ago
Plus, if you're an insurance company in a hurricane zone, you carry a "megacat" (a catastrophic event insurance which is rather larger than most consumer grade policies, to put it mildly) policy underwritten by, most of the time, Berkshire Hathaway. If you sustain $1 billion in claims then you call up Warren Buffet and say "Sorry Warren, we just won our bet and will be needing those premiums back, and quite a bit more." and he'll say "Ah, shucks, guess I don't crush the market quite so thoroughly this year. Oh well, I still get to keep all of my winnings from investing the float in good years."

a-priori 13y ago

It doesn't matter to an insurance company how likely car crashes are -- that just determines what the company charges in premiums. All that matters is that the likelihood is well understood and that the company has enough customers to stay solvent. Insurance companies essentially work by the Law of Large Numbers: that in a large enough number of trials, the average value should approach the expected value. In real world terms, if the chance of a house burning down in a fire is 1 per year per 1000 homes at an average cost of $200k each to repair (totally bogus numbers), then an insurance company can break even by charging a homeowner $200/year to insure the home against fire. Over a large enough number of homes, that should be reasonably close to the actual amount they have to pay out. Tack on a profit margin, and you have a business model. Edit: Fixed numbers a bit. Thank goodness I'm not an actuary.

gohrt 13y ago
I think you overlooked that in GTA we have a > 100-year-storm of destruction In the game world, insurance companies wouldn't have predicted the level of claims.
- a-priori 13y ago
  I haven't played the game. If the game's premise is that there's a one-of-a-kind rampage going on that's causing all sorts of mayhem that couldn't have been predicted, then I agree that buying shares in an insurance company would be a bad idea. But if the game's premise is that the mayhem is normal within the world, then insurance would be stupid expensive. But, assuming the market can bear those prices, insurance would be a good business to be in.
  - jlgreco 13y ago
    It's a game where getting into a fender bender with a cop car often results in hundreds of blown up cars, numerous car-jackings, and several crashed helicopters an hour or two later, but only if your character is involved.
drbaskin 13y ago

baddox 13y ago

What scenario would be good for a car insurance company? If cars never have any problems, then no one would buy car insurance (perhaps other than the government-mandated minimum). So is there some happy medium where the insurance industry would thrive?

aninhumer 13y ago
The ideal scenario is that the public hugely overestimate the risk of car accidents.
- eru 13y ago
  So a few high profile incidents like the ones caused by the protagonist are exactly what you need.