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Home insurers are dropping customers based on aerial images

wsj.com

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Re: Home insurers are dropping customers based on aerial images

#171

Post by Terr_ »

AnthonyMouse wrote: post #148
myself248 wrote: post #114

Earlier quoted context omitted.

I thought risk pooling was the point?

> I thought risk pooling was the point? The point is pooling unpredictable risk. You don't know ahead of time if your house is going to flood. You do know ahead of time if your house is on a flood plane. Therefore, people with houses on a flood plane pay more for flood insurance. The alternative is that low risk customers can't get insurance because they'd have to pay the same as high risk customers and that isn't wo…

> The point is pooling unpredictable risk.

This is important point about knowledge which I feel leads towards another kind of hazard: Which party is capable of predicting risk and how that information asymmetry may be exploited.

We already spend a lot of time thinking about one direction, where the insured hides a pre-existing condition or their nefarious plan to commit arson, or whatever.

But what about the other direction? What about when the insurer has tools and relationships to determine something but doesn't tell the insured?

That might either be because there's not enough competitive pressure to make them lower the premium, or perhaps they raised the premium to cover the higher risk but refuse to disclose exactly what the risk is or how they determined it.

Re: Home insurers are dropping customers based on aerial images

#172

Post by hilux »

gjsman-1000 wrote: post #37

5 years ago, a family friend got an angry letter from the city because he had cleared slightly too much lakefront weeds (and by slightly - I mean very lightly, enough to anger the algorithm lightly). How did they know? Drone. And this was suburban Minnesota. Not even insurance - this was the city of Newport on a power rampage. Turns out there’s also no shortage of general corruption in the police department… https://…

What does drones detecting weeds have to do with "general corruption"?

If anything, overzealous adherence to the letter of the law, while annoying, seems the exact opposite of "corruption."

Re: Home insurers are dropping customers based on aerial images

#173

Post by creato »

tptacek wrote: post #134
toast0 wrote: post #127

Earlier quoted context omitted.

Car insurance isn't mandatory; proof of financial responsibility is. In California, you can get a compliant insurance policy, deposit $35k with the DMV, setup a compliant $35k bond, or a self-insurance certificate which requires a larger deposit and is really for commercial motor vehicle carriers. I don't think it's unreasonable to require means to pay for damages when operating a motor vehicle; it doesn't take much…

Side note here on how ludicrous it is that you can substitute a $35,000 bond for a real insurance policy, given the likelihood that any driver is going to cause losses far in excess of $35,000.

The 35k bond doesn’t preclude getting sued for an unbounded amount. Presumably the idea is that a 35k bond demonstrates you have more available in case of a judgment.

That said, that seems like a risky idea in a world full of LLCs, trusts, etc.

Re: Home insurers are dropping customers based on aerial images

#174

Post by dragonwriter »

mb7733 wrote: post #6
malfist wrote: post #4

If insurance is individually priced to this degree, what's the point of insurance?

Why would insurance being individually priced negate its value? The benefit of insurance is the pooling of the risk. The more individually it is priced, the more efficiently it works. (Not that I'm a fan of insurers spying on their customers from the sky...)

> Why would insurance being individually priced negate its value?

Perfectly accurate insurance pricing would be for each policy to cost exactly the amount of covered losses in the period covered plus the overhead of managing the insurance, which obviously would be pointless.

Re: Home insurers are dropping customers based on aerial images

#175

Post by [deleted] »

throwaway74432 wrote: post #19

Related, my vehicle insurer keeps jacking up the rates. I've never been in an accident or had a ticket, and I drive 2000 miles per year. But every year up up up. Then they offer I install a tracking device on my car to get my rates back down to a reasonable amount. There seems to be a pattern of insurers wanting to know everything about everyone, and using irrationally higher rates to coerce consent. And I have to pa…

[deleted]

Re: Home insurers are dropping customers based on aerial images

#177

Post by [deleted] »

CubsFan1060 wrote: post #142
gjsman-1000 wrote: post #61

Earlier quoted context omitted.

Imagine if I put cameras all over a city that charged you $10 every time you exceeded the speed limit by 1 MPH. With an additional $10 fee for each additional MPH measure over the limit. Also, this is per camera, so if you pass 6 cameras on your commute going 70 in a 65, you’re getting a $300 penalty. Rules are rules.

I'm not sure how exactly you're drawing that parallel, but, IMHO, that would be just fine. I suspect people would speed a lot less.

[deleted]

Re: Home insurers are dropping customers based on aerial images

#178

Post by nneonneo »

jeffbee wrote: post #155
nneonneo wrote: post #144

Earlier quoted context omitted.

I would definitely mind if the police were following me personally in an airplane…

Did you recently rob a bank or carjack an old lady? If not, I sincerely doubt that anyone would go to the trouble of following you around.

Yes, but clearly an insurance company will go to the trouble of flying a plane around my house. Whether it’s manned or unmanned is immaterial - I wouldn’t want them to do it.

Re: Home insurers are dropping customers based on aerial images

#179

Post by AnthonyMouse »

neilv wrote: post #161
trogdor wrote: post #138

Earlier quoted context omitted.

Why are insurance rates regulated by the government? I understand that the state has a strong interest in ensuring that insurance companies are adequately capitalized, but I don’t understand the state interest in directly regulating premium prices. (Or is that not what you are referring to?)

Why is basic insurance for ordinary people a for-profit business at all, rather than something the collective (administered by the state) does to soften any misfortune that hits any of its members?

Because state insurance programs have perverse incentives. Insurance itself is a moral hazard. You buy insurance and then do something risky you wouldn't otherwise have done because if it goes wrong you're insured. It's also an opportunity for outright fraud. If the book value of your property is higher than its true value, you carry insurance and then set a fire.

Private insurers have the incentive to price this in. If they can predict you're going to be high risk, or uncover evidence of arson, they can charge you higher rates or refuse coverage. For state insurers the cost goes on the taxpayer and if claims are refused for legitimate reasons, the perpetrators go to the media and accuse the state of bankrupting their family. This puts pressure on elected officials to shift the burden of this fraud onto the taxpayer, whereas private insurers would push back because they have a direct financial incentive not to eat the cost of fraud and mispriced risk.

Re: Home insurers are dropping customers based on aerial images

#180

Post by vundercind »

trogdor wrote: post #138
brogrammernot wrote: post #69

Earlier quoted context omitted.

Alright, I spent years working and building 0-1 insurance products. Let me peel back some stuff that’s been happening behind the scenes. Some officials are elected and some are appointed which all depends on the state. Appointed officials are usually more reasonable and elected are not because higher rates = mad voters = re-election chances lower. For a long time, insurers have struggled to get sufficient rate change…

Why are insurance rates regulated by the government? I understand that the state has a strong interest in ensuring that insurance companies are adequately capitalized, but I don’t understand the state interest in directly regulating premium prices. (Or is that not what you are referring to?)

Ten-to-one you can go back to when the regulation started and find there was rampant, blatant abuse going on. That’s the usual story behind these kinds of things.
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