Health insurance and car insurance

[PAF]

Of course risk should be factored in. Insurance cannot work any other way. The only way around this is to introduce force (e.g., the government) into the matter - for example, by mandating "universal" coverage in order to make up for the shortfalls that will occur because risk is not allowed to be accounted for ... (and at that point, we are no longer talking about "insurance" at all - we are talking about "entitlement" ...)



Under a genuinely private, free-market insurance regime, if consistently doing those or other things correlates to a sufficiently high degree with greater liability, then those who do those things should indeed be considered more "risky" - because they are.

And if the actuarial analysis used by an insuror to identify "risky" insureds consistently miscalculates risk (by mistakenly identifying "risky" insureds as "not risky" or, conversely, misidentifying "not risky" insureds as "risky"), then the market will punish that insuror by inflicting losses (or reducing profits) commensurate to the degree of its miscalculations.

That is, after all, exactly how free markets are supposed to work. You judge and assess a risk and then either accept or reject it. If your accept it, then you reap the reward if the risk pays off, and you bear the burden if it does not - and you do it all without interference from others except in cases of force or fraud. It is no different for insurance than for any other enterprise, and it is simply absurd to say that insurors should not factor in the risk of liability when issuing or pricing policies.

I totally agree with that. I should have taken the time to note that government has no business in risk assessment for private companies. Thanks for the clarify + Rep.

 

[Occam's Banana]

I totally agree with that. I should have taken the time to note that government has no business in risk assessment for private companies.

Exactly. Among other things, government interference knocks actuarial soundness into a cocked hat. When "insurance"[1] is mandated "universally," insurors have a captive market. As a result, they can evade a lot of the discipline that a free market would impose on them. They can get away with overcharging or under-serving their insureds (by using actuarially dubious excuses to increase premiums, for example), because, hey, you're forced to get insurance from somewhere, so whaddaya gonna do? Switch to some other insuror that has the very same perverse incentives under the very same government regulations and mandates? Hah!

And this, of course, leads to yet more government interference in the name of "protecting" consumers from the very abuses that the government's previous regulations and mandates caused in the first place ...

... and the wheel goes round and round ...



[1] I put "insurance" in quotes because, as I noted before, it's not really insurance at that point - it's an entitlement (a half-assed sort of entitlement, to be sure, and one that at least some people are forced to pay premiums for, but an entitlement nonetheless).

 

[PAF]

Exactly. Among other things, government interference knocks actuarial soundness into a cocked hat. When "insurance"[1] is mandated "universally," insurors have a captive market. As a result, they can evade a lot of the discipline that a free market would impose on them. They can get away with overcharging or under-serving their insureds (by using actuarially dubious excuses to increase premiums, for example), because, hey, you're forced to get insurance from somewhere, so whaddaya gonna do? Switch to some other insuror that has the very same perverse incentives? Hah!

And this, of course, leads to yet more government interference in the name of "protecting" consumers from the very abuses that the government's previous regulations and mandates caused in the first place ...

... and the wheel goes round and round ...



[1] I put "insurance" in quotes because, as I noted before, it's not really insurance at that point. It's an entitlement.

Well said. Out of + Rep so here you go.

 

[aGameOfThrones]

Insurance premiums are based on risk. If you are a riskier driver then you should probably expect to pay more in premiums.

Then again, there's a good argument to be made on whether or not it is law-enforcement's place to be doing risk-assessment for insurance companies. Would we rather have insurance companies spying on our driving habits?


Insurance is the real racket. My mother tried progressive's little SNAPSHOT device that plugs into the computer of the car, which supposedly helps lower rates for good drivers, and ALL it does is measure braking habits. If you live in the city and have a traffic light every 100 feet, you're screwed. It is better to NOT opt not to use the device and rely solely on your driving record to argue for lower premiums.

They also use your credit history in the equation.

 

[nobody's_hero]

They also use your credit history in the equation.

I think practically every business does. That's fairly standard before anyone even wants to do any business with you.


My point was that for the sake of determining rates, the insurance companies don't really care that what you do with your property might be illegal or not. They just want to know what risks are involved.


It's not illegal to have a fireplace in your home or smoke cigarettes indoors (well, unless you live in Ban Francisco), but those were still questions I had to answer when I applied for homeowner's insurance.

 

[shakey1]

Exactly. Among other things, government interference knocks actuarial soundness into a cocked hat. When "insurance"[1] is mandated "universally," insurors have a captive market. As a result, they can evade a lot of the discipline that a free market would impose on them. They can get away with overcharging or under-serving their insureds (by using actuarially dubious excuses to increase premiums, for example), because, hey, you're forced to get insurance from somewhere, so whaddaya gonna do? Switch to some other insuror that has the very same perverse incentives under the very same government regulations and mandates? Hah!

And this, of course, leads to yet more government interference in the name of "protecting" consumers from the very abuses that the government's previous regulations and mandates caused in the first place ...

... and the wheel goes round and round ...



[1] I put "insurance" in quotes because, as I noted before, it's not really insurance at that point - it's an entitlement (a half-assed sort of entitlement, to be sure, and one that at least some people are forced to pay premiums for, but an entitlement nonetheless).

Well said... outta rep ammo