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 said purpose. You did. Originally I said “the point of insurance”.
What you describe is no different than two people making a bet. Making a bet isn’t insurance.
Insurance is different only because of the large organization on the other side making countless bets at scale.
It’s almost as though you’re refusing to consider the larger context, because:
My claim was predicted on nobody else in the world wanting insurance. Insurance companies wouldn’t exist. The concept of Insurance wouldn’t exist. That research and data wouldn’t be done. For that first person and whoever is on the other side, it’s still just a bet.
See what I mean. You’re leaving out the larger context.
Point, purpose, whatever. They are synonyms.
Look, you said you didn’t understand insurance. I tried to explain to you that the reason you don’t understand insurance is because you are wrong about your definition of insurance. If you fixed how you define “insurance” to make sense with how the rest of the world uses it, then you would have a much easier time understanding insurance.
But you refuse to change your definition of insurance. That to me signals that you’re not trying to learn, you just want to argue.
If that’s the case. Fine, let’s argue. But it is hard to argue about something if each of us have a different definition of what that something is.
Yes, you could see insurance as a bet. When giving insurance, you are betting that the insurer will be lucky. But since you have to make a profit, you have to obtain more than the expected value. It is not much different than a casino.
If you bet on a coin toss at a casino and win, you wouldn’t get 2x your offer, you might only get 1.9x. That 0.1x is the casino’s profit.
If your house has a 50% chance to lose all value in the next year, your insurance payment must be higher than 50% of your houses value. If it is 55%, then that 5% is the insurance companies’ profit margin.
If there is no data because nobody has ever been insured, then you just make an educated guess with a low confidence score.
So the last example has a high confidence that it’s a 50% chance results in 55%. Let’s say you eeucately guess that the chance is 20-80%. The middle point of your guess is still 50%, but due to the low confidence, your margin would need to be higher. In this case, they payment might be 70% instead of 55%.
Now you see why insurance companies need all that data. Higher confidence means lower prices without risk increase, or the same prices with a lower risk. Lower prices allow more market share, which results in more money.
If it were as you said, why would they even need to make predictions? Just adjust the rate according to the pool size. “Oh no, last month was really unlucky and the money pool shrank, we’ll increase prices this month”, “nice! Last month was lucky and the pool increased, we can lower the price”.
As I said, there are many ways to implement insurance.
I never said I didn’t understand insurance.
I said I didn’t understand wanting variable pricing of insurance based on individual risk.
But now I’ve learned, it’s a response to small scale conceptions of what insurance is and how it works.