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Yet, the end game is that everyone can predict risk so thoroughly that insurance is pointless. Not true. Suppose you have a 0.01% chance of needing a $10M trea

Yet, the end game is that everyone can predict risk so thoroughly that insurance is pointless. Not true. Suppose you have a 0.01% chance of needing a $10M treatment in your lifetime. First of all you can't say, "Oh I'll just self insure" because few people have $10M. Second, you may decide that paying $10,000 over the course of your lifetime is preferable to risking a payment of $10M. Removing uncertainty doesn't eliminate the need for insurance, it just reduces the opportunity for risky subscribers to socialize their risk, and for insurance companies to reap gross profit.

Scoundreller 12y ago
Um, in both of those cases, removing the uncertainty would eliminate the need for insurance: In the first, the insurance company would know, with certainty, who falls into that 0.01% category, and charge them $10m for insurance in their lifetime. In the second, the insurance company, with certainty, would know what year the treatment is needed, and charge a $10m premium for that year only.
- sliverstorm 12y ago
  Ok, I guess what I mean is eliminating uncertainty in risk profiles. IMO we are headed towards a world with good risk profiling- but I doubt we are anywhere close to predicting the future with certainty. Insurance companies are identifying things like "Driving at night increases risk of accident". They are nowhere close to, "A blue corvette driven by a 43 year old male will rear-end a ford pinto today"
- lilsunnybee 12y ago
  As of January 2014, the ACA made it illegal to base premiums on current or past health status. So at least in the US pricing like this no longer occurs.
  - Scoundreller 12y ago
    Which means that if your current and past health status are poor, you're probably aware of this, and should sign up for the best insurance you can, since you're far more likely to reap the benefits. You should overinsure yourself, and buy some investments in the hospitals that you're going to be visiting. Those with above average current and past health status should enrol into the very least amount of insurance they can get away with.
    - mikeash 12y ago
      This is, of course, why the law against changing premiums based on a person's health status was combined with a law requiring everybody to buy fairly comprehensive insurance whether or not they want it.
mikeash 12y ago
A 0.01% chance means uncertainty. Eliminating uncertainty would mean that you know your risk is either 1 or 0. If it's 0, you wouldn't buy insurance, and if it's 1, they wouldn't sell it.

Scoundreller 12y ago

Um, in both of those cases, removing the uncertainty would eliminate the need for insurance: In the first, the insurance company would know, with certainty, who falls into that 0.01% category, and charge them $10m for insurance in their lifetime. In the second, the insurance company, with certainty, would know what year the treatment is needed, and charge a $10m premium for that year only.

sliverstorm 12y ago
Ok, I guess what I mean is eliminating uncertainty in risk profiles. IMO we are headed towards a world with good risk profiling- but I doubt we are anywhere close to predicting the future with certainty. Insurance companies are identifying things like "Driving at night increases risk of accident". They are nowhere close to, "A blue corvette driven by a 43 year old male will rear-end a ford pinto today"
lilsunnybee 12y ago
As of January 2014, the ACA made it illegal to base premiums on current or past health status. So at least in the US pricing like this no longer occurs.
- Scoundreller 12y ago
  Which means that if your current and past health status are poor, you're probably aware of this, and should sign up for the best insurance you can, since you're far more likely to reap the benefits. You should overinsure yourself, and buy some investments in the hospitals that you're going to be visiting. Those with above average current and past health status should enrol into the very least amount of insurance they can get away with.
  - mikeash 12y ago
    This is, of course, why the law against changing premiums based on a person's health status was combined with a law requiring everybody to buy fairly comprehensive insurance whether or not they want it.

mikeash 12y ago

A 0.01% chance means uncertainty. Eliminating uncertainty would mean that you know your risk is either 1 or 0. If it's 0, you wouldn't buy insurance, and if it's 1, they wouldn't sell it.