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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

#651

Post by skissane »

tptacek wrote: post #638
Eisenstein wrote: post #457

Earlier quoted context omitted.

To explain the lawsuit issue, here is a perfectly plausible scenario and how it could play out somewhere in the USA.: 1. A person is at a friend's house for dinner 2. Upon leaving to go home, they trip and fall trying to navigate an unlit path to their car 3. Their injury lands them in the hospital and requires a week or so of recovery time in which they could not work, and as they contract out they lose that money 4…

I mean, sure, but really the simpler issue --- and this is an issue in Australia too, but I don't know how it's handled --- is that some kid is going to double bounce on the trampoline at a party, land funny, break their neck, and be paralyzed for life. Average payouts for paralysis cases are in the high millions.

Nowadays, the way it is handled in Australia is significantly different, for two reasons (1) we have a national disability insurance scheme (NDIS), under which the federal government funds lifelong care for the disabled, irrespective of how the disability was acquired (accident, medical negligence or natural causes) (2) whereas in most American states tort law reform is merely a topic of perennial debate in which little actually changes, Australian states enacted major tort reform which significantly capped personal injury payouts. A big motivation for that was to control their own medico-legal risk due to the extensive public health systems they operate

Re: Home insurers are dropping customers based on aerial images

#652

Post by dragonwriter »

shepherdjerred wrote: post #397
dragonwriter wrote: post #372

Earlier quoted context omitted.

> That wouldn't be pointless, because you would have a predictable expense instead of an unpredictable expense. What you're describing is actually the ideal scenario for both individuals and companies No, if the expense were that predictable, the best case would be dispense with insurance entirely, since it effects the cost not at all and imposes overhead, especially insurance where the rates are accurately computed…

If you can manage your finances well, then sure. Many people would see that pile of cash in their savings and spend it. Paying a monthly amount to a third-party is safer in many ways, even if you have some % of overhead.

If insurance can predict when losses will occur accurately and price accordingly, even this arguable temporal-cost-spreading benefit is lost.

Re: Home insurers are dropping customers based on aerial images

#653

Post by dragonwriter »

mb7733 wrote: post #528
dragonwriter wrote: post #372

Earlier quoted context omitted.

> That wouldn't be pointless, because you would have a predictable expense instead of an unpredictable expense. What you're describing is actually the ideal scenario for both individuals and companies No, if the expense were that predictable, the best case would be dispense with insurance entirely, since it effects the cost not at all and imposes overhead, especially insurance where the rates are accurately computed…

If you dispense with insurance entirely, how do you deal with catastrophic expenses? The key things I think you are not considering are: 1. If you choose not to take out an insurance policy, and instead save the money yourself, you will not have the lump sum immediately available to cover catastrophe. Whereas as soon as you start paying insurance premiums you are covered. 2. The payout you receive when you make an in…

> If you dispense with insurance entirely, how do you deal with catastrophic expenses?

If insurance can accurately predict losses that will occur and price accordingly, you are paying exactly the same amount plus overhead, on a similar schedule for insurance as directly paying for losses yourself without insurance.

The cost spreading effect (both over time and over individuals) is a direct consequence of the inability to accurately predict losses and the resulting inability to price accurately.

Re: Home insurers are dropping customers based on aerial images

#654

Post by skissane »

WalterBright wrote: post #626
theluketaylor wrote: post #624

Earlier quoted context omitted.

That makes sense in a vacuum, but in the real world not everyone is a lawyer and corporations have a vast power imbalance compared with a member of the general public. It's incredibly easy to bury something surprising among many other clauses, such as only scheduled flights being covered and not charters. The idea certain potentially surprising clauses need to more prominent seems pretty reasonable on balance. The on…

> The onus is still on the signing party to read them, but they are afforded the opportunity to notice among many clauses these are ones that deserve special attention. It's not unreasonable to expect a party to a contract to read all of it. If one's case is based on "I didn't read it", the other party should prevail. > Consumers gain a little power back (though still far from equal footing). The consumer can always…

> It's not unreasonable to expect a party to a contract to read all of it.

Walter, you are a very smart guy. And this is a site which attracts people with above average intelligence and education. It is easy to forget that not everyone is as smart or well-educated as we are.

I know a guy who has been diagnosed with borderline intellectual functioning (i.e. his IQ is above the cutoff for intellectual disability, but only just). He blames it on his alcoholic mother drinking when she was pregnant. He's able to live independently, he drives a truck for a living. But no way is he ever going to be able to comprehend all by himself the dense fine-print of a contract. The law has to look after people like him, not just people like you or me. There are literally millions of people like him out there – around 13% of the population has an IQ in the borderline range.

> The consumer can always say "no". An important feature of a free market is there are no forced contracts. Saying "no" is the ultimate power.

Some products, people need to buy to meet their basic human needs and to function in society. For many of those products, there are only a small number of vendors available. If all of them demand you sign an incomprehensible barrage of legalese, you can't realistically say "no" to doing so. It might not be a "forced contract" in an abstract theoretical sense, but it sure is in a practical sense.

Re: Home insurers are dropping customers based on aerial images

#655

Post by Calavar »

tptacek wrote: post #642
Calavar wrote: post #641

Earlier quoted context omitted.

> Insurance isn't a redistribution mechanism That's exactly what insurance is. The whole premise is that they will dip into other people's payments to pay you if you ever encounter a covered issue. If insurance only ever paid you back some fraction X of your own contributions, why would you ever buy it? It would make infinitely more sense to deposit whatever you would have paid to insurance in a high yield savings ac…

Read downthread for repeated explanations of how insurance works. You know you're in trouble when you profess shock that insurance has negative expected dollar value.

On the contrary, I think using expected value to explain the value of insurance from the perspective of an insurance holder is a misunderstanding of insurance. People don't buy insurance to optimize the average case; they buy it to optimize the worst case. But an insurance policy that doesn't redistribute wealth has both negative expected value and negative value in the event of a payout. At which point it is just a personal rainy-day fund held in a savings account with a negative interest rate.

Re: Home insurers are dropping customers based on aerial images

#656

Post by slyall »

Nifty3929 wrote: post #612
slyall wrote: post #439

Earlier quoted context omitted.

The US is very lax about enforcing speed laws compared to other countries. Compare to somewhere like Australia where you get fined for just going a few km/h over the limit and the use speed cameras extensively. https://www.qld.gov.au/about/newsroom/increased-penalties-fo... Whereas it seems to be common in parts of the US for everyone on a freeway to be 10 miles/hour over the limit and nobody cares

What is the Australian citizen’s sentiment toward these speed laws? And what are the limits on a typical freeway?

I'm not from Australia (in NZ) but I'd expect the usual range of views. However fines are a voluntary payment to usually attract less opposition

Typical limits are here. 100 km/h on most freeways, 100km/h on ones built to higher standards.

https://www.qld.gov.au/transport/safety/rules/speed-limits

Re: Home insurers are dropping customers based on aerial images

#657

Post by dzhiurgis »

lostemptations5 wrote: post #619
dzhiurgis wrote: post #476

Earlier quoted context omitted.

There was a case recently in NZ where home owner tried to defraud an insurance company. Well suddenly none of the insurance companies would work with him. Insurance is a requirement for mortgage so this person is effectively going to loose his house. False positive with similar circumstances would be a nightmare.

I'm curious-- have a link?

So this wasn't even fraud on his home insurance, but on car...

https://www.rnz.co.nz/news/national/508570/auckland-annivers...

Re: Home insurers are dropping customers based on aerial images

#658

Post by lazide »

AnthonyMouse wrote: post #649
lazide wrote: post #605

Earlier quoted context omitted.

Hard to ‘refrain’ from buying health insurance in the middle of cancer treatment eh? Or ‘refrain’ from buying house insurance because someone tripped in your house and is suing you for $1M worth of damages, or you discovered your house was built in a high risk fire zone. Or ‘refrain’ from buying vehicle insurance after an accident because the state will not let you drive without valid insurance. That’s the whole poin…

> Hard to ‘refrain’ from buying health insurance in the middle of cancer treatment eh? The thing you're insuring against in this case is a cancer diagnosis. If you're insured when that happens, the insurance company should now be on the hook for your lifetime worth of cancer treatment regardless of whether you pay them any more premiums. That isn't how we implement it, the existing regulations don't work like that, b…

You can’t get a mortgage without house insurance.

Things like fire danger risk tend to change after the home is built as new data comes in.

Health insurance isn’t implemented that way, as you acknowledge, exposing folks to exactly that risk.

You seem to be stuck in theoretical. I’m talking about actual behaviors.

Re: Home insurers are dropping customers based on aerial images

#659

Post by tptacek »

Calavar wrote: post #655
tptacek wrote: post #642

Earlier quoted context omitted.

Read downthread for repeated explanations of how insurance works. You know you're in trouble when you profess shock that insurance has negative expected dollar value.

On the contrary, I think using expected value to explain the value of insurance from the perspective of an insurance holder is a misunderstanding of insurance. People don't buy insurance to optimize the average case; they buy it to optimize the worst case. But an insurance policy that doesn't redistribute wealth has both negative expected value and negative value in the event of a payout. At which point it is just a…

Insurance almost mathematically must be negative EV in dollar terms. It's positive EV in utility terms because of the declining marginal utility of a dollar. If it was dollarwise positive EV, every insurer would be insolvent.

This is pretty basic? Like, it's an economics frequently asked question why buying an insurance policy isn't as irrational as playing the lottery, since both have negative dollar EV.

Re: Home insurers are dropping customers based on aerial images

#660

Post by tptacek »

skissane wrote: post #654
WalterBright wrote: post #626

Earlier quoted context omitted.

> The onus is still on the signing party to read them, but they are afforded the opportunity to notice among many clauses these are ones that deserve special attention. It's not unreasonable to expect a party to a contract to read all of it. If one's case is based on "I didn't read it", the other party should prevail. > Consumers gain a little power back (though still far from equal footing). The consumer can always…

> It's not unreasonable to expect a party to a contract to read all of it. Walter, you are a very smart guy. And this is a site which attracts people with above average intelligence and education. It is easy to forget that not everyone is as smart or well-educated as we are. I know a guy who has been diagnosed with borderline intellectual functioning (i.e. his IQ is above the cutoff for intellectual disability, but o…

The law (in the US and the Commonwealth) already has a concept that captures the difficulty people with intellectual disability have with contracts: capacity.
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