Drivers: Don’t allow insurance companies to use speed camera data. We don’t want bad drivers to pay more.
Also drivers: Insurance premiums are too expenvie. Do something.
Governor: 🙆
Drivers: Don’t allow insurance companies to use speed camera data. We don’t want bad drivers to pay more.
Also drivers: Insurance premiums are too expenvie. Do something.
Governor: 🙆
I never understood different rates for different insurance risk profiles.
The whole point of insurance is agrigate risk. Risk based rates work against that idea, defeating the purpose of insurance.
Because an insurance is nothing more than a glorified bet. “I bet you that this year you won’t crash your car. If I lose I pay you X. But next bet will be more expensive for you if I lose”
That’s because you misunderstand the purpose of insurance.
The purpose of insurance is to provide stability.
That is, instead of paying a lot of money with a low frequency, you pay a small amount of money with high frequency.
Of course, as the provider of that “stability service”, you pay the insurance company.
Note that at no point in this definition is more than one customer necessary.
Each customer has a different definition for “a lot of money” (X), “small amount of money” (Y), “high frequency” (Z). “Low frequency” is usually a month or a year though.
Customers “control” variables X and Z. Insurance companies control Y. For simplicity let’s say A = X*Z.
In an ideal market, each customer would accept the policy where Y is highest.
In your view, insurance policies should have constant Y.
If you make an insurance company based on that, you have 2 options:
In scenario 1. You’ll go bankrupt because your customers will be the ones with the highest A in the market. Since low A customers will go to another company that sets Y as a function of A.
In scenario 2. You’ll go bankrupt because you’ll have no customers. Setting a Y high enough so scenario 1. Doesn’t happen means that not even the highest A will be willing to pay your high Y.
If you see it from the PoV of the customer:
Why would I pay the same as my neighbour that drives drunk every day when I only use my car once a years on a small trip while following every traffic law and regulation? I’ll just go to that other insurance company that costs only a small fraction of my neighbour’s.
All of that is about a company selling a product in a market.
But insurance doesn’t need to be that. It’s purpose is unrelated to any of that.
Insurance, no matter where it comes from, is about pooling money from a large group to cover the losses of a small group. It exists because nobody knows which group they’ll be in.
EDIT:
Ideally insurance would be a state regulated monopoly, in order to have the largest possible pool. That would be the most effective and efficient way of doing it.
In fact trying to categorize people into lower and higher risk pools, just makes smaller pools. Which hurts the overall efficiency of insurance for the purpose of creating more attractive products to sell in a profit driven market. It’s an example of how commerce itself can actually hurt some markets.
What you describe as an individual spreading out small payments instead of having one large payment, is actually just a loan. You can open a line of credit at a bank for emergencies. That does the same thing. It isn’t insurance.
I agree a state monopoly on insurance would probably be beneficial but that doesn’t mean we have to get rid of different rates. Riskier drivers need to pay more because they’re more likely to take money out of the system. This doesn’t mean they have to go into a higher risk pool, it could be just one big pool but balancing money in and money out fairly will require different rates. It’s unfair to charge a person who barely drives their 10 year old car the same price as a 16 year old with a Porsche, one of those people is way more likely to have an accident, and a costly one at that, and take out more money from the pool and thus get disproportionate “benefit” for the same price.
No. Pooling the resources of all to spend it on the benefit of society (including helping the less-fortunate) is the purpose of taxes.
The purpose of insurance is to trade low chance big impact risks for 100% chance small costs.
As I said, you can have insurance with just one insurer and one insuree. You cannot have taxes with 1 taxpayer and 1 tax collector, that would be called an asset manager or something, where you pay someone to decide for you what to spend that money on.
Merriam-Webster:
1 a : coverage by contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril b : the business of insuring persons or property c : the sum for which something is insured 2 : a means of guaranteeing protection or safety The contract is your insurance against price changes. Frequent hand washing is good insurance against the common cold. 3 gambling : a side bet that a player in blackjack may place when the dealer’s first faceup card is an ace
Note: An insurance bet can be up to half of a player’s original bet. It wins at 2 to 1 odds if the dealer’s cards add up to 21.
The aggregated risk is “if the person gets into a collision and how much it’s likely to cost” not “how much it will cost when the person gets into a collision”
I don’t think an aggregate risk model makes sense for something like car insurance where personal behavior has such a huge impact on payouts.
Health insurance where insurance is a necessity and choices do not necessarily impact risk is where aggregate works better.
Healthe insurance (as done in the US) isn’t realy insurance, but that’s whole other issue.
Personal choice absolutely has a large effect on health risks. What foods you chose to eat? Where you chose live? How often you exercise? Those and hundreds more choices all effect health risk. Literally every choice you make has a positive or negative effect on your health risk. But most of them are ignored in health insurance prices.
Personal choice is a lot easier when you have money, leisure time, or both. Late-state capitalism means that many people don’t have those resources.
Is this even capitalism?