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So thieves broke into your storage unit again

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Re: So thieves broke into your storage unit again

#61

Post by dataflow »

rocqua wrote: post #56
dataflow wrote: post #49

Earlier quoted context omitted.

> The incentive would be for you to have a "happy pillow accident" in which you get $1M. Of course, you might think that's good for you but the rules have to apply for everybody, by definition. This doesn't pass the smell test, though. The premium would take care of that. You've told them you have a pillow, and that you want it insured for $1M. They could easily look at it and go "hm, this is worth $10", and give you…

The premium would be 1M. Maybe .99M if they have reason to assume not everyone will be fraudulent.

Sure, whatever. The exact value of the premium has no bearing on the point I'm trying to make.

Re: So thieves broke into your storage unit again

#62

Post by lifeisstillgood »

I’m stunned by the idea of making the pawn shop whole.

As I understand UK law, if you buy stolen goods, the original owner can just claim it back and you take the loss - simply to discourage buying with knowledge it was stolen.

I guess the pawn shop would go out of business but it does seem if you let them act as a fence you are solving for the wrong problem

Re: So thieves broke into your storage unit again

#63

Post by dataflow »

smallnamespace wrote: post #58
dataflow wrote: post #49

Earlier quoted context omitted.

> The incentive would be for you to have a "happy pillow accident" in which you get $1M. Of course, you might think that's good for you but the rules have to apply for everybody, by definition. This doesn't pass the smell test, though. The premium would take care of that. You've told them you have a pillow, and that you want it insured for $1M. They could easily look at it and go "hm, this is worth $10", and give you…

> What's wrong with just letting the premium take care of it? Offering a deal that nobody honest would take is a waste of time for everyone involved.

> Offering a deal that nobody honest would take is a waste of time for everyone involved.

I'm not suggesting any insurer should be forced to offer a deal. They're welcome to just shrug and tell you to pound sand. What I don't see is the logic behind having an international code prohibiting the offering of such deals. Is the international code trying to dictate to the insurance company what is worth their time?

Re: So thieves broke into your storage unit again

#64

Post by schoen »

dataflow wrote: post #59
rocqua wrote: post #55

Earlier quoted context omitted.

The difference between gambling and insurance, is whether you have an insurable interest. It makes the market for insurance much better if everyone actually has insurance. Because it reduces cost. It also keeps the industry legitimate, preventing gambling legislation from applying, and anti-gambling activists from targeting insurers. You'll have to go to a bookie if you want to gamble.

I don't follow the logic? How does above-market-value insurance discourage people from having insurance? I don't get the comparison to gambling either, that reads more like an appeal to emotion than actual reasoning.

You can read about it at

https://en.wikipedia.org/wiki/Insurable_interest

(I don't know if that will make you more sympathetic to the legal rule or not.)

Re: So thieves broke into your storage unit again

#65

Post by spencerflem »

tgsovlerkhgsel wrote: post #54
Magi604 wrote: post #5

Good old insurance companies, always looking for ways to get out of having to pay out for claims. I mean, I guess it is their job, so can't really fault them for that.

No, their job is to accurately calculate the expected value of the losses, then collect a premium slightly higher than the expected value, turning an unpredictable, potentially high loss into a predictable small one. Reverse gambling, basically. 1. Know your insurance contract, know what's actually covered and what not (sometimes describing the same facts in two different yet truthful ways will result in your claim b…

But they can offer a lower price than competitors or collect more profits (to taste) by having a lower expected value of losses by screwing you over

Re: So thieves broke into your storage unit again

#66

Post by dataflow »

schoen wrote: post #64
dataflow wrote: post #59

Earlier quoted context omitted.

I don't follow the logic? How does above-market-value insurance discourage people from having insurance? I don't get the comparison to gambling either, that reads more like an appeal to emotion than actual reasoning.

You can read about it at https://en.wikipedia.org/wiki/Insurable_interest (I don't know if that will make you more sympathetic to the legal rule or not.)

You're definitely right -- it's interesting, but it's not making me any more sympathetic, because I fail to see why the lack of insurable interest is something the premium can't account for, and they fail to provide any explanation of that.

As far as insurance gambling goes, it feels fundamentally different? In gambling, the "house" that sells you the ticket sets the rules and introduces the element of chance. In insurance, the entity selling the financial product here is in no way in control of the outcome, which is the exact opposite of gambling.

Re: So thieves broke into your storage unit again

#67

Post by praptak »

dataflow wrote: post #45
praptak wrote: post #42

Earlier quoted context omitted.

If they let me insure my stuff for 100x of what it's worth, I lose all the incentive to prevent damage. Even in the legit cases the insurance companies have to account for the "don't worry, it's insured" mindset. Keeping the ceiling on the insurance value is intended to leave at least some of the incentive to prevent the damage with the owner. The insurance companies cannot rely solely on the "don't be careless" cont…

> If they let me insure my stuff for 100x of what it's worth, I lose all the incentive to prevent damage. So what, though? Can't they just adjust the premium to account for that? It's not like they can't do their own modeling of what the item is likely worth -- if they see it's 1% of what you stated, then they can just as well cite you a ridiculous premium so that you wouldn't feel it's worth it. What's wrong with th…

In theory nothing, in practice it's just not worth it. Mind that the bad effects would also spread broader than a voluntary contract between two parties.

We'd have to fund the courts to resolve the inevitable insurance fraud accusations, not to mention the additional firefighting crews to put out the additional fires that consume the $1 pillows.

Re: So thieves broke into your storage unit again

#68

Post by thaumasiotes »

tgsovlerkhgsel wrote: post #54
Magi604 wrote: post #5

Good old insurance companies, always looking for ways to get out of having to pay out for claims. I mean, I guess it is their job, so can't really fault them for that.

No, their job is to accurately calculate the expected value of the losses, then collect a premium slightly higher than the expected value, turning an unpredictable, potentially high loss into a predictable small one. Reverse gambling, basically. 1. Know your insurance contract, know what's actually covered and what not (sometimes describing the same facts in two different yet truthful ways will result in your claim b…

> No, their job is to accurately calculate the expected value of the losses, then collect a premium slightly higher than the expected value, turning an unpredictable, potentially high loss into a predictable small one. Reverse gambling, basically.

No, premiums don't need to cover payouts. You have to pay the premiums before you get any payouts, so the company invests them and makes money that way.

Re: So thieves broke into your storage unit again

#69

Post by js8 »

dataflow wrote: post #49
js8 wrote: post #44

Earlier quoted context omitted.

The incentive would be for you to have a "happy pillow accident" in which you get $1M. Of course, you might think that's good for you but the rules have to apply for everybody, by definition.

> The incentive would be for you to have a "happy pillow accident" in which you get $1M. Of course, you might think that's good for you but the rules have to apply for everybody, by definition. This doesn't pass the smell test, though. The premium would take care of that. You've told them you have a pillow, and that you want it insured for $1M. They could easily look at it and go "hm, this is worth $10", and give you…

You have simply rephrased the actuarial rule "don't insure item for more than its actual value". The "premium" you describe just inflated the value of the item.

Re: So thieves broke into your storage unit again

#70

Post by js8 »

s1artibartfast wrote: post #60
js8 wrote: post #41

Earlier quoted context omitted.

It's not their job. It would be easy to adopt laws requiring insurance companies to separate insurance pool money (used to pay out insurance) and operational money (used to pay employees and profits), and have these separated when showing the price of insurance. That would reduce the moral hazard of insurance companies paying profit out of the pool.

It can actually make it worse, and creates different Hazards. When it does work is when insurance has no influence on the price of goods, and is a minor consumer. For example, when fire insurance pays to replace your goods that burnt up. When it doesnt work is when insurance is the predominant purchaser of those goods. A good example would be US health insurance, which has an 80/20 rule just like your proposal. Healt…

What you're talking about is a market failure, basically admitting that markets don't decrease prices in many cases. Which is a much deeper rabbit hole.

My proposal even doesn't say what the ratio should be. If there wasn't legally defined maximal price margin (say 20%), I don't see what it would change in your argument - the companies would be free to ask for even more. Conversely, there is nothing that prevents the companies from lowering the margin as a result of competitive pressure from consumers.

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